US regulators have blocked EchoStar Communication's proposed acquisition of its rival satellite television operator Hughes Electronics.

The communications regulators, the Federal Communications Commission (FCC), argued that the $16bn (�10bn) acquisition would hamper competition in the industry and create a monopoly.

The deal will now be referred to the law courts, where both companies could argue their case.

But analysts had anticipated that the deal would not be approved, and say major changes would need to be made before it could be reconsidered.

No quick fix

There are some significant public interest harms here that require remedy

FCC

Hughes Electronics operates the satellite TV provider DirecTV, the main provider in the US with 10 million subscribers.

EchoStar owns the number two service with 6.7million viewers.

The FCC voted unanimously against the proposed merger of the two satellite companies, saying it was not in the public interest.

"The combination of EchoStar and DirecTV would have us replace a vibrant competitive market with a regulated monopoly," said FCC chairman Michael Powell.

Both companies now have 30 days to submit an amended version of their proposal, which is now being investigated by the US Justice Department's anti-trust division.

But an FCC spokesman said the companies would find it difficult to create a suitable deal.

"There are some significant public interest harms here that require remedy," said FFC media chief Kenneth Ferree, "It's not clear to me that there is any quick or easy fix to that".

Good news for Murdoch?

EchoStar and Hughes had argued that their services competed not with eachother, but with cable operators.

Mr Murdoch could try to bid for DirecTV again

The FCC thought otherwise: "The record shows that EchoStar and DirecTV compete vigorously, not only with cable, but with each other," said Mr Powell.

However, a failed merger between EchoStar and Hughes could be good news for News Corporation chairman Rupert Murdoch.

Mr Murdoch has previously sought, unsuccessfully, to merge Hughes' DirecTV business with his SkyGlobal network.

A failed merger with EchoStar could leave the door open for the media tycoon to make another bid approach.