FCC approves $40 billion sale of EchoStar spectrum to SpaceX and AT&T

The U.S. Federal Communications Commission said Tuesday it has approved the $40 billion sale of EchoStar's wireless spectrum to SpaceX and AT&T.

EchoStar is selling approximately 50 megahertz of its nationwide spectrum to AT&T for their 5G network for $23 billion, including 30 MHz of mid-band and 20 MHz of low-band spectrum. It then goes on to sell 65 megahertz of its spectrum to SpaceX for $17 billion to support the supply of devices on equipment from the next generation Starlink.

FCC conditions approval on record $2.4 billion escrow

The US Federal Communications Commission (FCC) yesterday approved the USD40 billion sale of EchoStar's wireless spectrum to SpaceX and AT&T $T, citing the decision's rationale of boosting connectivity across the US. At the same time, the FCC is requiring EchoStar to set up a $2.4 billion escrow account to cover potential obligations to suppliers related to the licenses.

EchoStar is selling approximately 50 megahertz of nationwide spectrum to AT&T for $23 billion for its 5G network, including 30 MHz of mid-band and 20 MHz of low-band spectrum. AT&T will acquire licenses covering more than 400 markets across the U.S., according to a Reuters report.

SpaceX is buying 65 megahertz of spectrum for $17 billion to boost its next-generation Starlink service's direct-to-device offering. According to a Fierce Network analysis, SpaceX will gain exclusive rights to use the spectrum for hybrid satellite and terrestrial architectures.

Escrow requirement sparks dispute with EchoStar

EchoStar $SATS said in a statement, "The FCC has continually praised EchoStar's spectrum sales to AT&T and SpaceX as pro-competitive transactions serving the public interest, and we appreciate its approval today. However, these approvals come with an unprecedented involuntary escrow condition. We are analyzing this requirement and evaluating next steps."

EchoStar argues in its letter that its subsidiary Dish Wireless is not entitled to any proceeds from the sale of EchoStar spectrum and that it is exempt from contractual obligations due to force majeure - even though parent EchoStar is getting $40 billion (or more) for the spectrum.

EchoStar said in a filing Monday that it has already reached agreements with hundreds of companies and paid out hundreds of millions in the process. However, according to a Broadband Breakfast report, subsidiary Dish Wireless continues to inform business partners that it is exempt from contractual obligations.

AT&T gains strategic advantage against competitors

The FCC said AT&T's low-band spectrum will expand coverage across the United States, particularly in rural and underserved areas. The FCC also requires AT&T to build out its network years faster than the company originally requested.

According to Morningstar's analysis, the acquired spectrum provides AT&T with mid-band capacity across the U.S. that it can use very quickly to close the gap with competitors T-Mobile and Verizon. EchoStar is giving up about a third of its total spectrum holdings, including most of its low-band licenses, effectively removing itself as a long-term threat in the traditional wireless market.

"We've already deployed mid-band spectrum at record speeds, providing added capacity and stronger performance to our customers," said an AT&T spokesperson. "We look forward to closing the transaction, deploying low-band spectrum and continuing to invest in a network that keeps people and communities connected."

SpaceX boosts satellite connectivity with flexible rules

The FCC is also granting relief to SpaceX to address the convergence of wireless and satellite broadband. The announcement allows SpaceX to use its new spectrum flexibly for terrestrial, space and hybrid network architectures.

"Today's decision allows SpaceX to use its new spectrum flexibly for terrestrial, space and hybrid network architectures. This flexibility is subject to first-of-its-kind performance commitments designed to be technology neutral," the agency said.

The additional spectrum provides SpaceX with exclusive usage rights that can support direct connections between satellites and standard mobile phones, potentially transforming the way users access broadband in remote locations or during emergencies. According to a Cord Cutters News report, this could be invaluable for disaster response, maritime operations and underserved communities.

Transaction rounds out EchoStar's debt crisis

Other factors contributing to the FCC investigation included more than $500 million in outstanding interest payments and the completion of DirecTV's acquisition of Dish Network. EchoStar is reportedly sitting on more than $20 billion in debt.

EchoStar's ambitions to become the fourth major U.S. nationwide mobile carrier are over. Its subsidiary Dish built an advanced network based on Open RAN technology, but it proved slower and more complicated than expected.

"Today's approval, along with other secondary market transactions and FCC auctions already in the pipeline, puts America on track to free up approximately 300 megahertz of low- and mid-band spectrum by the end of 2027," said FCC Chairman Brendan Carr. "In the coming months, we will take additional steps to ensure that companies looking to innovate in direct device-to-device connectivity have the regulatory framework and spectrum resources to match."