WASHINGTON (AP) _ The federal government is expected to increase the subsidies that make local phone service affordable for customers in expensive areas.

The Federal Communications Commission on Thursday will nearly double the pot of money available for telephone companies that serve rural customers and others in high-cost areas, industry and government sources said Wednesday.

``Everybody acknowledges that as the markets change and as we get more competition, we will transition to a new model,'' said FCC Chairman Bill Kennard.

Giant phone companies such as the regional Bells and GTE now get $207 million in federal subsidies to help make local phone service affordable. Of that, $130 million goes to the main phone company in Puerto Rico.

Federal subsidies are mostly paid by fees the FCC imposes on AT&T, MCI, Sprint and other long-distance companies, which pass them on to customers.