The Federal Communications Commission vote was expected to open the door to a string of consolidations, especially among larger scale carriers hoping to gain spectrum in major cities. Struggling companies such as Nextel Communications and VoiceStream Wireless are considered ripe for acquisition.
But the souring economy has left many potential buyers short on cash, while most carriers, including Cingular Wireless and AT&T Wireless, are in the middle of upgrading their networks, leaving them little room to buy.
"Nobody has got any money," said one source, a sentiment echoed by people at other telecommunications companies, none of whom wanted to speak on the record.
Consumer groups are wary of an industry consolidation. David Butler, the media director at the Consumers Union, said the spectrum cap helped create competition in the industry because it allowed smaller wireless carriers to enter the market.
"The biggest players will likely buy some of the smaller players, and the others will just whither on the vine," said Butler. "That kind of consolidation is likely to lessen the competitive pressure to lower the cost of cell phone service."
Months before the FCC vote, analysts had begun predicting a wave of consolidations within the industry.
"The regulatory liberalization could...trigger small-scale consolidation, as national carriers buy up regional players," but not at least until mid-2002, wrote analyst Blair Levin and Sean Butson of Legg Mason in a recent report. Regulators may want to block any consolidation among major wireless carriers because of antitrust concerns, they wrote.
The wireless industry has been asking for a removal of the cap for several years. They claimed there was a spectrum shortage and that carriers in large markets were concerned they wouldn't be able to service new customers.
Verizon Wireless, the nation's leading wireless carrier, is considered the likeliest candidate to go shopping in the wake of the vote. Some analysts believe that the company has already reached the FCC's old spectrum limit in Los Angeles and New York City, the largest wireless markets in the country, and that it would be among the first to start buying smaller carriers.
But Verizon Wireless' president, Dennis Strigl, wasn't hinting either way in a statement released moments after the FCC made its decision.
"Today, the FCC took an important step to eliminating artificial barriers," he said. "America's wireless subscribers will be the ultimate winners."
AT&T Wireless is another candidate, but a source at the company indicated that it won't act anytime soon. Ritch Blasi, a spokesman, had no comment on AT&T's buying plans but praised the vote.
"We applaud the FCC for recognizing that the existing caps are outmoded and inefficient in today's marketplace," he said.
On Wednesday, an AT&T Wireless executive said he didn't think the FCC vote would affect the company's business.
"It will not have a big impact on us at all," Chief Financial Officer Joseph McCabe told analysts at the J.P. Morgan Global Telecommunications Conference in New York. He added that the company has enough spectrum to provide third-generation services in 90 of the top 100 U.S. markets, especially if it gets the NextWave Telecom spectrum it won in an auction in January.
One carrier also not likely to make any moves is Sprint. Luisa Lancetti, vice president for Sprint regulatory affairs, would not comment on company plans but said "Sprint can move forward, we already have enough spectrum."
Sprint hadn't actually reached the maximum levels for spectrum in any market it serves, Lancetti said.
Congress does not completely agree with the decision. Sen. Ernest F. Hollings, D-S.C., Sen. Daniel Inouye, D-Hawaii, and Rep. Edward Markey, D-Mass., sent a letter to FCC Chairman Michael Powell saying the expected move would hurt the wireless industry.
Lifting the cap would "encourage unnecessary consolidation, relieve pressure on companies to innovate, and pose a significant risk to consumers," the letter said.
The FCC voted 3-1 to raise the current spectrum levels to 55 megahertz in urban markets, and elected to abolish the cap starting Jan. 1, 2003. Simultaneously, the commission voted to totally remove the 55 megahertz cap imposed on rural wireless markets.