III. Procedural Matters

Paperwork Reduction Act

            The Paperwork Reduction Act (PRA), 44 U.S.C. Chapter 35, requires federal agencies to seek and obtain OMB approval before undertaking a collection of information directed to ten or more persons. Under the PRA, a rule creates a “collection of information” where ten or more persons are asked to report, provide, disclose, or record “information” in response to “identical questions.”

            In the NPRM, NTIA invited comment on three information collections required for the implementation of the Coupon Program. To successfully administer the Coupon Program, NTIA requested approval on three collection requirements and reporting requirements for: (1) The applications that households must submit to receive coupons; (2) the certification form for retailers that will sell the converter boxes and submit coupons for redemption; and (3) the certification form and recordkeeping and reporting requirements for manufacturers regarding converter boxes eligible for the coupon program. Specifically, comments were invited on (a) whether the collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency’s estimate of burden including the validity of the methodology and assumptions used; (c) ways to enhance the quality, utility; and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology.

            NTIA received over 100 comments in response to the NPRM. There were no comments submitted specifically with respect to the information collection and recordkeeping requirements. The comments to the NPRM and the analysis to the NPRM, however, resulted in changes or modifications from the proposed rule to the Final Rule. Accordingly, NTIA has modified certain aspects of the information collection and reporting requirements. These modifications are discussed below.

(1)       Title: Application for the Digital-to-Analog Converter Box Coupon

            Type of Request: New Collection

            Estimate of Burden: Public reporting burden for this collection of information is estimated to average .25 hours (15 minutes) per transaction

            Respondents: U.S. households

            Estimated Number of Respondents: 110 million

            Estimated Number of Responses per Respondent: 1

            Estimated Total Annual Burden on Respondents: 27,500,000 hours

            This new information collection is for the application required to request and receive a coupon to purchase a digital-to-analog converter box. This collection of information is necessary for NTIA to provide the benefit to U.S. households as directed in the Act. In the NPRM, NTIA estimated the public reporting burden for this collection to average .25 hours (15 minutes) per respondent. The NPRM identified the respondents affected by this information collection as U.S. television households that receive over-the-air television in an analog format. The estimated number of respondents was 21 million U.S. television households. Because the Final Rule has been changed to include all U.S. households, the estimated number of respondents is 110 million. This estimate assumes that all U.S. households with analog television sets will apply for a coupon. The Final Rule requires consumers to submit the following: (1) name; (2) address; (3) the number of coupons requested; and (4) a certification as to whether they receive cable, satellite, or other pay televison service.

            The OMB Approval Number of the information collection will be provided in a subsequent Federal Register notice.

(2)       Title: Certification for Retailer to Accept and Redeem Coupons for the purchase of a Digital-to-Analog Converter Box Coupon

            Type of Request: New Collection

            Estimate of Burden: Public reporting burden for this collection of information is estimated to average .25 hour per respondent

            Respondents: Retailers that accept coupons for digital-to-analog converter boxes

            Estimated Number of Respondents: 10,000

            Estimated Number of Responses per Respondent: 1

            Estimated Total Annual Burden on Respondents: 2,500 hours

            As part of the coupon program, retailers that choose to participate in the program by selling converter boxes must accept the coupons from consumers and then seek reimbursement from the Federal Government. The Final Rule requires retailers that wish to participate in the program to submit a form to the agency which requires them to self-certify to that they: (1) have been engaged in the consumer electronics retail business for at least one year; (2) have completed a Central Contractor Registration; (3) have in place systems that can be easily audited as well as systems that can provide adequate data to minimize fraud and abuse in retail redemption and government payment for coupons; (4) agree to have coupons box sales audited at any time during the term of participation in the coupon program by the U. S. Government or an independent auditor at no expense to the retailer; (5) will provide NTIA electronically with redemption information and payment receipts related to coupons used in the purchase of converter boxes, specifically tracking each serialized coupon by number with a corresponding converter box purchase; (6) agree only to accept coupons for, and receive payment from authorized purchases made for CECBs.

            The OMB Approval Number of the information collection will be provided in a subsequent Federal Register notice.

(3)       Title: Certification of Digital to Analog Converter Box

            Type of Request: New Collection

            Estimate of Burden: Public reporting burden for this collection is estimated at 1.25 hour per respondent

            Respondents: Companies that manufacture digital to analog converter boxes who request NTIA certification

            Estimated Number of Respondents: 10

            Estimated Number of Responses per Respondent: 1

            Estimated Total Annual Burden on Respondents: 12.5 hours 

            Manufacturers that wish to participate in the program must submit a notice of intent to NTIA at least three months prior to submitting test results and sample models of converter boxes. The notice shall include a brief description of the proposed converter box, including permitted as well as required features, and the date which the proposed converter box is expected to be available for testing. The notice of intent shall supply the name, title and address and phone number of an individual responsible for the manufacturer’s submission. When the manufacturer submits its converter box to NTIA, it shall also provide test results along with a certification of the testing supervisor as to their authenticity, completeness, and accuracy.

