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Verizon's Fios TV is coming to New York City starting Monday.

The phone company sent a media advisory on Friday about the launch and will provide more details about the service during a Webcast press conference Monday morning. New York City granted Verizon its TV franchise back in May. And on July 16th, the company won final approval to offer its TV service from the New York Public Service Commission.

Verizon has been aggressively marketing its Fios Internet and TV service in the New York City suburbs for the past couple of years. And the company has offered the Fios high-speed Internet service in some apartment buildings in New York City. Now the company will be able to offer a complete package of telephony, TV, and broadband services to New Yorkers, helping it compete head-to-head with Time Warner Cable, the predominant cable operator in the city.

Verizon's Fios service uses a new fiber network that extends directly into people's homes to deliver nearly unlimited bandwidth capacity.

Technology blogger Dave Zatz reported earlier this week that Verizon will soon offer Web-based videos as part of its Fios TV offering through its set-top boxes. Initial Internet video partners include YouTube, Veoh, Blip.tv, and Break.com, the post said.

To unseat iTunes as lord of digital music, challengers are falling over themselves to strip copy protections off music.

Apple's iTunes still wraps most of its music in digital rights management software, and the latest to try to exploit this perceived vulnerability is RealNetwork's Rhapsody. The music service, which has up to now focused on renting music through subscriptions, is expected to announce Monday that it will start selling DRM-free songs.

This means that Rhapsody's music will play on iPods and many other digital players. In addition, Rhapsody has teamed with Verizon Wireless and will offer customers with specific V Cast phones the ability to download unprotected music.

By selling downloads, Rhapsody opens its service up to two important groups: those who don't like subscription services, and owners of devices that were once incompatible with Rhapsody.

But increasingly, one can't help but catch a whiff of staleness surrounding open-MP3 offers. Besides Amazon.com, others offering at least some DRM-free music are Wal-Mart and Napster. MySpace also has plans to offer MP3s.

Amazon began offering open MP3s last September and there hasn't been much movement of the needle. Amazon's digital music store is growing but not at the expense of Apple, NPD Group said in April.

The issue of DRM only counts when iPod owners can't play iTunes music on other devices they care about. Which ones are those, you ask?

That's the point. There aren't any.

I'd be really steamed at Apple CEO Steve Jobs if my iTunes music were incompatible with some must-have cell phone, home-entertainment system, or car stereo. If there were something that his DRM-scheme locked me out of, then I might look for an iTunes alternative.

I don't have this problem because there isn't anything that compelling out there. The big digital home-entertainment system that will enable me to throw video, music, and photos around my house, still hasn't arrived.

When I'm at home and don't want to listen with headphones on, I plug my iPhone into speakers. As for cell phones, U.S. consumers just don't listen to music on them. The sticking points, such as memory, battery power, and poor user interface, haven't been worked out.

Remember, Apple didn't become an all-powerful music company just because of iTunes. Jobs was successful because of the total package: the player as well as a great music store. He made it easier to find, buy, and listen to music. And now, many of us are accustomed and comfortable with iTunes.

To pull us away, somebody has to offer a great new device and service that can do all these things and more. Or else why jump?

All this is no easy task, of course. (See Zune).

Verizon Wireless has upped the ante in its efforts to take on Apple's iTunes store in the digital music market by offering DRM-free music for all purchased music plus a new subscription service. But will it be enough to make a dent in Apple's dominance?

On Monday, Verizon Wireless will announce the revamped V Cast music store, which will be loaded with digital music that is free of the pesky digital rights management encryption on all songs that are purchased through the store. Verizon is joining Amazon as the only other digital music distributor that will be selling DRM-free music from all four of the major record labels, including, Sony BMG, Universal Music Group, Warner Music Group, and The EMI Group.

The company is also offering its first ever music subscription service courtesy of its relationship with Real Networks' Rhapsody America service. Verizon announced it was partnering with Rhapsody last year. And through this partnership, the company has redesigned its music store and the V Cast user interface.

