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Investing.com -- EchoStar Corporation (NYSE: SATS) shares dropped 8.7% after the Wall Street Journal reported that the Federal Communications Commission has begun an investigation into the company’s compliance with federal requirements for building a nationwide 5G network. This news has raised concerns among investors about potential regulatory challenges and the future of the company’s network expansion plans.
The FCC (BME:FCC)’s inquiry centers on whether EchoStar has met the milestones set by the U.S. government in 2019 for maintaining valuable cellular licenses. These milestones are part of an effort to ensure that EchoStar, which owns Dish Network (NASDAQ:DISH) and Boost Mobile, delivers on its promise to provide high-speed wireless services, including in rural areas. The report indicated that although EchoStar claims its 5G network covers over 268 million people and has met all regulatory requirements, the FCC is seeking comments on a petition to reconsider the decision to give the company more time to build its network.
EchoStar’s chairman and co-founder, Charlie Ergen, has stated that the company has long worked collaboratively with the FCC and emphasized that EchoStar’s network contributes to creating American jobs. Despite this, the FCC’s investigation follows a period of challenges for EchoStar, including a shrinking subscriber base for Boost Mobile since its acquisition from Sprint five years ago.
FCC Chairman Brendan Carr expressed in a letter that the buildout obligations were structured to prevent spectrum warehousing and to expand access to high-speed wireless services. The investigation by the FCC could take years and may not necessarily lead to any immediate changes. However, the market’s reaction to the news suggests investors are weighing the potential risks associated with the regulatory scrutiny.