Biden’s bid to inject government deeper into the private sector is getting its first big test in the broadband industry.

Congress on Tuesday advanced legislation that allocates $65 billion in new taxpayer money to expand high-speed internet access for millions of unconnected households—by far the largest allocation of federal funds ever earmarked for broadband.

The Senate approved it as part of the broader $1 trillion infrastructure bill passed on Tuesday. The measure still requires House approval, where the path is more complicated.

The legislation would wire communities across the country that companies haven’t reached and subsidize bills for low-income households. Private companies would be required to publish details about their products, much like nutrition labels, and offer low-cost service plans if they take federal funds to help build networks.

In doing so, proponents say, the legislation recasts broadband service as a necessity, more akin to water and electricity, to which everyone should have access. Government estimates say about 14 million Americans lived in areas without high-speed internet as of 2019, but officials acknowledge that data is incomplete, and private estimates put the figure at 40 million or higher.

“It’s a more robust government role in a key part of the economy,” said Bharat Ramamurti, deputy director of the White House National Economic Council. “It’s an opportunity, another opportunity, to show that government really can work for people.”

For the broadband industry, which has flourished for decades without strict governmental oversight, the initiative set off alarm bells. While telecom and cable giants ranging from AT&T Inc. to Comcast Corp. stand to benefit in the near term from a big infusion of cash if the bill becomes law, industry officials worry about the precedent this sets for greater government intrusion in their business.

Some aspects of the legislation have drawn industry complaints, at least privately, including provisions that empower federal and state officials to direct how new subsidies are spent, regulate pricing disclosures and authorize new rules preventing “digital discrimination.”

“The details on implementation and the inevitable unintended consequences are going to matter,” said Jonathan Spalter, CEO of USTelecom, a trade association for broadband providers such as AT&T and Verizon Communications Inc. “Some in Washington continue to be chronically allergic to the notion that America’s broadband providers—today, right now—deliver world-class connectivity, affordable and valuable service plans, reliability and network capacity that have been a technological and economic boon.”

Many providers agree that government help is necessary to connect remote regions. “Sparsely populated areas are difficult for any communications provider to serve due to the costs of building and maintaining the network infrastructure,” said Lumen Technologies Inc., a large Louisiana-based internet service provider. “Which is why policy makers are proposing historic levels of funding to support broadband build-out in rural areas.”

Since taking office in January, Mr. Biden has laid out an expansive economic blueprint designed to recalibrate the balance of power between Washington and corporate America.

The White House and congressional Democrats hope to follow up the infrastructure bill with a separate $3.5 trillion spending plan that would create new government roles in electricity production and transmission, child care, elder care, pre-K and community college. The Senate passed a budget blueprint early Wednesday, the first step in that arduous process

The bulk of the roughly $1 trillion infrastructure measure the Senate passed on Tuesday goes to industries that have long been heavily subsidized and regulated, such as roads, bridges, public transit and Amtrak.

This would be the biggest-ever government foray into internet infrastructure; Mr. Biden and his aides like to compare their broadband plans to Franklin Roosevelt’s New Deal policies spreading electricity through rural America.

The administration originally pushed Congress to steer federal broadband funds to local government, nonprofits and other alternatives that would compete with incumbent private providers. It also wanted to direct the use of high-speed fiber on new networks, brushing aside older technologies.