            The OMB Approval Number of the information collection will be provided in a subsequent Federal Register notice.

Executive Order 12866

            This Final Rule has been determined to be economically significant for purposes of Executive Order 12866; and therefore, has been reviewed by the Office of Management and Budget (OMB). In accordance with Executive Order 12866, and Economic Analysis was completed outlining the costs and benefits of implementing this program. The complete analysis is available from NTIA upon request.

Executive Order 12988

            This Final Rule has been reviewed under Executive Order 12988, Civil Justice Reform. NTIA has determined that the rule meets the applicable standards provided in section 3 of the Executive Order, to minimize litigation, eliminate ambiguity, and reduce burden.

Congressional Review Act

            This rule has been determined to be major under the Congressional Review Act, 5 U.S.C. § 801 et seq.

Regulatory Flexibility Analysis

            As required by the Regulatory Flexibility Act, an Initial Regulatory Flexibility Analysis (IRFA) was prepared and published with the NPRM. ^{[ 196 ]} A copy of the IRFA was provided to the Chief Counsel for Advocacy of the Small Business Administration. Although NTIA specifically sought comment on the costs to small entities of complying with the Final Rule, no commenters provided specific cost information. NTIA has carefully considered whether to certify that the Final Rule will not have a significant impact on a substantial number of small entities. NTIA continues to believe the Final Rule’s impact will not be substantial in the case of small entities. However, NTIA cannot quantify the impact the Final Rule will have on such entities. Therefore, in the interest of thoroughness, NTIA has prepared the following Final Regulatory Flexibility Analysis (RFA) with this Final Rule in accordance with the Regulatory Flexibility Act.^{[ 197 ]}

            1. Succinct Statement of the Need for, and Objectives of the Rule:

            NTIA is issuing this Final Rule because of a statutory mandate to create and implement a coupon program that will affect the public under Section 3005 of the Digital Television Transition and Public Safety Act of 2005.^{[ 198 ]} The Act requires the Federal Communications Commission (FCC) to require full-power television stations to cease analog broadcasting after February 17, 2009. After that date, households using analog-only televisions will no longer be able to receive over the air television broadcasts unless the television is connected to a converter box that converts the digital signal to analog format. As a result, the Act authorizes NTIA to create a program whereby U.S. households can apply for $40 coupons to be used towards the purchase of digital-to-analog converter boxes.

            The Final Rule sets forth a framework to implement the coupon program as authorized by the Act. The Final Rule also provides clear guidance for consumers, manufacturers, and retailers regarding eligibility, responsibilities, and certifications.

            2. Summary of the Significant Issues Raised by the Public Comments in Response to the IRFA; Summary of the Assessment of the Agency of Such Issues; and Statement of Any Changes Made in the Rule as a Result of Such Comments:

            The only comments that directly responded to the IRFA were those submitted by Stored Value Systems, Inc. (Stored Value), although other comments submitted in response to the NPRM addressed issues raised in the IRFA.^{[ 199 ]} Stored Value commented on the IRFA section regarding “Alternatives to Minimize Burdens.” In that section, NTIA stated that the proposed self-certification by retailers for certain compliance requirements was less burdensome than other alternatives such as requiring third-party compliance, or instituting a process whereby NTIA certified compliance.^{[ 200 ]} NTIA stated that either of those options would involve additional steps in the certification process and would therefore increase time and cost.^{[ 201 ]} Although Stored Value agreed with our analysis, it added that “not pursuing either option would not necessarily relieve the program or associated stakeholders with conducting similar additional steps and most likely would add even increased time and cost, or possible program delay.”^{[ 202 ]} NTIA maintains that a third-party certification of retailer credentials would add costs and delay implementation of the program. The Final Rule, therefore, permits retailers to provide self-certification as to the program requirements.

            3. Description and Estimate of the Number of Small Entities to Which the Rule will Apply Or an Explanation of Why no Such Estimate is Available:

            The RFA requires agencies to provide a description and an estimate of the number of small entities to which the rule will apply or an explanation of why no such estimate is available.^{[ 203 ]} Under the RFA, the term “small entity” has the same meaning as the terms “small business,” “small organization” and “small governmental jurisdiction.”^{[ 204 ]} To the extent that this rule affects small businesses, the affect would be on businesses in the retail or manufacture of digital-to-analog converter boxes. The Small Business Administration defines small entities in the “radio, television and other electronic stores” sector as those organizations with less than $8 million in annual revenue.^{[ 205 ]} With respect to equipment manufacturers, the SBA defines those small entities as those with less 750 employees.