The new service clearly puts Verizon Wireless in a new category when it comes to digital music. Verizon cell phone subscribers as well as nonsubscribers can download the DRM-free music onto a PC and sync it to any MP3-enabled device for $0.99 a song. Songs can be purchased over Verizon's cell phone network onto a Verizon phone for $1.99 a pop. And the new V Cast service also allows Rhapsody subscribers to sync their phones to the subscription service, much the same way AT&T subscribers can access the Napster subscription service.

But even though it has potential to become a major player, it's still unlikely that the cell phone company's moves will have much impact on market leader Apple. Instead, experts believe that Verizon is much more likely to help grow an already underperforming market.

"The issue isn't whether Verizon can take down iTunes," said Russ Crupnick, a senior analyst at the NPD Group. "But rather, can it help grow the market? And I think the answer to that is yes. Verizon is very well-positioned for that."

The music industry is in dire straits. Sales of CDs have been plummeting over recent years, and the industry hasn't been able to make up for the losses through digital distribution. Apple is by far the leader in digital downloads, hitting the 5 billionth song download mark from its iTunes music store just a couple of weeks ago. According to Crupnick, over three-fourths of the full music tracks downloaded come from the iTunes store. Amazon is a distant second, with other players such as Wal-Mart trailing even further behind.

So far, freeing music downloads from DRM protection hasn't done much to move the needle. Amazon and Wal-Mart have been offering DRM-free music for almost a year, and they still lag behind Apple. The reason for this could simply be that Apple is so far ahead in terms of market share that few people have reason to see DRM protection as a problem.

"When you have 80 percent market share on Apple devices," Crupnick said, "there isn't much demand from people to get unprotected music. They don't seem to encounter any issues with it."

Ed Ruth, director of digital music for Verizon, said that the company is simply trying to offer customers choices.

"Of course we recognize that Apple has done a great job," he said. "They have helped tell the digital music story quite well, and they've tilted the ecosystem in one direction. But in some ways they have trapped people into one experience. And that's the problem we're trying to solve."

Meanwhile, Verizon could also have an uphill struggle in getting people to use the Rhapsody subscription service, which costs about $15 a month for unlimited access to millions of songs. In the online world, only a small niche of music aficionados use services like Rhapsody and Napster. And so far, the model hasn't proven to be much more successful in the mobile world. AT&T has been offering the Napster music service, and even though the company hasn't published figures on how many customers are using the service, analysts say it hasn't been a runaway success.

But some analysts think that a service that does a good job of integrating Verizon's V Cast with Rhapsody could help attract new users to the subscription model.

"If they can make the experience of Rhapsody on a handset complimentary to what they are already doing with V Cast, I think it will make Verizon a stronger player by attracting new music subscribers," said Susan Kevorkian, an analyst at IDC.

While Verizon may never be able to beat Apple in the online music game, there's reason to believe that the company could beat out its fellow cell phone carriers and other music downloading services for market share. And in such a nascent market, Verizon still has an opportunity to make a significant amount of money from its music store and help move the carrier away from simply being a phone company.

Verizon claims that record labels have told it that in terms of revenue, it is already second to Apple when it comes to the money that is made from full track downloads. And in a recent survey of Internet users conducted by NPD Group, Crupnick said that over half of the respondents had heard of the V Cast music service. This was higher than awareness for music services from other cell phone companies such as Sprint Nextel or AT&T. But it was also higher than some well-established music brands, such as Microsoft's Zune music store, Rhapsody, and Napster. Still, only about 7 percent of the respondents said they had ever used the V Cast music service to download songs.

But Crupnick believes this consumer awareness could someday translate into growth for Verizon's V Cast service. Verizon also has other attributes that some of these other music distribution channels don't have. In addition to selling full track songs, Verizon is also able to help the record labels monetize the same songs in multiple ways by selling ringtones, ring-back tones, and wall papers of the artists. The company has even begun working to help produce some albums using a mobile recording studio.

What's more, Verizon has access to a wide variety of music playing devices, something that Amazon and Wal-Mart don't readily offer themselves. And it already has an established billing relationship with most of the customers that will likely use its site to download music. All of this bodes well for Verizon. But is it enough to really challenge Apple's dominance?

