The FCC voted to launch a notice of inquiry (NOI) and a notice of proposed rulemaking (NPRM) in an effort to phase out the US$4.6-billion-a-year, high-cost Universal Service Fund and replace it with a broadband deployment fund. The FCC's national broadband plan, released in March, recommended that the agency spend $15.5 billion over the next 10 years to subsidize broadband in rural and other hard-to-reach areas, and Wednesday's action is the first step needed to transform the USF.

Many people in the telecom industry have been calling for USF reform for years, with a major piece of the fund's traditional fee base -- traditional long-distance telephone service -- becoming less popular. At the same time, several groups have called for USF money to go into broadband, but USF reform is a complex issue with many competing constituencies, and the FCC has shied away from tackling the issue, until now.

"This item is an important milestone in our deeply important effort to ensure that every American, no matter where they live or what they earn, has access to affordable, high-quality broadband communications service," FCC Chairman Julius Genachowski said. "It will not be easy. But that is what we are committed to do."

In the NOI, the FCC will seek comments on how to cap the growth of USF and how to phase out funding for traditional telephone service in rural areas. The NOI and NPRM seek public comments on a model to determine levels of USF support for broadband in a way that's fair to rural carriers, the FCC said.

In an NOI, the FCC asks the public to generate ideas about a topic. The commission issues an NPRM when it is considering changes to its rules. An NPRM asks members of the public whether they agree with the proposed changes.