Please take it for what it is, advice from a wannabe SEO.  I'm basically a newbie at it, but here's what I think:

Use directories, not sub-domains.  Sub-domains basically tell google to separate everything.  They work well for people that have user generated content, like wordpress.com because if one user posts horrible dupe content with pages of links it doesn't hurt the whole site.  On the other side of things, that subdomain does not get favoritism from google because it's on wordpress.com...

So, for your site, I'd recommend against sub-domains.  It's pretty, but it doesn't bode well SEO-wise.

Also, dont forget to 301 those domains to the appropriate URL when you change things up

Subdomain will receive less authority because example.com/omaha will receive some benefit from being in the parent domain.  Are you saying you want to get rid of the domains that have been in place for several years?  What are you wanting to accomplish by switching these sites?

I've only been doing SEO for my company for the last month and I've made some headway but what is really frustrating me right now is a couple of competitors that have OBVIOUS spammy links ranking in the number 1,2,3 stops all over the board for the keywords i'm going for.  One competitor in particular has anchor text links EVERYWHERE that make absolutely no sense...junk like...

"I have never been more saddened by anything in my life than when my grandfather got cancer.  I told my uncle he needed to buy some auto insurance.  I really like pork."

I mean, these links are the pages with the most page authority and page rank out of all of the ones they have...and I'd venture to say that almost all of their backlinks are like this...well, half of them are just random links with good anchor text on the sidebar of a bazillion spam websites (diapers, toys, fake blogs, etc.)...while i have about 3k links and most of my top competitors have about 5k links...these guys have over 33k.

Worse yet, when I look at something like Alexa rank, they have pretty high overall traffic rank but it shows traffic rank in MX (mexico) instead of the US...these guys only sell in the US!  I mean, they're black hat if I've ever seen such a thing and they rank superbly on all keywords.

What can I do to compete with this junk?

Like so: Cupertino, per:

http://developer.apple.com/library/ios/#featuredarticles/iPhoneURLScheme_Reference/Articles/MapLinks.html#//apple_ref/doc/uid/TP40007894-SW1

In case you're interested, for Phone numbers go with:

["tel:0845 365 0000"](<span)[>0845 365 0000](<span)

Please take it for what it is, advice from a wannabe SEO.  I'm basically a newbie at it, but here's what I think:

Use directories, not sub-domains.  Sub-domains basically tell google to separate everything.  They work well for people that have user generated content, like wordpress.com because if one user posts horrible dupe content with pages of links it doesn't hurt the whole site.  On the other side of things, that subdomain does not get favoritism from google because it's on wordpress.com...

So, for your site, I'd recommend against sub-domains.  It's pretty, but it doesn't bode well SEO-wise.

Also, dont forget to 301 those domains to the appropriate URL when you change things up

Subdomain will receive less authority because example.com/omaha will receive some benefit from being in the parent domain.  Are you saying you want to get rid of the domains that have been in place for several years?  What are you wanting to accomplish by switching these sites?