The answer is probably no. But it could be enough to make it a strong alternative. At the end of the day, Verizon's Ruth said that it's all about forming good relationships with the music industry and providing a great service to customers.

"Our approach is to be as good a partner to the music industry as we can be, " he said. "And we always keep the customer experience and expectations in mind when designing and delivering the service. I think we've done that so far and as a result have earned the trust of our customers."

There's no question that Verizon Communications hit a home run with its aggressive fiber strategy.

The fiber-to-the-home network called Fios has enabled Verizon to supercharge broadband speeds and compete against cable in the TV market.

Fios also has helped future-proof Verizon's network. While its cable competitors buckle under the pressure of peer-to-peer traffic on their networks, Verizon has enough capacity in its network, thanks to its fiber upgrades, to weather the storm unscathed and work on its own timetable to find more efficient ways to handle peer-to-peer traffic.

Mark Wegleitner, Verizon's senior vice president of technology in charge of broadband and consumer services, has helped develop and drive Verizon's fiber strategy. I sat down with him at the Nxtcomm trade show in Las Vegas last week to talk about a wide variety of topics, including the controversy over Comcast's treatment of BitTorrent traffic, faster speeds for Fios, and what the company plans to do next when it reaches its 2010 goal of passing 18 million homes with fiber.

Below is an edited excerpt from that conversation. Feel free to share your thoughts after in the "TalkBack" section.

Q: As you know, Comcast got caught slowing down peer-to-peer traffic on its network. As a network provider yourself, do you think it's necessary to manage your customers' traffic?
Wegleitner: I think we can come up with scenarios where network management would be necessary. While there might be plenty of bandwidth out there, you can't really guarantee that you can get an error-free transmission of, say, a video file that will be guaranteed at a specific point in time. That is why you might need rational network management.

So what would you consider to be acceptable network management?
Wegleitner: It's still a work in progress. But it's important to ensure the capabilities of applications.

But is it acceptable to identify and slow down specific types of traffic like BitTorrent or other peer-to-peer applications?
Wegleitner: Well, it's sort of a glass-half-full situation. Degrading traffic for one application enables another to work better. But we have to allow people who use the peer-to-peer applications for lawful and legitimate purposes to do so.

Verizon is working with several peer-to-peer companies to find ways to use the technology to distribute content more efficiently. How can the P2P protocol benefit service providers like Verizon?
Wegleitner: Peer-to-peer is a distribution enabler. But often when people talk about P2P, it gets lumped into a category with things that are bad, mainly because it takes up so much capacity on the network. But whether it's a good thing or a bad thing, there is underlying technology for P2P that can be used to everyone's advantage to get content like video, which everyone is asking for, distributed in the most efficient way.

We conducted some tests with the P4P group and Yale University, and showed that customers have a better experience, and we use fewer resources, when we used the P2P technology. It's really a win-win situation for us and the customer.

And we're still working cooperatively with P2P companies and the rest of the folks in the P4P group to employ the technology in a way that would maximize its impact.

Verizon has said it expects to pass 18 million homes with its Fios fiber- to-the-home service in 2010. Where are you guys in that deployment?
Wegleitner: I'd say we are slightly ahead of schedule for homes passed. But in general, I'd describe us as on schedule. We will have 12 million homes passed this year, which is the goal we had previously stated.

Verizon announced recently that it's increasing the speed of its Fios service to 50Mbps on its high-end tier of service. How much faster can the speeds on Fios get?
Wegleitner: The original specification for the Passive Optical Network, or the FTTP network, we are using allows us to provide 100Mbps to the home. So that's probably a reasonable ceiling, given the current technology. But we are also deploying GPON, which is an enhancement to the original fiber technology we're using.

The specification for that calls for 200Mbps to the home, with 400Mbps peak utilization. But we'll probably see the next generation of technology allow us to deliver between 125Mbps and 175Mbps to the home. We are working with suppliers for that technology to go even faster. But 100Mbps is within range, and we could even go a little higher.

