An article and picture series in the NYT described the pay phone situation in NYC. (Don't forget to check out the pictures, though they're sad). I'm not sure they're representative of the whole city.
see:
Until recently it was reported that the pay phone business in NYC was profitable. Not so much from the phone itself, but rather the advertising revenue gained from the kisok walls. I don't know if that has changed. Advertising space in high pedestrian places like NYC is at a premium and profitable.
On my last visit to NYC I noticed a number of people simulataneously using pay phones within Pennsylvania Station. Of course, far more people use cell phones.
Any New Yorkers out there who would care to comment? How about other large city downtowns?