EchoStar Expected to Get FCC OK to Pursue Spectrum Deals

In a letter to EchoStar dated Monday and included in an SEC filing, FCC Chairman Brendan Carr said he has directed agency staff to dismiss VTel's reconsideration petition regarding EchoStar's 5G buildout and to confirm that EchoStar has exclusive mobile satellite service (MSS) and terrestrial rights over the AWS-4 spectrum. The agency in May began proceedings into how much the company was using the 2 GHz band, which includes AWS-4, for MSS and looking into the deadline extensions EchoStar received for its 5G network buildout (see 2505130003).

Carr's letter also said he had directed staff to "find that relevant FCC buildout and other related obligations have been satisfied by EchoStar in view of the company’s current FCC milestones." It was sent the same day EchoStar announced a $17 billion cash and stock agreement with SpaceX to sell the AWS-4 and H-block spectrum (see 2509080052), which AT&T CEO John Stankey said Tuesday didn't come as a surprise (see 2509090055). AT&T's $23 billion spectrum deal with EchoStar was announced last month (see 2508260052).

In a note, New Street Research's Blair Levin wrote that Carr's letter clears the way for the AT&T and SpaceX transactions, as well as potential future EchoStar spectrum deals. It seemed likely when EchoStar announced the AT&T deal that the FCC would have believed that it had accomplished its mission of forcing a spectrum sale, he said, and that the agency wouldn't pursue further enforcement actions that would delay spectrum reassignment or expose EchoStar to fines. The letter confirming that the probes are over ends any potential concern for a finding of liability that could diminish what compensation EchoStar receives or delay the transactions from being approved, Levin noted. The letter also confirms that SpaceX will own both the AWS-4 terrestrial and MSS rights, he added.

The end of the probes is "a positive sign the FCC is favorably inclined to approve the deals," Summit Ridge Group President Armand Musey told us, adding that there's still a question about whether the DOJ will weigh in. Musey also said EchoStar might not see the same strong demand for its AWS-3 licenses. Most of the industry has been focused on low-band spectrum for coverage and upper-midband spectrum for capacity. For terrestrial mobile, the 1 GHz-2.3 GHz range "has become a bit of a no-man's land -- hardly any transactions since Auction 97 in 2015."

The FCC and DOJ will clear the SpaceX deal, Recon Analytics’ Roger Entner wrote Tuesday, because the FCC wants the spectrum used and DOJ sees no new terrestrial mobile concentration. With SpaceX buying EchoStar's AWS-4 spectrum, the FCC's yearslong efforts to foster a fourth wireless carrier are "officially dead," he said in a thread on X. EchoStar "did not choose to sell" but rather had to, with company debt and losses killing its terrestrial wireless ambitions.

Wireless Competition

Now T-Mobile -- through its SpaceX direct-to-device partnership -- gets the ability to more cheaply provide voice and data service in rural areas, Entner said. Verizon and AT&T "need a countermove," such as aligning with AST Spacemobile or buying access to SpaceX. Without direct-to-device (D2D) service at scale, costs of providing access in unserved rural areas remain noncompetitive, he said.

William Blair's Louie DiPalma wrote investors Tuesday that the EchoStar spectrum could increase throughput of Starlink's existing D2D offering by 20 times, making it closer to 5G-like. It's also possible SpaceX will try to launch its own stand-alone cellular service as a bundle with its Starlink Ku-band satellite broadband service, he said. SpaceX could set up a mobile virtual network operator (MVNO) relationship with T-Mobile that uses the latter's network in certain indoor locations and the Starlink Ku-band network in others, DiPalma noted.

Musey told us a terrestrial mobile play by SpaceX "would require a lot more spectrum." The 600 MHz and 3.45 GHz licenses that AT&T is buying "was the only collection block of low and midband spectrum available that a new mobile operator would need."

The AT&T and SpaceX deals have turned EchoStar from being nearly bankrupt to becoming a way for investors to have indirect exposure to SpaceX, a highly sought-after private company, LightShed's Walt Piecyk wrote Monday. He predicted that EchoStar will likely liquidate its remaining spectrum holdings and sell its legacy pay-TV assets -- the result being a small legacy business, a lot of cash and a sizable stake in SpaceX.

Meanwhile, SpaceX now has spectrum that lets it strike D2D deals directly with device makers and opens the door for "an even deeper push into wireless," Piecyk said. By entering into an MVNO agreement with a wireless carrier, SpaceX could be a wireless operator without huge capital expenditure and accelerate adoption of its AI platform Grok, he added. While carriers might resist an MVNO deal, Carr "has demonstrated an ability to 'incent' structural changes when he sees benefit."

The FCC forcing a sale of underused spectrum licenses "isn't the worst outcome here," wrote Jeffrey Westling, the American Action Forum's director of technology and innovation policy, on Tuesday. "Forcing 4 nationwide carriers was not supported by the economics," and taking back the spectrum for reauction would have been a lengthy process.

Xona Partners' Frank Rayal wrote Monday that EchoStar paid just over $4.4 billion for the spectrum assets that it's selling to SpaceX for $17 billion, and more deals seem likely for its AWS-3 spectrum. He said that with the AWS-4 spectrum, SpaceX "gained a major advantage" in D2D competition.