03.02.2005 11:53 AM
GAO reports potential cost of OTA set-top box subsidy

Testifying before the House Subcommittee on Telecommunications and the Internet Feb. 17, General Accounting Office Director, Physical Infrastructure Mark Goldstein laid out the estimated cost of supporting set-top boxes to help advance the DTV transition.

Goldstein presented findings from a survey of 2471 randomly selected U.S. households conducted by research firm Knowledge Networks.

They include:

  • Nineteen percent, roughly 21 million U.S. households rely exclusively on free over-the-air television
  • Fifth-seven percent, nearly 64 million households view via cable
  • Nineteen percent, or about 22 million subscribe to a DBS service
  • Forty-eight percent of OTA households have incomes less than $30,000
  • Twenty-nine percent of cable and DBS households have incomes less than $30,000
  • Six percent of OTA households have incomes exceeding $100,000
  • Thirteen percent of cable and DBS households have incomes exceeding $100,000

The GAO looked at two different scenarios requiring a set-top box. In case No. 1, the GAO assumed that cable and DBS providers would continue carrying broadcast signals as they do today, eliminating the need for subscribers to get new equipment. Case No. 2 assumed that cable and DBS providers would be required to carry broadcasters’ digital signals in substantially the same format transmitted, requiring subscribers to have new equipment to receive HD digital signals.

  • A set-top box subsidy for case No. 1 would cost about $460 million to $2 billion, depending on the cost of the box and whether there’s a means test.
  • A set-top box subsidy for case No. 2 would cost between $1.8 billion to about $10.6 billion.

The GAO also projected the cost of a set-top box subsidy based on a means test set at 200 percent and 300 percent of the poverty level and without a means test.

At 200 percent of poverty level, the results are:

  • Fifty percent of over-the-air households are eligible
  • At least 9.3 million households would be subsidized
  • At $50 per set-top box, the cost of subsidy would be $463 million
  • At $100 per box, the cost of subsidy would be $925 million

At 300 percent of poverty level, the results are:

  • Sixty-seven percent of over-the-air households are eligible
  • At least 12.5 million households would be subsidized
  • At $50 per set-top box, the cost of subsidy would be $626 million
  • At $100 per box, it would be $1.25 billion

With no means test, the results are:

  • One hundred percent of over-the-air households are eligible
  • At least 20.8 million households would be subsidized
  • At $50 per set-top box, the cost of subsidy would be $1.04 billion
  • At $100 per box, it would be $2.08 billion

All percentage estimates from the survey have margins of error of plus or minus six percentage points or less, and all cost estimates based on the survey data have margins of error of plus or minus 16 percent or less, according to Goldstein. The survey was conducted between August 2004 and January 2005.

For more information, visit www.gao.gov/atext/d05258t.txt.

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