The Federal Communications Commission said it would give EchoStar and Hughes -- a unit of General Motors -- 30 days to file an amended application for the merger, valued at some 18 billion dollars.

But the FCC move effectively kills the merger in its present form and could open the door to other buyers of DirecTV, including Rupert Murdoch's News Corp.

The companies said in a joint statement that were disappointed by the ruling, but added, "We will continue to work aggressively within the context of this FCC process to achieve approval of the merger."

FCC chairman Michael Powell said in announcing the action that "the combination of EchoStar and DirecTV would have us replace a vibrant competitive market with a regulated monopoly."

He added, "This flies in the face of three decades of communications policy that has sought ways to eliminate the need for regulation by fostering greater competition. I decline the invitation to turn our national communications policy back so many years."

EchoStar and Hughes, which control the only US national direct broadcast satellite service, have said that a merger would not eliminate competition because their services compete with cable. But the FCC ruled otherwise.

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

He added a tie-up would create at best a duopoly in areas served by cable, and monopoly in other areas and would lead to "higher prices, increased risk of collusion, fewer innovations and fewer benefits to consumers."

He said it would have been worse in rural areas and areas not covered by cable.

The companies were preparing to submit proposed structural changes to the deal before a high-level meeting with the Department of Justice on October 28, and had asked the FCC to delay a ruling until then.

An FCC spokesman said that the agency would consider a new application from EchoStar but noted that it was no "quick fix," and that a similar assessment by the Department of Justice -- which is also considering the proposal -- would have no bearing on the FCC judgment.

If the EchoStar/DirecTV deal fails, it would be a major victory for News Corp. chairman Murdoch, who had sought unsuccessfully to buy DirecTV.

GM has for some time sought to spin off Hughes, an electronics firm that grew out of its Hughes aircraft division into a satellite group that became the largest group in direct broadcasting.

DirecTV has some 10 million subscribers. EchoStar, based in Littleton, Colorado, owns the second-largest US satellite TV operation with 6.7 million subscribers.

Analysts said the decision was widely expected because of broad opposition from consumer organizations as well as rival businesses.

"This comes as no surprise," said independent equity strategist Barry Hyman. "There was so much opposition, from consumers and business, to the deal."

But Gene Kimmelman of Consumers Union said he was disappointed the FCC failed to find a way to allow the deal, saying that if structured properly it could have "helped consumers by making satellite TV a legitimate competitor to cable TV."

"Cable companies have a monopolistic grip on the vast majority of communities in America," he said. "Satellite companies haven't been able to compete head-to-head with cable because they cannot offer local TV channels in many places ... Satellite could have posed a serious threat to cable monopolies under the proper conditions."

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