Verizon Wireless has agreed to pay US$1.25 million to the U.S. Federal Communications Commission to resolve a complaint that it blocked third-party tethering applications on Android phones, the FCC said Tuesday.

Verizon's request for Google to block third-party tethering apps on the Android apps store violated open Internet, or net neutrality rules, approved by the commission for the so-called C block of spectrum in the 700MHz band, according to a complaint filed in June 2011 by digital rights group Free Press. The FCC approved the net neutrality conditions as part of a spectrum auction completed in early 2008.

Verizon denied blocking third-party tethering apps in a statement released Tuesday.

"Verizon Wireless has always allowed its customers to use the lawful applications of their choice on its networks, and it did not block its customers from using third-party tethering applications," the company said in the statement. "This consent decree puts behind us concerns related to an employee's communication with an app store operator about tethering applications, and allows us to focus on serving our customers."

The consent decree shows that compliance with FCC rules is "not optional," FCC Chairman Julius Genachowski said in a statement. "The open device and application obligations were core conditions when Verizon purchased the C-block spectrum. The steps taken today will not only protect consumer choice, but defend certainty for innovators to continue to deliver new services and apps without fear of being blocked."

This is the first case involving the open Internet obligations on the C block spectrum, the FCC said in a statement.

The FCC's Enforcement Bureau launched an investigation after news reports suggested that Verizon Wireless had successfully requested that Google block Verizon's customers from accessing tethering applications from its online market, the FCC said.

At that time, Verizon Wireless' terms of service required all customers who wanted to use their phones for tethering to subscribe to the company's Mobile Broadband Connect service, at an additional charge.

Verizon Wireless said the additional fee was because customers who tether laptops or other devices have the capability to use more data capacity than others. But Verizon Wireless, at the time, required all customers, including those who paid incrementally for data use, to pay the fee, the FCC said.

As part of the agreement, Verizon will notify app stores that it no longer objects to third-party tethering apps, the FCC said.

Free Press praised the FCC action. "Today's action makes it clear that Verizon was flaunting its obligations as a spectrum-license holder and engaging in anti-competitive behavior that harmed consumers and innovation," Free Press policy director Matt Wood said in a statement. "The FCC sent a strong signal to the market that companies cannot ignore their pro-consumer obligations."

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.