            As stated in the IRFA, NTIA does not have precise information on the number of qualifying small businesses that are in the manufacturing or electronic retailing sectors that would be affected by the Final Rule. The digital-to-analog converter box is not commercially available today and the life of this particular product is limited. Thus, there is no readily available data that would assist NTIA in making an estimate as to the number of “small business” retailers or manufacturers that would be affected by the regulations. Moreover, none of the comments submitted in response to the NPRM addressed the number of small entities to which these regulations will apply.

            According to data from the U.S. Census Bureau, there were 1014 U.S. companies in 2002 that manufactured radio and television communications equipments, and approximately 1010 of these firms were classified as small entities having fewer than 750 employees.^{[ 206 ]} Specific figures for the number of firms that manufacture television equipment are unavailable, however, NTIA believes that some of these companies are capable of manufacturing a converter box pursuant to the standards provided in the Final Rule. In fact, several electronic equipment manufacturers submitted comments in this proceeding. There was no indication that any of these manufacturers were small businesses. To the extent that there exist small entities capable of manufacturing a converter box pursuant to the standards provided in the Final Rule, the extent to which they choose to participate in the coupon program will be a business decision and not based on any mandatory action resulting from this Final Rule. Therefore, NTIA is unable to predict with any certainty the number of small entities that will consider the coupon program an advantageous business opportunity. Moreover, the comments submitted in response to the proposed rule did not provide data that would assist NTIA in making such an estimate.

            Likewise, it is not possible to ascertain the number of consumer electronic retailers that qualify as small entities for the purpose of this program. Certain data from trade associations, however, provide a glimpse of the type of small businesses that may participate in the coupon program. For example, the Professional Audio-Video Retailers Association (PARA) division of the Consumer Electronics Association (CEA) has more than 250 professional audio, video, home theater, and custom electronics specialty dealers.^{[ 207 ]} CEA has also formed a partnership with the North America Retailers Association (NARDA), a group of independent retailers that include consumer electronics retailers that represent approximately 3,500 storefronts and accounts for over $11 billion in annual sales.^{[ 208 ]} However, not all NARDA members may be interested in participating in the digital-to-analog converter box coupon program. In addition to consumer electronics, NARDA’s members also sell and service kitchen and laundry appliances, consumer mobile electronics, computers and other home and small office products, furniture, sewing machines, vacuum cleaners, room air conditioners, and other consumer products. Moreover, NARDA’s members are not limited to retailers, but also include manufacturers, suppliers and vendors. PARA and NARDA members may be specialty electronic dealers not interested in selling converter boxes. The comments submitted in response to the IRFA did not provide data that would assist NTIA in making an estimate of “small entities.”

            4. Description of Projected Reporting, Recordkeeping and Other Compliance Requirements of the Rule, Including an Estimate of the Classes of Small Entities That Will Be Subject to the Requirement and the Type of Profession Skills Necessary for Preparation of the Report or Record:

            It should be noted again here that this coupon program is for a limited amount of time so there will not be any long term or recurring reporting, recordkeeping and other compliance requirements. Moreover, participation in this program is voluntary, thus any requirements would only occur if a retailer or manufacturer chooses to participate. As stated above, there is no readily available data to assist NTIA is making an estimate as to the number of “small entities” that will be subject to the requirements of the rule, and comments submitted in response to the proposed rule did not address such an estimate.

            A. Manufacturers

            The Final Rule requires manufacturers that wish to participate in the program to submit a notice of intent to NTIA at least three months prior to submitting test results and sample models of converter boxes. The notice shall include a brief description of the proposed converter box, including permitted as well as required features, and the date which the proposed converter box is expected to be available for testing. As part of this notice of intent, the manufacturer shall supply the name, title, address and phone number of an individual responsible for the manufacturer’s submission. When the manufacturer submits its converter box to NTIA, it shall also provide test results along with a certification of the testing supervisor as to their authenticity, completeness, and accuracy.

            Because these certification and recordkeeping requirements should be a part of a manufacturer’s normal course of business, NTIA does not anticipate that a particular type of professional skill is necessary beyond that already incorporated into the manufacturer’s existing business operations. It should be noted that most of the comments submitted in response to the NPRM, supported the approach adopted in the Final Rule whereby the manufacturer would conduct its own testing and submit the converter box to NTIA for “verification plus.” No comments submitted in this proceeding indicated that the compliance requirements of this Rule would require a particular type of professional skill.

