II. Discussion

B. Coupon Value and Use Restrictions

12. Consistent with the Act, NTIA proposed in the NPRM to issue $40 coupons to be redeemed only at certified retailers when purchasing a CECB. The Agency also proposed to place identifying serial numbers on the coupons to keep track of the number of coupons issued to and redeemed by consumers as well as to minimize fraud, such as counterfeiting. NTIA did not propose a specific form of the coupon, but requested comment on whether the Agency should issue a paper coupon or an electronic coupon card.

13. NTIA proposed to restrict each individual coupon to the purchase of one CECB. Consistent with the Act, NTIA also proposed to prevent coupon holders from using two coupons in combination toward the purchase of a single CECB. To prevent fraud, NTIA also proposed to prohibit coupon holders from returning a converter box to a retailer for a cash refund or for credit towards the purchase of another item. However, the Agency did propose to permit the even exchange for another CECB in the event of defective or malfunctioning equipment.

14. One commenter argued that a buyer should be able to use the $40 coupon to buy a converter box with deluxe features. ^{[ 32 ]} Best Buy supported only “even” exchanges of devices and opposed allowing consumers to return converters for a cash refund or for credit towards the purchase of an upgraded device.^{[ 33 ]} RadioShack recommended that statements such as “No Cash Value” or “Exchange Only for Eligible Converter” be clearly printed on the coupon and in accompanying consumer material.^{[ 34 ]}

15. Consistent with the Act, the value of the coupons issued will be $40. In no case may consumers receive any cash value for the coupon.^{[ 35 ]} If the cost of a CECB is less than $40, retailers will only be reimbursed for the retail price of the box. Likewise, consumers cannot receive a refund or credit towards the purchase of another item if the price of the CECB is less than the $40 value of the coupon. Retailers and consumers are also prohibited from using two coupons in combination towards the purchase of a single CECB. NTIA recognizes the opportunities for fraud and abuse by permitting consumers to receive a cash refund for the value of the coupon or for credit towards another item outside of the program. Therefore, NTIA will permit an exchange only for another converter box certified under these regulations.^{[ 36 ]}

16. Some commenters supported the use of a paper coupon. For example, one commenter stated that it was Congressional intent to issue a paper coupon with UPC coupon-type barcode, which brick-and-mortar retailers and clearinghouses could handle in the same fashion as manufacturers’ cents-off coupons because this would minimize the cost of the overall program.^{[ 37 ]} Another commenter stated that the paper coupon was both straightforward to use and provides for a fast and economical means to mail eligible applicants their coupons in a short time frame.^{[ 38 ]} Moreover, paper coupons could have several security features, including unique serial numbers, barcodes, security paper and consumer identification.^{[ 39 ]} Many of the comments, however, addressed the problems associated with paper coupons including the potential for fraud, delay in retailer reimbursement and increased administrative costs.^{[ 40 ]}

17. Other commenters, particularly retailers, supported the use of an “electronic coupon card” (ECC) on which the $40 value can be credited towards the purchase of a CECB. Many commenters agreed that use of the ECC was the most efficient way to administer the program as well as the best way to reduce fraud.^{[ 41 ]} CERC stated that an ECC should (a) bear a “use by” date on its surface and should be coded to expire after the time indicated on its surface; (b) carry a unique serialized number (encoded in a magnetic strip and printed in human-readable form on the card) that can be transmitted to a central database immediately upon submission for on-line verification; and (c) provide clear and succinct rules concerning coupon use.^{[ 42 ]} CERC also noted that the use of ECCs would permit more consumer friendly converter exchanges.^{[ 43 ]} It was also noted that the use of ECCs would facilitate real-time transmission of information on redemption rates which is important because transmission delays may limit NTIA’s ability to monitor performance or to request additional congressional funding.^{[ 44 ]} There were, however, concerns expressed about the use of ECCs. For example, ORC Macro noted that these cards may not be compatible with electronic scanning devices used by participating retailers, and that the requirement for electronic systems may eliminate small retailers from participating.^{[ 45 ]} NTIA also received conflicting comments on whether ECCs could be encoded to limit use to a specific product.^{[ 46 ]} Retailers suggested that ECCs may require significant up-front costs for software, payment processing and employee training.^{[ 47 ]}

18. The coupons will not carry any “stored value,” but the appropriate amount will be identified on the cards and authorized for redemption when matched to the central database to verify each transaction. In light of the comments received, particularly those from retailers, NTIA will provide coupons that are capable of electronically encoding information that is necessary for the program to run efficiently and permit electronic tracking of transactions. NTIA also believes that electronically encoded coupons will reduce opportunities for fraud in the program. NTIA notes that electronic information may be encoded on paper coupons as well as plastic cards.^{[ 48 ]}