Verizon Wireless and Microsoft today announced they are launching a joint mobile music service over Verizon’s V Cast 3G service using Windows Media format. The service goes beyond a mobile-centric model being promoted by other carriers, though. The companies are positioning V Cast music as an all-purpose music download service competing with Apple’s iTunes Internet download service, using the V Cast phone as a substitute for the iPod.

V Cast music will span both the wired broadband and wireless networks, allowing customers to purchase music over the air from their phones at a premium and from their computers. Unlike other mobile music services like Sprint’s Power Vision Music Store, Verizon Wireless doesn’t require over-the-air downloads. Customers can buy music in the Internet storefront or and transfer it over to their phones, just as a customer would buy music from the iTunes storefront and transfer it their digital music players. Customers can also “side load” their existing digital music collections into their phones as they would to an iPod.

CEO Denny Strigl said Verizon Wireless is going after far more than the digital music player market with this service. While only a fraction of the population has an iPod or other digital music device, 200 million people have cellular phones, roughly a quarter of which are Verizon subscribers. The potential for turning those 200 million into even casual music listeners is enormous and would be an estimated $3 billion industry in four years, Strigl said.

“V Cast music will not only revolutionize your wireless phone,” Strigl said. “It will revolutionize music.”

Verizon Wireless and Microsoft are pricing the service a $1 a song for an Internet download, exactly at the price point offered by iTunes and competing services like MTV’s Urge Music. For an over-the-wireless network download, the price is doubled to $2, undercutting Sprint’s price by 50 cents. With the V Cast model, however, most of the traffic will likely come from Internet purchases, since music can be easily transferred from PC to handset. Verizon Wireless appears to be counting on the convenience of getting a song instantly to bring in additional revenue for the wireless network.

Like the Sprint’s music service, an over-the-air download gives two versions of a song, a highly compressed version using Microsoft’s new Windows Media Audio Pro (WMA-Pro) for the handset and a standard WMA file for download to a computer. The service, however, will support direct PC-to-handset transfers of must standard digital music files, including WMA and MP3.

Verizon Wireless and Microsoft have already signed contracts with four of the major record labels and dozens of independent labels under the umbrella of The Orchard, giving it thousands of artists. Officials with the companies said the number of individual tracks available for download will soon be more than 1 million.

The service will launch on Jan. 16 with three V Cast EV-DO handsets from LG Electronics, Samsung and UTStarcom, all of which have memory card slots capable of being upgraded to 2 GB.