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By Kenneth Corbin

Lawmakers are set to consider a measure next week to reform the federal subsidy paid to telephone companies to provide service to low-income and rural households to include broadband service.

Reps. Rick Boucher (D-Va.) and Lee Terry (R-Neb.) this morning released draft language of a bill that aims to curb waste in the Universal Service Fund (USF) and shift money from phone to Internet service in areas on the wrong side of the digital divide.

"The Universal Service Fund is broken," Boucher and Terry said in a statement. "The measure will expand who pays into the fund, cap the growth of the fund and modernize the fund by allowing its use for the deployment of high-speed broadband service."

Boucher issued a nearly identical statement when he and Terry introduced a previous version of the USF reform bill in 2006.

The House Subcommittee on Communications, Technology and the Internet, which Boucher chairs, is set to consider the measure at a hearing Nov. 17.

The drive to reform the USF revisits a long-deferred item on the policy agenda at the Federal Communications Commission, the agency that oversees the fund.

The FCC is currently working to develop a national broadband strategy due to Congress in February. At a conference in Washington yesterday, Brian David, a director of the FCC's National Broadband Task Force, hinted that USF reform would likely be included in the plan's recommendations.

David also floated the idea of a federally recognized digital outreach service to speed adoption of broadband technology similar to the AmeriCorps program, as well as an education campaign similar to the media blitz the FCC spearheaded in advance of the digital television transition.

"We are one of the last of the major countries to do this sort of plan," David said. "We are at a point in this technology ... where we are close to if not past the tipping point where it is no longer just an advantage to be online. It has become -- in our view, in my view -- a disadvantage fundamentally to not be online."

Boucher and Terry's bill echoes complaints that the USF has failed to keep pace with the evolving demands of the telecommunications landscape, where

Just yesterday, the leading lobby of the cable industry released a petition it submitted to the FCC calling for USF reform, claiming the program wastes as much as $2 billion annually funding telephone companies in areas where non-subsidized companies already offer service.

The bill also drew early praise from AT&T (NYSE: T). Tim McKone, the telecom giant's executive vice president of federal relations, said the measure "recognizes that we cannot accomplish President Obama's goal of universal and affordable broadband for all Americans without also fixing the federal universal service fund."

Under the bill, recipients of Universal Service funding would be required to provide high-speed Internet service within five years of its enactment, aiming to do for broadband what the fund did for telephone service. Broadband, defined by the bill as access with a download connection speed of 1.5 megabits per second, would be classified as a universal service, and the USF bidding process would be opened to wireless providers.

"This bill brings the fund into the 21st century by modernizing it and allowing it to play a role in our country's plan for eventual ubiquitous broadband," Terry said.

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