U.S. bill would overhaul annual phone fund

* Bill includes broadband use for universal service fund

* A Nov. 17 hearing set

* AT&T, Verizon, Qwest support legislation

WASHINGTON, Nov 6 (Reuters) - U.S. lawmakers said on Friday they introduced a measure aimed at overhauling an annual fund intended to ensure nationwide telephone service in high-cost, rural areas by including money for high-speed Internet use.

Earlier this year, U.S. phone companies complained to lawmakers that the $7 billion universal service fund, whose mission is to help low income customers, rural healthcare, schools and libraries, is outdated and promotes inefficiency.

AT&T Inc (T.N: Quote, Profile, Research), Verizon Communications and Qwest Communications International Inc (Q.N: Quote, Profile, Research), which support the measure, want a competitive bidding process to set fund awards. Some also want its annual total capped, amid double digit growth in the last several years.

The bill, introduced by U.S. Representatives Rick Boucher, chairman of the House Energy and Commerce Subcommittee on Communications, Technology and the Internet, and Lee Terry, a Nebraska Republican, would establish a competitive bidding process and cap the fund.

Verizon Wireless is a joint venture of Verizon Communications Inc (VZ.N: Quote, Profile, Research) and Vodafone Group Plc (VOD.L: Quote, Profile, Research).

Rural carriers such as CenturyTel Inc's (CTL.N: Quote, Profile, Research) Embarq and United States Cellular Corp (USM.N: Quote, Profile, Research) have said funding should stay based on actual costs and said a cap would discourage investment and jeopardize coverage in hard-to-serve areas.