Are people really using the 50Mbps service?
Wegleitner: Under specific circumstances, transferring files at 50Mbps is better than 10Mbps. The key here, though, is concurrent use. In the old days, when you had one PC, there probably wasn't much need for these kinds of speeds. But now there are multiple devices connected to broadband in the home. And that number is only going to grow. So it's important to have the performance there.

Verizon has begun selling a bundle that includes Verizon Wireless service and high-speed Internet and video, and no home phone line. How long before you think that the old landline telephones will be obsolete and will disappear altogether?
Wegleitner: In the broadband world, voice service is a small increment of traffic, in terms of bandwidth and cost. And in a converged world, we can give people who keep a voice over Internet Protocol (VoIP) landline a rich set of features. So I don't know that it won't be a useful service for a large portion of the population. I don't think the last chapter has been written on voice yet.

So when you talk about new voice services, are you talking about offering unified communications in the home?
Wegleitner: Yes, we can offer a unified communication experience in the home today with point solutions. And we have run way left for more sophisticated and converged services.

When will we see these services?
Wegleitner: We can already provide the ability to forward calls. But the find-me and follow-me services haven't caught on as rapidly as we thought. Sometimes the first time an application comes out of the shoot, it doesn't catch. But then later, it does. I don't think we've created enough selection or a compelling-enough template to drive mass-market adoption of some of these services yet. But that will come. I don't think we're talking more than a couple of years away.

Verizon's original Fios plan goes through 2010. What happens after that? Will Verizon continue to deploy fiber to more customers in its footprint, or will you focus more on DSL?
Wegleitner: I think there is more gas in the engine for fiber-to-the-home beyond 2010 that will help us get into the remainder of households in our footprint. Will we cover all the homes in our footprint? Probably not.

In the lowest-density areas, it's hard to justify new wireline deployment. And technically, DSL is available over copper. But it has limitations on long loops. Wireless solutions are attractive in these rural areas. We are looking at options in that area. But it's worth noting that even many of the small towns in our footprint are still within miles of a city center. So it's only about 30 percent that is out in low-density areas.

Would Verizon use LTE or WiMax to provide wireless broadband in those rural areas?
Wegleitner: Well, LTE is the horse we are riding right now. So that will likely move to the head of the line, in terms of the high-speed wireless-broadband data service we'll offer. We are already offering direct broadcast satellite for video delivery where we aren't offering Fios TV. So we could pair DBS with wireless data to also offer a triple-play offering in those rural areas.

Some of your cell phone competitors, such as AT&T and T-Mobile, are using Wi-Fi in different ways to extend their broadband networks to public hot spots. T-Mobile is actually using it to augment its cellular voice service. Will Verizon use Wi-Fi?
Wegleitner: We might see Wi-Fi used in the home to provide multiple device interconnection. Right now, we are using the Multimedia over Coax Alliance (MoCA) cable standard to deliver connectivity using the existing cable infrastructure in the home. But we could use other kinds of connectivity in the home, such as Wi-Fi or power line.

But as far as offering Wi-Fi in hot spots or covering whole communities with Wi-Fi, we've tried it. We provided Wi-Fi in Manhattan, but we no longer offer that service.

I remember that. A few years ago, you guys turned your existing phone booths in Manhattan into Verizon Wi-Fi hot spots. But when you rolled out EV-DO service, you shut down the Wi-Fi hot spots. Why?
Wegleitner: The economics just didn't pan out. I think right now, the primary horse we are betting on will be 3G and 4G solutions for wireless.

Speaking of 4G, there's been so much talk about moving to the next generation of wireless networks. What do you see as the biggest challenges in building and running the next-generation broadband wireless networks?
Wegleitner: One challenge will be the sheer number of new devices on the network. It's a double-edged sword. There's more capability for end users, but it also means that the network provider has to understand these capabilities. There's not going to be a common denominator, so we will have to be able to identify and recognize the devices and their capabilities, and adapt to it.

The other thing is that we'll need additional management for all these devices. We'll have to be able to localize problems, identify them, and be able to fix them. And we'll have to make sure we can do this at a reasonable cost.

Verizon Wireless has certified the first device that will operate on its Open Development network, the company said Friday during a conference call to update developers participating in the program.

