- Charlie Ergen’s EchoStar is at the center of two FCC investigations
- The FCC may act slower as a result of Thursday’s blowout between President Trump and SpaceX owner Elon Musk
- New Street analysts revised their view on satellite sharing in the 2 GHz band
Does the blowup between President Trump and Elon Musk give the advantage to EchoStar, whose spectrum usage is under investigation at the Federal Communications Commission (FCC)? The short answer: No one knows for sure, but if the rift between Trump and Musk continues, it could be positive for EchoStar Chairman Charlie Ergen.
ICYMI: The FCC is investigating whether EchoStar is meeting buildout requirements to deploy 5G that it’s supposed to hit in order to keep its spectrum licenses. FCC Chairman Brendan Carr launched investigations into that, as well as EchoStar’s use of its 2 GHz/AWS-4 licenses. The Musk-owned SpaceX has been lobbying for the FCC to open up the 2 GHz band for sharing among satellite companies, something EchoStar has fought against.
If Trump continues to view Musk unfavorably – he threatened to end government contracts with Musk’s companies on Thursday – then the odds are higher that Carr will back off harming EchoStar in favor of SpaceX. However, if Trump and Musk make nice and go back to business as usual, all bets are off.
Wall Street certainly appeared to take notice. EchoStar shares rose 17% on Thursday as the battle royale between Trump and Musk played out on social media, but EchoStar shares were trading down about 6% this morning, illustrating just how topsy-turvy the situation stands.
What's happening is not typical
It’s worth noting that what’s happening is not typical. FCC staff historically take great pride in not being partisan in their decision-making, strictly sticking to the facts and ensuring whatever they do holds up in court. But the Trump administration has not been shy about using the powers of the government to back a private company, like selling Teslas on the lawn of the White House. Now we hear Trump may be selling the red Tesla he bought in March.
But back to EchoStar. Before Thursday, analysts at New Street Research were confident that the FCC’s Space Bureau would recommend the agency allow sharing between EchoStar’s terrestrial network and satellites in the 2 GHz band. That would be beneficial to SpaceX's Starlink.
“After all, Carr has consistently taken Musk’s side, both rhetorically and in actions at the FCC,” wrote New Street policy analyst Blair Levin in a June 6 note for investors. “Further, Carr started that proceeding just a few days after SpaceX requested it (though it was not the first time SpaceX had requested it.)”
However, considering the very public feud between Trump and Musk, New Street is revising that view. “While we think the Space Bureau will eventually propose satellite sharing in the band, we have a lower confidence level that that will be the outcome,” Levin said. “In addition, we think Carr and the Space Bureau may move more slowly so that they can determine how the Trump/Musk battle plays out.”
If Trump tells Carr to stop doing things that help Musk, Carr is expected to honor that request. But either way, Levin doesn’t think it will change what the Wireless Bureau does, which is to revoke some EchoStar spectrum licenses.
Industry analyst and Recon Analytics founder Roger Entner said that where EchoStar built out 5G, it should keep its licenses and where it didn’t, the licenses should revert back to the FCC. The presumption is the FCC will eventually make the licenses available to the Big 3 wireless carriers via an auction.
But that’s not necessarily how it’s going to play out. EchoStar decided not to pay a $326 million interest payment on May 30 and declined to pay another $183 million interest payment this past Monday, citing uncertainty due to the FCC review. The company has 30 days to make the payments before they constitute an event of default, leading to bankruptcy.
If the FCC attempts to take away licenses, Ergen will most assuredly fight that in court, and if EchoStar files for bankruptcy, that will put it in a stronger position to keep its licenses than if it doesn’t, Entner said.
“Charlie likes to be in court. It’s another opportunity for him to have fun and he often wins,” Entner said.
Levin agreed, saying that while he believes the FCC ultimately is likely to rule against Ergen in the two proceedings before it, Ergen will take it to court. “I think that if it were to go to court, Ergen would win both,” he told Fierce.
Now we wait to see what happens between Trump and Musk and how that spills over into the FCC. For his part, Ergen isn't publicly talking about it. Fierce reached out to EchoStar. “We have no comment at this time,” a spokesperson said.