That long-debated question on Wall Street took on new urgency today after Bernstein Research’s Craig Moffett bet that the companies will make a deal, and that it will be approved by the FCC and antitrust officials. This morning he raised his target stock price for each company by $9 (to $72 for DirecTV and $37 for Dish) “to reflect the increased probability of a merger.” Why now? Dish seems to have leverage over the FCC, which wants to promote competition in broadband and telephony more than it wants to block media mergers. Charlie Ergen’s company has been amassing wireless spectrum that “offers the prospect of either a fixed wireless broadband network to compete with cable, or, alternatively, a new competitor for mobile wireless to compete with Verizon and AT&T,” Moffett says. “Either would be a tremendous regulatory (and political) win” for the government. By year-end regulators likely will help their cause, and Ergen’s, by giving Dish permission to use its spectrum for terrestrial services. But the approval will include a timetable requiring Dish to deploy its services quickly. That gives Ergen the opportunity to tell regulators that he’ll proceed — but only if they enable Dish to combine with DirecTV, Cost savings and other benefits could amount to $3.5B a year, which Moffett says is “a staggering sum.”

The analyst acknowledges that regulators would swallow hard at the thought of creating a combined entity that would have more than 34M video subscribers — 50% more than Comcast’s 22M. But he says that officials might warm to the idea if the satellite companies agreed to share their savings with customers, which “would put downward pressure on industry pricing.” Sure, it would leave just one video provider for rural homes that cable companies don’t reach. The companies could argue, though, that “the pro-consumer benefits of additional competition in broadband in a large part of the country would more than outweigh the anti-competitive risks of going from two video competitors to one in a relatively small part.”

Others doubt that the companies could thrive under these conditions. For example, cable companies might go after the combined satellite companies’ video subscribers in the period before they have their own Internet service running, Brean Capital’s Todd Mitchell says. All the cable guys have to do is slash their pay TV prices and make up the difference by raising fees on broadband, where competition is weak. He also questions whether the feds would take the bait and agree to a satellite monopoly. “The FCC does not look at the U.S. as one market,” he says, and regulators would balk at the thought that for 15M households “it would drop competition from two to one.”