Anthony Lewis, vice president for open development at Verizon, said that at least one device developer has completed the certification process that was first launched in March. The device that has been certified was already in the works when Verizon made details of the Open Development Initiative public just a few months ago.

Lewis said he was unable to provide details about the new handset. He wouldn't even name its manufacturer. He also didn't give a time frame for when the device will be commercially available on the open network. Still, he wanted to show the developer community that progress is being made.

"I want you to know the process works," he said during the conference call. "We believe the time is right to have this open development program. And I'm happy about some of the devices I've already seen."

Lewis also emphasized the importance of partnerships and collaboration in the process.

"We are here for you," he told the developers. "We're listening to you, and we are working to find the most effective way for you to bring your products and services to the network and out to the general population."

Verizon first announced plans for an open development network in November with the hope that it would make it easier and less expensive for third-party developers to bring new devices and applications to its network. Ultimately, Verizon hopes its open network will help spur innovation and provide a testing ground for new devices, applications, and services.

The new certification process is much more streamlined than the process companies must go through if they want to sell a Verizon-branded phone. Verizon is trying to make the new process as easy and open as possible. The company recently updated its Web page with a link that will allow those seeking product certification to track their device's progress from the initial stages all the way through to final certification and testing.

Developers urged to work directly with device makers
Since the device specifications for the open development network were released a few months ago, application developers have been clamoring for more information about how to get their applications on these new devices. Lewis said that Verizon is working with device makers first to lay the foundation for the open network. And he said the developers should work directly with device makers to develop applications.

"We are leaving the door wide open for applications," he said. "We are not going to evaluate applications on ODI (Open Development Initiative) devices. Any certification for applications we will leave up to device manufacturers."

He added that developers are free to use any operating system they choose on their devices whether its Google's Android, the open Linux platform Limo, or Microsoft's Windows Mobile.

Even though Verizon won't be taking an active role in certifying applications, the company will help bring application developers together with device makers. And Lewis encouraged application developers to join the Open Development Initiative and to contact Verizon to help initiate and facilitate conversations with device makers.

Lewis also confirmed that devices running on the ODI network will not be sold with contracts. This means that Verizon will not be subsidizing the cost of the devices. But it also means that Verizon will not charge those controversial early termination fees when customers ditch its service. Exact pricing details or ODI service plans haven't been made public yet. Lewis said Verizon is still working out the details, but it's likely the company could offer "pay as you go" and month-to-month service.

"We want to make sure the plans are simple," he said.

LAS VEGAS--Verizon Communications is looking toward big cities as the next big opportunity for its Fios broadband and TV service.

The company said Wednesday that it expects to get approval from the New York Public Service Commission to offer its Fios video service in New York City as early as next month.

"Our plan is to cover all of the 3.1 million households in all five boroughs in the next five to six years," Verizon's COO Denny Strigl said during a keynote speech at the NxtComm trade show here. "We will start this year as soon as we receive the approval of the New York Public Service Commission, which we expect will be next month."

Denny Strigl, COO of Verizon Communications, speaks at NxtComm.

(Credit: Marguerite Reardon/CNET News.com)

Verizon is also working to get video franchise approval for the Fios TV service in other large cities such as Philadelphia and Washington, D.C., Strigl said at a press conference after his keynote.

Verizon sees cities as a huge opportunity for the Fios service, which provides high-speed Internet service, telephony, and cable TV service over a super-fast fiber connection. Because most customers in big cities such as New York City live in large apartment buildings, Verizon has had to adapt its installation process.

This proved to be a technical challenge for the company when it first started deploying Fios a couple of years ago. But the company has since started using bendable fiber optic cabling and has solved many of the issues associated with deploying the service in these buildings.

"Providing Fios in large cities is very important to us because the economics of multiple dwelling units is very good for us," Strigl said at the press conference. "When you think about it, the ability to pass a building that has 300 apartments is much easier than deploying service to an acre or half an acre for a single-family dwelling. So it's a very good growth opportunity for us."

