FCC Chairman Julius Genachowski wants to use cash from the Universal Service Fund (USF) to expand mobile broadband service as part of a sweeping reform of the country's telephone subsidy system.

"These programs are interrelated. They are complex. And they are broken," Genachowski said in a speech today announcing the reforms.

Genachowski laid out a plan to transition the outdated USF to a new Connect America Fund that would subsidize fixed and mobile broadband deployments in rural areas. The proposal could give a big boost to wireless Internet services, which do not currently receive the large subsidies enjoyed by landline telephone services.

Genachowski also suggested limiting the growth of the fund by making providers compete for universal service support, the first time the fund has even used competitive bidding.

He pointed out that USF is wasteful and inefficient as it stands today, paying some companies more than $20,000 a year for a single home phone line, funding overlapping networks and subsidizing companies to offer service even when there is a competing provider.

The FCC chief also proposed changes for the intercarrier compensation system (ICC). His plan would close loopholes like phantom traffic, clarify subsidies for VoIP calls, reduce charges starting with the lowering of intrastate access rates and employ a "tightly controlled" mechanism for compensation.

"The plan we are circulating represents a historic opportunity to truly achieve universal broadband in this country," Genachowski said.

USF and ICC reform were one of the central recommendations of the National Broadband Plan, which was released in March 2010. The FCC voted in February 2011 to move forward with the plan.

FCC commissioners will vote on the plan at an Oct. 27 open meeting.