The converter box coupon program was intended to subsidize converter boxes for consumers who may find themselves unable to receive digital signals after the transition. By making consumers largely indifferent between $0 and $40, however, the program appears to have hindered price competition, allowing retailers to charge between $21 and $34 more than they would if the coupon program did not exist. In other words, the coupon program largely benefits retailers, not consumers. This result does not necessarily mean that the program is wasteful. Raising awareness of the transition among people who have televisions that can receive only analog transmission is valuable. The program thus has benefits to the extent that the program helps accomplish that goal. In addition, because not all retailers accept the coupon some price competition remains, meaning that consumers do see some of the benefit. Nevertheless, this analysis reveals that the coupon program has an unintended consequence: keeping retail prices higher than they would be otherwise. As a result, the real winners of the coupon program appear to be retailers, who can earn an extra $21 – $34 by accepting the coupon.
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Scott Wallsten is President and Senior Fellow at the Technology Policy Institute and also a senior fellow at the Georgetown Center for Business and Public Policy. He is an economist with expertise in industrial organization and public policy, and his research focuses on competition, regulation, telecommunications, the economics of digitization, and technology policy. He was the economics director for the FCC's National Broadband Plan and has been a lecturer in Stanford University’s public policy program, director of communications policy studies and senior fellow at the Progress & Freedom Foundation, a senior fellow at the AEI – Brookings Joint Center for Regulatory Studies and a resident scholar at the American Enterprise Institute, an economist at The World Bank, a scholar at the Stanford Institute for Economic Policy Research, and a staff economist at the U.S. President’s Council of Economic Advisers. He holds a PhD in economics from Stanford University.