Strigl also confirmed that the company is looking to expand its Fios service out of region on a limited basis. Specifically, he said the company will look to deploy Fios service in neighborhoods that are adjacent to its current footprint. The company has already begun deploying fiber in certain neighborhoods around Dallas, where AT&T also provides service.

But Strigl emphasized that this was not a wide-scale change in strategy to take the Fios service out of region.

"What we are doing on a limited basis is, where it's economical, we are offering the complete Fios solution in neighborhoods next to ones we already serve," Strigl said.

He explained that these neighborhoods can easily be served by existing Verizon central offices, which means the capital expenditure to move into the neighboring area is minimal. He wouldn't say where, other than the Dallas area, Verizon had considered doing this. But he didn't rule out extending service into some areas in California, such as around Los Angeles.

Strigl also announced Wednesday that Verizon has upgraded the speed of its Fios broadband service across its 16 state region. The highest-tier service will offer 50 megabit-per-second downloads and 20Mbps uploads. Verizon had offered this upper tier of service in only a handful of markets previously.

The company has also doubled the upload and download speeds of its lowest-tier Fios broadband service. The service will now offer 10Mbps downloads and 2Mbps uploads.

LAS VEGAS--Verizon Communications is boosting speeds for its Fios fiber-to-the-home service, the company plans to announce Wednesday.

The company's COO Denny Strigl is expected to announce the speed upgrades during his keynote speech at the NxtComm trade show here. The upgrades come as Verizon customers use more bandwidth intensive applications such as video downloading and photo sharing.

"The appetite for bandwidth shows no sign of slowing down," Strigl said in a statement. "Neither will we. We've already had successful trials of the 100-megabit home, which will be a reality faster than anybody thinks."

As part of the upgrade, all Fios customers will now have access to download speeds of 50 megabits per second and uploads of 20 Mbps for about $140 a month. The company is also offering its symmetrical 20 Mbps download and 20 Mbps upload service to all Fios customers for $65 a month.

Verizon had already been offering these speeds in certain markets such as Connecticut, Massachusetts, New Jersey, and New York. But now the service will be expanded to Verizon's entire Fios customer base, which is spread throughout its 16-state territory. Previously Fios in these states, such as Delaware, Maryland, and Virginia, topped out at 30Mbps/15Mbps and 15Mbps/15Mbps.

Verizon will also upgrade its mid-tier offering increasing speeds from 15Mbps/2Mbps to 20Mbps/5Mbps. And the low-end service will increase from 5Mbps/2Mbps to 10Mbps/2Mbps.

Correction: This story misstated a quote from Tom Tauke, executive vice president of public affairs and policy for Verizon. Tauke said that it was in the best interest for the FCC to make a decision on the Comcast/BitTorrent case. He did not say that it was in the best interest for the FCC to make a decision against Comcast.

LAS VEGAS--Executives from AT&T and Verizon Communications said Tuesday that it's important for the Federal Communications Commission to take action in the Comcast debate over slowing down certain forms of peer-to-peer traffic in order to prove that legislation is not necessary when it comes to Net neutrality.

Jim Cicconi of AT&T (left) and Tom Tauke of Verizon (right) appeared on a panel together at the NxtComm trade show Tuesday.

(Credit: Marguerite Reardon/CNET Networks)

Comcast, the largest cable provider in the U.S., has been under fire for months after it was discovered the company had been slowing down peer-to-peer traffic on its network. The company claimed it had singled out peer-to-peer, file-sharing traffic, because it was eating up an inordinate amount of bandwidth, which caused degradation across the rest of its customers.

Consumer groups were incensed by the tactic, and the blogosphere filled with criticism. And as a result the FCC has been examining whether Comcast violated any of the agency's Net neutrality principles. A hearing was held earlier this year, and the FCC is expected to make a ruling on the matter sometime this summer.

Jim Cicconi, senior executive and vice president for legislative affairs for AT&T, and Tom Tauke, executive vice president of public affairs and policy for Verizon, told an audience at the NxtComm trade show here that it's important for the FCC to make a decision in this case to show that the agency's Net neutrality principles are enough to keep service providers honest.

