Hold Prelaunch Test Rollout of DTV Coupons and Boxes, Vendor Urges NTIA

The vendor, Garden City Group, of Weston, Fla., proposed the test in comments it filed in NTIA’s request for information (RFI), which closed Sept. 15 (CED Sept 22 p1). In the RFI, NTIA asked those experienced with similar projects to say how they would run the coupon program efficiently and with minimal waste, fraud and abuse. Fifteen vendors submitted comments, and copies were released to Consumer Electronics Daily as a result of a Freedom of Information Act (FOIA) request we filed at NTIA Sept. 20. Confidential portions of the documents -- most commonly, the information on cost estimates -- were withheld or blacked out, as is allowed under the FOIA.

The 15 vendors responding: (1) Archway Mktg. Services, Valencia, Cal.; (2) Booz Allen Hamilton, McLean, Va.; (3) Choicepoint Govt. Services, McLean, Va.; (4) CLC Payment Solutions, Wichita; (5) Deloitte Financial Advisory Services, McLean, Va.; (6) Garden City Group Inc., Weston, Fla.; (7) JPMorganChase, N.Y.; (8) Navigant Consulting Inc., Chicago; (9) PhePhiPhoPhum Omnitech, Nashville; (10) Pearson Govt. Solutions, Arlington, Va.; (11) Poorman- Douglas Corp. and Hilsoft Notifications, subsidiaries of Epiq Systems, Kansas City, Kan.; (12) Sodexho, Gaithersburg, Md.; (13) Solix, Whippany, N.J.; (14) Stored Value Systems, Louisville; (15) Young America Corp., Young America, Minn. The Assn. of Public TV Stations also filed, telling NTIA that public broadcasting’s “roots and national scope are ideal tools” for a “comprehensive” DTV consumer education campaign that’s “desperately needed” if the DTV switchover is to succeed.

In the RFI, NTIA sought vendors’ advice on the feasibility of its “proposed project objectives and time frames” for doing the job Congress handed it. Vendors were told in the RFI to strut their qualifications by listing their “corporate capability and approach, proposed products, services and solutions, experience and rough order of magnitude cost estimates.” NTIA won’t formally seek contract bids until a request for proposals that’s expected Q1. It plans to award the contract by June 2007.

Most of the vendors said they were well versed in handling projects similar in scope and complexity to the DTV coupon giveaway. But none claimed to have done a project just like it, and most had no direct experience working with CE retailers. Garden City Group, the vendor that proposed the prelaunch trial, said it’s qualified because it has done “highly scalable, cost-effective complex claims administrative services for more than 2 decades.” Its forte is mailing millions of claim forms in high-profile class- action settlements, it said.

Poorman-Douglas said it mailed 84 million pieces of first-class postage last year -- mainly sensitive legal and financial documents. That included $678 million in checks, wire transfers and negotiable vouchers it mailed as the administrator of settlement and bankruptcy funds. Its past projects have included the Swiss banks holocaust notice program, it told NTIA. Another vendor, CLC, under contract with the American Red Cross, performed emergency lodging and payment processing services for victims of Hurricanes Katrina and Rita, it told NTIA. “This program has included communications with over 30,000 hotel vendors and online processes to reduce the time to get evacuees into hotels and to get vendors paid on a timely basis,” CLC said.

Most who stated a preference in NTIA’s separate rulemaking said electronic coupon cards were the way to go instead of paper because they were less prone to fraud. But vendors in the RFI said they could go either route. For example, JPMorgan Chase recommended a paper coupon “with image components to enable greater efficiencies.” It said it also could give an “alternative rebate offering” based on a debit card.

Paper DTV coupons would be “very similar to a traditional payment process we provide in a daily basis to thousands of our corporate clients,” JPMorgan Chase said. It can “easily accommodate a coupon print and distribution solution” for NTIA, it said: “JPMorgan Chase’s tool set includes the ability to prevent duplicate coupon issues by performing validation checks against specific attributes in the issue file provided to the bank by the verification entity prior to printing and mailing. Our proven process will help to minimize fraud, waste and abuse risk associated with a coupon program. All print transactions are recorded within our system and available for audit purposes.”

Another vendor, Stored Value Systems (SVS), is the leading provider of electronic cash and gift cards, it told NTIA. It’s also unique among its rivals for offering “card and carrier management and production services,” SVS said. The DTV coupon program “could leverage the same technologies” as those used on cards distributed to the USDA’s WIC program recipients. Those cards -- which SVS also supplies -- screen for eligible groceries as a DTV coupon card would screen for eligible boxes, it said.

SVS suggested the cards list barcodes of the DTV converter boxes eligible for subsidies. “The NTIA-approved product could be managed similar to how states manage the WIC database,” SVS said. “Conceivably, NTIA or its contracted box certifier could be adding approved manufacturer converter boxes throughout the program term,” it said. A specific manufacturer converter box might not be on the list of approved devices at the time a coupon card is issued to a requesting household, but could be coupon-eligible by the time a household presents the coupon for redemption at a certified retailer, it said: “With online, centralized authorization, however, all purchases would be validated against a single certified box list maintained real-time.”

Several vendors told NTIA the schedule was very tight, though doable, but urged the agency to move up the contract award date from June 2007. Doing so would give the winning contractor more time to prepare before consumers begin requesting the coupons Jan. 2008 -- the date Congress mandated. “With thousands of redemption locations, millions of applications, and hundreds of millions of dollars of disbursements, this program is large, technically complex and highly visible,” said Booz Allen Hamilton.

The schedule allows only 6-8 months “to have a fully operational system ready to support customer coupon requests” beginning Jan. 2008, said Deloitte Financial Advisory Services. The CE Retailers Coalition (CERC) told NTIA in its rulemaking comments that there’s even less flexibility in the schedule than that. It called on NTIA to require that vendors have their operational systems in place by Sept. 2007 so as not to be burdened with MIS headaches at the height of the crucial 2007 holiday selling season.

The tight schedule is one of the coupon program’s “more obvious risks,” Deloitte said. “Implementing an iterative development requiring incremental build and verification cycles would make it extremely challenging to field an operational system in this timeframe.” It proposed a 3- bullet solution that’s blacked out in our copy.

Deloitte warned of an “additional risk that is hard to predict and results from human behavior.” If consumers “procrastinate” or believe there will be a cost savings by waiting until late in the program, “a last-minute surge in coupon orders and processing could result,” Deloitte said. It suggested the program include “techniques to help drive these consumer behaviors,” including incentives for “early participation.” Public service announcements warning of limited funding and supply might be another remedy, it said.

Another Deloitte worry: “Retailers are likely to discount boxes toward the end of the program schedule to help move inventory.” It suggested “specific agreements or controls be put in place to prevent this from occurring” or risk putting further strain on the system. Such measures to bar or limit discounts or closeouts would seem to raise huge red legal flags. CERC attorneys wouldn’t comment but referred us to the group’s NTIA rulemaking comments in which it said it or its members won’t discuss pricing or marketing plans.