Verizon (NYSE: VZ), AT&T (NYSE: T), and phone carriers around the world are facing a tough problem. As their cellular businesses grow, people are turning off their home phones. What these telecoms pick up in wireless business revenue is being partially offset by a drop in the landline operations which have brought them sales for nearly a hundred years. If the trend accelerates, Verizon and it peers could even face a contraction of their overall revenue.

Verizon plans to solve the problem by making landline phone service so cheap that people will be less likely to cut their service.

Cell phones and VoIP are killing the regular old home phone business. Reviewing a new study from a Citigroup analyst, Barron's said, "The telcos continue to lose residential phone subscribers to both cable VoIP and wireless subscriptions at a steady 7%-8% a year."

The number of consumers who use only a wireless phone at home is expected to hit 27% in 2010. And the penetration of cable VoIP is expected to be 25% by then.

It might seem bad news for AT&T (NYSE: T) and Verizon (NYSE: VZ), but both do have large wireless businesses that should help offset attrition among home phone users. They are also selling new fiber-to-the-home broadband, which will also supplement revenue.

In markets where 3G connections are widely available to allow user to have high-speed connections to the internet, video ads on cell phones are becoming a big business. The New York Times writes that Japanese think-tank Dentsu Communication Institute Inc. sees revenue for this form of advertising tripling in that country to $1 billion by 2011.

If the market for TV-type ads on phones is indeed growing that fast, it could have considerable benefit for U.S. carriers AT&T Wireless (NYSE: T), Verizon Wireless (NYSE: VZ), and Sprint (NYSE: S). Wireless revenue is the engine driving growth at these companies, especially as they lose landline service to VoIP products from the cable companies.

A look at Verizon's 10-Q shows that wireline revenue fell slightly to $12.6 billion. Operating income for the segment was also off a bit to $1.1 billion. But , wireless revenue was up from $9.2 billion to $10.8 billion and operating income moved from just over $2.3 billion in the June quarter of last year to $3 billion.

That revenue growth rate cannot keep the same pace without new ways to get money out of the wireless business. While Verizon Wireless has about 62 million customers, AT&T has about as many and Sprint has over 50 million. In a country with slightly over 300 million people, many of them not old enough to use a phone, the number of subscribers to wireless programs must slow.

An advertising model could help offset that. Marketers are hungry for new ways to reach customers, especially as they move away from TV. Even if Verizon could pick up several hundred million a year in ad dollars, most of that would be profit. The costs of delivering video ads is small.

Douglas A. McIntyre is a partner at 24/7 Wall St.