Members of the City Council pushed back on the de Blasio administration's plan to turn the 7,000 payphones into free Wi-Fi hubs so long as only one company can take over the contract.
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In April, the administration put out a request for proposals for companies interested in rolling out the hotspots citywide, awarding the best plan a 15-year contract.
Many of the companies that currently have contracts with the city to manage its more than 9,000 payphones argued they faced being shut out and stifled by the city limiting the plan to a single provider.
Queens Councilman Mark Weprin, who helped convene Wednesday's hearing, agreed.
"Competition leads to improvements to technology," he argued.
The program would be overseen by the city's Department of Information Technology & Telecommunications, which already manages an ongoing pilot program for some 20 converted payphones across the five boroughs.
In a prepared statement, the agency argued that the winning proposal could come from a joint venture or partnership between companies.
It also defended its current strategy as a means to "provide the most innovative, effective and efficient new public services."
Follow Chester Jesus Soria on Twitter@chestersoria