Huge cable and internet phone provider faces Chapter 11 bankruptcy

It's not a great time to be a cable company in a broad sense.

For decades, cable had sort of two monopolies. First, it was the only real option if you wanted an expanded universe of channels.

Yes, you could get an old-school giant satellite dish and pick up feeds from other countries, but unless you spoke multiple languages, that wasn't a viable alternative.

In addition, when most major cable companies expanded, they had to spend millions to wire each market. In exchange for doing that, they asked for (and generally received) exclusivity.

At first, they agreed to some pricing caps, but by the 2000s, those started going away. Cable prices were high because people had no choices and, to paraphrase the 1980s, “wanted their MTV.”

Now, however, the internet has made cable less needed and less exclusive.

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“Data revealed that the number of traditional pay TV households in the United States stood at around 58 million in 2023. This figure will likely drop further over the next few years and amount to less than 41 million by 2028,” according to data from Statista.

Fewer people pay for traditional cable. Some of that has migrated to streaming services like YouTubeTV and Sling which off cable-like packages and “skinny bundles” of channels for lower prices (albeit with the cost being much more per channel in most cases).

Satellite was once a needed alternative to wired cable.

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EchoStar has a lot of exposure

EchoStar used to have a unique place as a cable and internet provider that offered service in markets not served by traditional. Cable and Internet service provider.

The company's HughesNet brand, for example, offered satellite internet to rural areas. It was slow and pricey, but also a lifeline to the markets it served.

Elon Musk's Starlink has made HughesNet irrelevant as it's now not the best choice for nearly any consumer.

The company does own Boost Mobile, which operates in the crowded prepaid wireless space and Dish, the satellite/internet cable company, as well as Sling, its pure digital sister company.

Boost Mobile has been an asset for the company.

“Wireless’ performance remains strong with 150,000 subscribers net adds in the first quarter as compared to an 81,000 net loss in the same period of 2024,” CEO Hamid Akhavan said during its first-quarter earnings call.

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The company did not share subscriber numbers for its cable or internet businesses, but cable saw revenue drop by $126 million while internet revenue was down $46 million.

Now, due to an issue with the Federal Communications Commission (FCC) EchoStar has threatened to file for Chapter 11 bankruptcy.

Why an EchoStar bankruptcy could happen

EchoStar (SATS) has said that it won't make an interest payment because of an FCC inquiry into its 5G network.

“The move could potentially set the stage for EchoStar to seek Chapter 11 bankruptcy protection – and blame the FCC for it,” according to Light Reading.

FCC Chairman Brendan Carr has launched a “a review of EchoStar's compliance with its federal obligations to provide 5G service throughout the United States per the terms of its federal spectrum licenses,” Carr wrote in a letter to EchoStar's Charlie Ergen, who runs EchoStar and its Boost Mobile business.

EchoStar skipped a $326 million interest payment, according to a May 30 filing with the US Securities and Exchange Commission. The company did share that it has a 30-day grace period to make the interest payment “before such non-payment constitutes an Event of Default”.

“This uncertainty over our spectrum rights has effectively frozen our ability to make decisions regarding our Boost business, including continued network buildout and adversely impacts our ability to implement and adjust our overall business plan and requires us to re-evaluate the deployment of our resources,” EchoStar explained in today’s filing.