CEA Warns of Box Shortages After Feb. 17

The Consumer Electronics Association warned regulators this week that extending the DTV transition deadline to June could result in a shortage of DTV converter boxes.

In testimony before FCC the day after Congress voted to move the deadline to June 12, Michael Petricone, senior vice president of government affairs for CEA, told the commission that retailers had made “significant orders” for converter boxes in anticipation of increased demand prior to the original Feb. 17 analog shutoff. CEA estimated that at the beginning of 2009, U.S. retailers had an inventory of between six and 12 million converter boxes, or approximately one-half the total number of boxes sold since the beginning of the program, (NTIA estimates that 18 million boxes have been sold so far).

Planning for production and inventories for a one-time product creates unique problems for manufacturers, Petricone said. To avoid shortages, the association recommended that the NTIA, which is managing the converter box program, only limit availability of vouchers exclusively to over the air households or allow vouchers to be used for converter boxes that are currently not eligible for the program or to the purchase of DTV sets under $300 or for cable or satellite services.

As of this week, consumers have redeemed coupons to purchase approximately 22.6 million converter boxes, according to the NTIA. Nearly 4.5 million coupons have been redeemed since the beginning of the year, leaving CEA to estimate that between three and six million boxes remain in inventory. Petricone said that the extension of the deadline will result in slower coupon redemptions over the next several months.

“CEA believes that the extension of the transition date to June 12 could reduce daily coupon redemption rates in the coming weeks,” Petricone told commissioners. “Consumers ramped up daily redemptions over 50 percent in the weeks leading up to the Feb. 17 transition date; now that the date has been extended by four months, we anticipate that daily redemption rates will fall off and then accelerate again as the June 12 transition date approaches.”

If daily coupon redemptions stay at 115,000 and with only 3 million boxes left in stock, Petricone said the inventory of boxes could run out by the end of February. However, what is more likely, CEA expects, is that if there are 6 million boxes in inventory and the same rate of coupon redemption continues, the supply of converter boxes at U.S. retailers would run out in mid-April. The association based its calculations on an estimated 11.5 million over the air households in the United States.

Anticipating the Feb. 17 deadline, converter box makers ended production of the boxes in January, according to the CEA, which predicted that new supplies of converter boxes could appear on retail shelves by mid-April. Noting that ramping up production can take up to 20 weeks, Petricone said this represents “a highly accelerated cycle of only 60 days.”

Currently, the converter box program, which ran out of money in December, has a waiting list of approximately 3.7 million, with additional funding tied up in the stimulus package now being debated on Capitol Hill.