The Federal Communications Commission will announce plans to begin converting the $8 billion fund that subsidizes rural telephone services into one that will help pay for broadband in underserved areas. According to The New York Times, FCC chairman Julius Genachowski is set to outline the proposal in a speech today.

The plan will involve reshaping the Universal Service Fund, a decade-old subsidy which is paid for by fees added onto most consumers' phone bills. That money is then disitributed among phone companies to help subsidize the costs of providing services to rural areas.

The FCC proposal involves phasing out these payments and consolidating the funds into a new pool, the Connect America Fund, that aims to bring broadband to underserved areas.

Genachoswki says that the Universal Service Fund needs to be updated as it "was designed for a world with separate local and long-distance telephone companies, a world of traditional landline telephones before cellphones or Skype, a world without the Internet - a world that no longer exists."

Instead of subsidizing phone service directly, says Genachowski, we need to support broadband access, something that could in turn be used for telephony.

According to The New York Times, Genachowski rejects the idea put forward by some members of Congress to simply scrap the Universal Service Fund altogether. To do so, he says, "would let the broadband revolution bypass a substantial portion of the 24 million Americans who the commission says lack access to high-speed Internet connections."

The proposed changes address just one portion of the Universal Service Fund - the high-cost program which accounts for about 55T of the fund's annual disbursements. Other parts of the fund include the E-Rate program, which helps provide schools and libraries with broadband.