The Universal Services Fund (USF) was an initiative put in place by former U.S. President Bill Clinton's Federal Communication Commission in 1997.  The USF takes a large cut out of consumer phone bills -- approximately 15 percent out of a long-distance bill, for example -- and redirects that money to funding landline telephone service to low-income rural areas, and providing broadband at public institutions.

Over time the usefulness of landline phones has faded, but the FCC continues to pour money into that aspect of the effort.  In his bid to beef up our nation's broadband, U.S. President Barack Obama's appointed FCC Chairman, Julius Genachowski, is looking to scrap that funding and redirect it to promoting broadband in rural areas.

He proposed the change during a speech [PDF] at the Information Technology and Innovation Foundation.  He stated:

In the 21st century, high-speed Internet, not telephone, is our essential communications platform, and Americans are using wired and wireless networks to access it. But while the world has changed around it, USF -- in too many ways -- has stood still, and even moved backwards.

Currently the landline fund eats up $4.3B USD a year, while the broadband fund only gets a chunk of the remaining money.  Chairman Genachowski suggests a gradual fadeout of the telephone funding, transitioning that money to a new broadband deployment and support fund designed to push broadband into rural areas.

The new fund, formally titled the Connect America Fund, would aim to cover 24 million Americans with broadband.  Chairman Genachoski complains that the USF is becoming outdated and needs the changes.  He states, "The fund pays almost $2,000 per month -- more than $20,000 a year -- for some households to have phone service. And in many places, the existing system funds four or more phone companies to serve the same area."

The speech came with the filing of a "Notice For Proposed Rule-Making" (NFPRM).  This is the FCC's way of giving the public chance to comment.

Wireless service providers like Verizon and rural broadband providers have expressed enthusiasm about the shift.  Thus far rural landline operators have kept quiet, but they're unlikely to appreciate the measure.