One source said the measure would focus only on revamping the multibillion-dollar fund, which subsidizes telecommunications service in rural and impoverished areas -- and is not envisioned as broader telecom legislation.

Noting that the committee's membership is heavily rural, Inouye, said during a USF hearing, "I can assure you that we will have some action here, including a measure on the floor."

But to do so, he acknowledged that he must consider the concerns and interests of many parties. "It will be a challenge, but I can assure you, we will take on that challenge," he said.

To assist with the process, Inouye plans an in-depth briefing on the potential -- and limitations -- of high-speed Internet and wireless services.

Lawmakers and regulators agreed that the USF is bloated and outdated, but disagreed on how to improve it.

"I come from a town of 300 people. I can tell you that lots of places are being left behind, are going to be left behind," Sen. Byron Dorgan, D-N.D. warned, adding that "none of us can afford to be timid."

Sen. Ted Stevens of Alaska, the panel's top Republican, reiterated his opposition to reverse auctions, which would be intended to limit the number of carriers qualifying for subsidies and reduce the fund's size.

Stevens is concerned that national carriers would edge out rural ones under the approach, which awards subsidies to companies that require the lowest amounts of support. Nevertheless, he agreed that the USF needs to be improved.

John Burke, a member of the state Public Service Board in largely rural Vermont, warned that the high-cost portion of the fund, which subsidizes telecom service in rural areas, could rise from $4 billion a year to more than $6 billion.

"It's the challenge of all of us to do what we can to take pressure off that fund," Burke said.

"We're facing serious challenges," agreed Sen. John (Jay) Rockefeller, D-W.Va. While Rockefeller thinks a cap is inevitable, in the near term he wants the FCC to limit the fund's growth.

Democratic FCC Commissioner Michael Copps, among others, recommended that the USF include subsidies for high-speed Internet service. "Broadband is the great infrastructure challenge of our time," he said.

The current system is unsustainable, complicated and out of control, testified Billy Jack Gregg, an official with the West Virginia Public Service Commission.

Under the present arrangement, there are "no losers" among wired and wireless carriers competing for high-cost support, he said.

As a result, duplicative carriers receive USF money in rural areas, he said, noting that the high-cost component grew by $1 billion in the last three years.

"One of the things that's unusual about the high-cost fund is that there's no limit," he complained. "We must support access, not excess."