The future of EchoStar’s wireless telecommunications service is at the center of conflicting governmental views on the competitive nature of the U.S. mobile telecom space brought to the forefront by T-Mobile US gaining approval for its UScellular acquisition.

The apparent conflict is between the U.S. Department of Justice (DOJ), which has legal oversight over merger and acquisition activity, and the Federal Communications Commission (FCC), which has oversight of wireless spectrum license ownership. The two government agencies recently granted their individual approval for T-Mobile US’ $4.4 billion purchase of regional wireless operator UScellular, but provided divergent commentary.

The gist of that commentary was that the DOJ found the deal was continuing a worrying trend toward spectrum consolidation by the nation’s three largest wireless operators: Verizon, AT&T, and T-Mobile US. The FCC found no issue with the spectrum moves and instead highlighted the importance for operators to have access to as much spectrum as possible in order to provide more robust services.

There also seemed to be a difference of opinion in terms of potential competition in the space. The DOJ’s language indicated the need for a more formidable No. 4 option in the market that controls and operates its own spectrum licenses and network, while the FCC indicated that competition can come from mobile virtual network operators (MVNOs) that lease access from established providers.

EchoStar’s precarious position

EchoStar is currently the nation’s fourth-largest operator that owns and operates its own network. However, the operator has struggled to grow its business. This is highlighted by its roughly 7 million wireless connections compared to the more than 100 million connections controlled by each of the three largest operators.

EchoStar launched its commercial 5G network in mid-2022, just hitting a government-mandated deadline tied to some of its spectrum licenses. That network is using a portion of the approximately $35 billion worth of spectrum licenses EchoStar has acquired.

However, EchoStar is operating in a fraught fiscal position due to an ongoing battle with the FCC over already granted deadline extensions for some of EchoStar’s wireless spectrum licenses. Specifically, over EchoStar’s 2 GHz licenses that have become a point of contention for satellite-to-device communications.

EchoStar’s Dish subsidiary initially acquired those spectrum licenses more than a decade ago from financially strapped would-be satellite communication provider TerreStar Networks and its acquisition of DBSD North America. Dish noted that it planned to use that roughly 40-megahertz of spectrum to power a satellite-to-device service.

However, spectrum licenses have FCC-mandated buildout requirements designed to ensure that a license owner is putting those licenses to work for the common good and not just sitting on those licenses to sell at a later date. EchoStar has received a handful of FCC extensions on some of its licenses as it has attempted to launch commercial services and has used some of its 2 GHz spectrum to support its terrestrial-based 5G network.

This notion came to a head earlier this year when the FCC’s Wireless Telecommunications Bureau (WTB) opened comments on EchoStar's spectrum license management. FCC Chairman Brendan Carr has openly questioned EchoStar’s management of those spectrum licenses.

Is a spectrum sale inevitable?

Analysts note that the FCC’s position combined with EchoStar’s perilous financial position is angling toward pressure on EchoStar to sell its spectrum licenses.

“It is widely believed (and we agree) that Carr is hoping that the two public notices he started would cause financial stress to [EchoStar] so that it would have the impact of forcing [EchoStar] to end its efforts to become a fourth wireless network and sell its spectrum,” NewStreet Research U.S. policy and regulation analyst Blair Levin noted in a recent report.

Levin’s colleague Jonathan Chaplin added that the force of this pressure could impact an actual outcome.

“Our thesis hinges on [EchoStar] being able to sell its spectrum to the three national carriers,” Chaplin wrote. “If EchoStar can’t sell spectrum to the three national carriers, we don’t think they will get full value from other buyers.”

EchoStar noted in a recent Securities and Exchange Commission (SEC) filing that it had made a past-due payment on a handful of secured notes, but warned that it would not be making scheduled interest payments on another handful of secured notes with due dates of July 1.

EchoStar explained that the FCC investigation harmed its ongoing deployment and "threatens its viability as a wireless provider as well as endangers the video and broadband satellite services upon which millions of consumers rely." The company used that argument to forgo $326 million in interest payments that were due in late May and early June.

EchoStar Chairman Charlie Ergen and Carr met in June in an attempt to negotiate a solution, a plan that later received support from President Donald Trump, who EchoStar in its latest filing “encouraged the parties involved to reach an amicable resolution.”

That filing noted that while “no such resolution has been achieved, and it is possible that no such resolution will ultimately be achieved, … based on the current discussions, [EchoStar] should in good faith cure the non-payment defaults under the indentures by making the interest payments.”

“These actions will further extend the timeline for EchoStar to explore an acceptable resolution of the FCC’s stated concerns in a manner that minimizes disruption to the company’s businesses and lifts the regulatory uncertainty created by the inquiries,” EchoStar notes in the filing, which also ends with a more ominous, “all of the company’s strategic options remain under consideration as it continues to explore potential resolution pathways.”

NewStreet Research’s Chaplin further highlighted EchoStar’s complicated spectrum ownership position that was bolstered by the DOJ requiring T-Mobile US to divest some Sprint assets as part of approving the former operator’s acquisition of the latter in 2019. That deal consolidated the country’s wireless carrier base from four to the current three, with the DOJ’s provisions targeted at helping EchoStar build out its Dish Network subsidiary to be a competitive No. 4 entrant.

“The DOJ doesn’t have jurisdiction over spectrum license transfers outside of a merger. This is the FCC’s domain,” Chaplin wrote. “Carr didn’t share the DOJ’s view on the need for a fourth carrier in 2019, and he doesn’t now. We are fairly certain that this FCC will have no issue with EchoStar selling licenses to the three national carriers. We believe Carr actively wants this.”