The Federal Communications Commission unanimously adopted a radical changeover Thursday to the $4.5 billion Universal Service Fund, created by a fee attached to telephone bills, and will now channel the bulk of subsidies to expand rural broadband use, rather than rural phone service.

While updating a Depression-era program for the 21st century seems like a no-brainer, the change is pitting traditional phone service provider AT&T against Comcast, which provides calling services over its broadband network, and is exposing the FCC’s intellectual confusion over how to regulate communications in the internet age.

The FCC projects the change will fund broadband projects that reach 7 million of the estimated 18 million rural Americans who can’t subscribe to high-speed broadband now if they wanted to. What’s more, the FCC, for the first time, established a $500,000 “mobility fund” to help expand mobile broadband service in rural areas.

The FCC said the six-year spending plan could cost consumers “on average” of 10 cents to 15 cents per month more in new levies, but create as many as 500,000 jobs over the next six years.

While the plan is being criticized by the wireless industry for not providing enough funding, it also fails to address adequately the increasing popularity of internet telephony, which is expected to expand even further under the program.

That failure threatens the future of online phone calling services.

Given that the FCC  is shifting subsidies from traditional phone carriers to high-speed broadband providers, it asked for public comments about its authority to regulate Voice-Over-Internet-Protocol calls, such as Comcast’s broadband-based phone service. That’s because it’s legally unclear whether the FCC has the authority to regulate VOIP calls. That puts into doubt a complicated system of FCC-required payments between phone carriers, who reimburse each other via “access charges” as calls move to and from one another’s lines.

AT&T is now seemingly threatening not to pay these fees or abide by rules that require them to let their customers call any number they like. AT&T says it is now clear that internet-based VOIP services are a Title II “telecommunications service” — a designation that comes with a complicated host of FCC common carrier regulations — not a Title I “information service,” which lives outside the FCC’s jurisdiction. And AT&T, ironically, is citing Comcast’s own arguments.

The FCC re-classified broadband access as a Title I service in the George W. Bush administration as a deregulation move, even though it’s tried to retain right to regulate DSL and cable companies. Most recently,  Comcast won a ruling from a federal appeals court that the FCC has no right to regulate Title I services as it fought off an FCC edict that Comcast abide by so-called net-neutrality principles that forbid ISPs from unfairly blocking certain kinds of internet traffic.

Comcast was caught red-handed blocking peer-to-peer file sharing, using the same tactics as China’s Great Firewall.

Harold Feld, the legal director of digital rights group Public Knowledge, says Comcast is reaping what it sowed.

“Letting Comcast collect access charges as if it were a traditional telecom provider subject to Title II, while shielding it from any actual oversight or obligations as a Title I information service, is nothing more than an undeserved windfall to the company that tore up the social contract in the first place,” Feld said.

“If they don’t like the outcome, then perhaps they should have thought about it before they declared jihad on Title II,” he said.

The FCC on Wednesday, however, announced that both VOIP and traditional telephone services will be treated as if it was under Title II, although it did not resolve the legal conundrum. “All carriers originating and terminating VOIP calls will be on equal footing in their ability to obtain compensation for this traffic,” the FCC said.

The latest  Title I versus Title II debate on VOIP, for the moment, is purely esoteric unless AT&T puts its money where its mouth is, by withholding payment and not allowing its customers to call people using Comcast and other VOIP providers.

“Now, here’s some free regulatory/legal advice to my friends at Comcast,” AT&T Vice President Hank Hultquist said. “This slope is so slippery that Comcast may never again be able to stand up a reasonable argument against regulation of their broadband IP network.”