            B. Retailers

            The Final Rule requires retailers to have in place systems that are capable of electronically processing coupons for redemption and payment, tracking each transaction and generating reports that are auditable. The Final Rule also requires retailers to provide transaction reports to NTIA and to retain such reports for at least one year. Retailers are required to provide NTIA redemption information and payment receipts related to coupons used in the purchase of converter boxes. To participate in the program, retailers must have engaged in electronic retailing for at least one year and must register in the Central Contractor Registration database.

            Because these certification and recordkeeping requirements are typically part of a retailer’s normal course of business, NTIA does not anticipate that a particular type of professional skill is necessary beyond that already incorporated into a retailer’s existing business operations. No comments submitted in this proceeding indicated that the compliance requirements of this Rule would require a particular type of professional skill. The recordkeeping requirements for reports are necessary for NTIA to monitor the program to ensure that coupons are being utilized and redeemed. This information is necessary in the event NTIA is required to request additional program funding. Moreover, because this is a federal government program, NTIA must ensure that it can be audited as necessary.

            There were comments received that the use of coupons 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. Moreover, some retailers suggested that the use of electronic coupon cards may require significant up-front costs for software, payment processing and employee training. NTIA notes again that this program is voluntary, thus any costs incurred are a result of retailers choosing to participate. With respect to limiting small retailers, NTIA did not receive comments from any small retailers that the use of electronic systems would somehow discourage them from participating. On the other hand, most of the retailers stated that incorporating electronically encoded information on the coupons was necessary for the program to run efficiently. There was no data submitted in this proceeding indicating that small retailers would not have electronic systems in place. As for those retailers that state that electronic systems would require significant up front cost, NTIA reiterates that retailers are free to set the retail price of the converter boxes. Thus, any up-front costs incurred by a retailer can be recouped.

            5. Description of the Steps the Agency Has Taken to Minimize the Significant Economic Impact on Small Entities Consistent with the Stated Objectives of Applicable Statutes, Including a Statement of the Factual, Policy, and Legal Reasons for Selecting the Alternative Adopted in the Final Rule and Why Each of the Other Significant Alternatives to the Rule Considered by the Agency That Affect the Impact on Small Entities Was Rejected:

            The IRFA proposed and solicited a number of alternatives to minimize the economic impact on small entities. It should be noted, as it was in the IRFA, that any significant economic impact would not be caused by the Final Rule because participation in this program is voluntary on all levels - - consumers, retailers and manufacturers. Likewise, there is no significant economic impact if a small entity chooses not to participate in the program. Nonetheless the Final Rule includes steps to minimize any adverse economic impact on all participants.

a. No Limits on Pricing of the Converter Boxes

            The Final Rule does not restrict the wholesale or retail price of the converter box. Thus, to the extent that manufacturers and retailers incur certain costs to provide the converter boxes, these costs may be recouped through the retail or wholesale price established by them. The alternative would have been to limit the retail price of the converter box. That alternative may cause a hardship on small entities because it would limit the ability of small entities to recoup costs involved in making the converter box available. Because this program is new and the demand for the converter box is uncertain, NTIA’s decision to allow manufacturers and retailers to price the box as they deem appropriate should minimize economic burdens. Moreover, NTIA does not have the statutory authority to determine the price for the set top boxes.

b. Retaining Hard Copies of Sales Data

            In the NPRM, NTIA proposed to require retailers to retain hard copies of sales information for at least one year. Retailers submitted comments asserting that if electronic systems were used, there would be no need for such a records retention requirement. Accordingly, the Final Rule dispensed with the requirement that retailers retain hard copies of sales information for one year, however, retailers are still required to retain such information electronically for one year and to convert it to a hard copy format if requested by NTIA.

c. Electronic Processing of Coupons

            The comments from retailers overwhelmingly recommended the use of an electronic coupon card system. Retailers were concerned that unless an electronic system was utilized, reimbursement from the government would be delayed. As a result of these comments, NTIA intends to use retailer point of sale electronic tracking systems to authorize coupon redemptions and to track sales transactions of eligible devices. To ensure that retailers are reimbursed in a timely manner, the Final Rule permits retailers to register in Central Contractor Registration which facilitates paperless payments though electronic funds transfer. Alternatively, retailers would have to wait a longer period of time to be reimbursed by the Federal Government.

List of Subjects in 47 C.F.R. Part 301

            Antennas, Broadcasting, Cable television, Communications, Communications equipment, Electronic products, Telecommunications, Television.