NEW YORK (CNN/Money) - The Justice Department Thursday sued to block the proposed $26 billion marriage between the nation's two satellite television providers, saying combining DirecTV and EchoStar's DISH Network would hurt customers by stifling competition.

The DOJ and 23 states filed a civil lawsuit to block the deal three weeks after the Federal Communications Commission voted to halt the purchase because of its own concerns the combination would monopolize the satellite TV market.

"This merger would create a monopoly in those areas where cable television is not available, thereby eliminating the only competitive choice for millions of households," Charles A. James, assistant attorney general in charge of the Antitrust Division, said.

James said EchoStar's purchase of Hughes "would leave tens of millions of households... with a reduction from three to two competitive choices."

Hughes Electronics Corp., the El Segundo, Calif.-based General Motors unit that owns DirecTV, and EchoStar Communications Corp. (DISH: Research, Estimates), which operates the DISH Network, have faced anti-competitive questions since announcing the $26 billion deal in October 2001.

To allay competition concerns, the companies had offered to sell some of their satellite capacity to Cablevision Systems Corp. (CVC: up $0.29 to $9.63, Research, Estimates), an entertainment conglomerate and seventh-largest cable television operator.

But the DOJ, which filed suit in the U.S. District Court in Washington, D.C., said that measure was not "sufficient replacement for the vigorous competition that now exists between Hughes and EchoStar."

Responding, Hughes called the DOJ move disappointing and argued that the combination would be good for consumers by offering new programming, new services like HDTV and video-on-demand, and potentially hold the opportunity for residential broadband.

"We will consult with EchoStar to jointly determine our next steps," Hughes said. An EchoStar spokesmen could not immediately be reached for comment.

The proposal is not yet dead, as the two sides still could still salvage it in court.

But Matthew Harrigan, who covers EchoStar for Janco Partners, doubts they can come up with a new combination acceptable to regulators.

"This was broadly expected, to say the least," Harrigan said of the DOJ move. "There's very little likelihood that you can tweak this to get it to work."

A dead deal would subject EchoStar to a $600 million breakup fee to Hughes. It also opens the door for another buyer of Hughes.

Analysts say media company News Corp. (NWC: Research, Estimates) may be interested in buying the operator of DirecTV. Liberty Media (L: Research, Estimates) also has been named as a suitor.

Shares of EchoStar (DISH: Research, Estimates), based in Littleton, Colo., rose 50 cents to $20.32, while Hughes Electronics (GMH: Research, Estimates) fell 7 cents to $9.70. EchoStar has fallen 25 percent this year while Hughes is off 35 percent.

States also filing suit to block the merger include Arkansas, California, Connecticut, Hawaii, Idaho, Illinois, Iowa, Kentucky, Maine, Massachusetts, Mississippi, Montana, Missouri, Nevada, New York, North Carolina, North Dakota, Oregon, Pennsylvania, Texas, Vermont, Washington and Wisconsin.