Why EchoStar Stock Is Falling to Earth Today

The Federal Communications Commission (FCC) intends to launch a probe into EchoStar's (NASDAQ: SATS) compliance with government requirements for how it uses spectrum, as rivals line up for access to the bandwidth.

Investors are concerned, sending EchoStar shares down as much as 13% for the day and down 9% as of 11:30 a.m. ET.

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The government wants to see results

EchoStar is a satellite television and communications company that has been trying to grow its cellular business. The company owns Boost Mobile, the nation's fourth-largest wireless carrier, and has said it intends to use its vast spectrum holdings to transform Boost into a viable competitor to the nation's three largest wireless operators.

But the FCC is apparently concerned that EchoStar is not moving fast enough. The Wall Street Journal reports that the government agency would investigate EchoStar's compliance with federal requirements to build a nationwide 5G network with the spectrum in compliance with milestones set in 2019.

In 2024, the commission altered some of the requirements to give EchoStar more time. But FCC Chairman Brendan Carr, in a letter to EchoStar chairman Charlie Ergen, said the FCC will seek comments on a petition to reconsider that decision.

Is EchoStar stock a buy?

SpaceX, the satellite company founded by Elon Musk, has been lobbying for use of EchoStar's 2-gigahertz spectrum band for years. Given Musk's newfound influence in Washington, EchoStar investors need to take this threat seriously.

That said, assuming the FCC goes through its normal processes, there is little risk of EchoStar losing its access to that spectrum overnight. SpaceX has previously asked only to share the spectrum, and not to take it away from EchoStar completely, meaning Ergen should have time to continue to build out Boost.

The bigger question is whether Boost can succeed in establishing itself as a viable competitor to AT&T, Verizon Communications, and T-Mobile. Until there are real signs of progress on that front, investors would be wise to look elsewhere.

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool recommends T-Mobile US and Verizon Communications. The Motley Fool has a disclosure policy.