Verizon Wireless is paying $1.25 million to settle a complaint that it violated FCC regulations by blocking tethering applications for some of its smartphone users.

As part of the settlement, Verizon has agreed to allow its customers to download tethering apps that allowed them to circumvent a fee it charged for tethering on its former data plans.

The FCC said it began investigating Verizon after reports surfaced that it had asked a "major application store" to block its customers from accessing tethering applications, a violation of open access rules for Verizon's 700 MHz C-block spectrum, used for the operator's LTE network.

Licensees of the C-block are forbidden by the FCC to "deny, limit or restrict the ability of their customers to use the device and applications of their choice."

"Today's action demonstrates that compliance with FCC obligations is not optional," FCC Chairman Julius Genachowski said in the agency's announcement Tuesday. "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."

At the time the FCC started its probe into the alleged app blocking, Verizon charged an extra $20 fee for tethering to both customers on usage-based and unlimited plans. Third-party tethering apps allowed customers to turn their phones into Wi-Fi hotspots without paying the additional fee.

The Commission did not specify which application store was implicated in its investigation, but there were widespread reports in April 2011 that Verizon had blocked its customers from accessing tethering apps on Android Market.

Verizon continues to deny it ever blocked the apps.

"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. "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."

While the opening of tethering apps is good news for the handful of Verizon customers still on unlimited plans, it's something of a moot point for the operator's other smartphone customers. Tethering is included without an extra fee under the new shared data plans Verizon launched in June. AT&T followed suit, including tethering in the shared data plans it unveiled in July.

Verizon is unlikely to feel much pain from the FCC's fine. The company made $1.8 billion last quarter on sales of $28.6 billion.