"It's in the best interest of the industry for the FCC to make a judgment on the Comcast/BitTorrent case," Tauke said. "None of us want to be in a world where there is a sense that nobody is watching what is going on. We have the FCC and the Federal Trade Commission, which have authority to enforce some policies in this area. And if they do their jobs properly, they can make positive contributions on how the Internet develops."

Cicconi agreed, saying that the FCC has the opportunity to prove to Net neutrality supporters and Congress that it can enforce its own policies and keep the Internet open.

"The Comcast case has brought the debate over Net neutrality into specifics," Cicconi said. He added that this is important because up until now the discussion has centered on hypothetical problems. And creating new laws to deal with problems that haven't yet occurred could be disastrous for the industry.

LAS VEGAS--Executives from AT&T and Verizon Communications defended early termination fees for wireless customers Tuesday, but said they wouldn't oppose Federal Communications Commission rules that required these fees to be "reasonable."

Jim Cicconi, AT&T senior executive and vice president for legislative affairs for AT&T, and Tom Tauke, executive vice president of public affairs and policy for Verizon, said following a panel discussion at the NxtComm tradeshow here, that their companies are justified in charging early termination fees for wireless contracts, which often top out at $200.

The battle over early termination fees is heating up as wireless operators face multimillion-dollar class action suits from consumers who say these fees are unfair and deter competition. So far, wireless operators seem to have the upper hand in the battle, as a California state jury ruled in favor of Sprint Nextel last week in the first of these class action lawsuits.

But now, the FCC is considering taking jurisdiction over early termination fees. And the agency is considering a proposal from Chairman Kevin Martin that would require consumers be given a 30-day grace period to cancel their contracts without penalty. After those 30 days, early termination charges would then be prorated or reduced over the duration of the contract. Martin also proposes that fees should be based on the cost of the phone and that they should be "reasonable."

Cicconi and Tauke said that they are confident they could reasonably justify the cost of their fees, despite criticism from consumer advocates who say these fees are not used to recover costs but are merely used to deter customers from switching services. One industry expert who testified at a recent FCC hearing said that the early termination fees wireless operators charge are roughly 12 times higher than the cost of the actual phone subsidy they claim to be recovering.

"The fact is that it costs us hundreds of dollars more than the fees we charge to acquire a customer," Tauke said.

The executives also argued that consumers have many choices when it comes to the phones they buy and the services they subscribe to. Both carriers offer some phones at full price and allow customers to subscribe to month-to-month contracts, they said.

While AT&T and Verizon Wireless might offer some phones at full retail price in exchange for month-to-month service contracts, most of the hottest and most popular phones are not offered in this way. For example, the new 3G version of Apple's iPhone offered exclusively on AT&T's network can only be bought for the subsidized price of $199. AT&T also requires new iPhone users to sign up for a two-year contract. The previous version of the iPhone, which was not subsidized by AT&T, also required customers to sign up for a two-year contract with AT&T.

When asked why AT&T isn't giving consumers the choice of buying the new iPhone for the unsubsidized retail price without the constraints of a contract, AT&T's Cicconi had this to say: "Apple is providing the iPhone on these terms and conditions that it negotiated with AT&T. And if customers don't want to accept these terms, they can buy other devices."

While that's true, consumers still have no other way to buy this particularly innovative phone without agreeing to strict contractual terms from AT&T. This is despite the fact that AT&T said it has found its iPhone users to be among its most loyal customers.

"People have a choice," Cicconi continued. "They make decisions based on a lot of factors, like features and functionality of the phone and the terms and conditions under which that device is offered. Why should the government intercede on a deal that was struck between AT&T and Apple? I don't think the FCC should single out any one device in making policy."

Verizon's Tauke chimed in by saying that other industries also require term contracts.

"My gym requires me to have a year contract," he said. "The lawn service that cuts my grass has a one-year contract. Tivo requires a year service. This isn't unusual, and it's questionable that any government should regulate fees on any service."

This might be true, but there are many goods and services, particularly utility services, which don't require contracts. I've never had to sign a contract to get water or electricity. And I never signed a contract for my landline telephone service. I'm interested to hear what readers think about this issue. So please share your thoughts in the "Talk Back" section below.