California is accepting $1.86 billion in broadband grant funding from the Trump administration, but the state is not accepting the Trump administration’s demand that it stop enforcing a net neutrality law and other telecom regulations.
California’s stand against the Trump administration could result in multiple legal battles involving the state, federal government, and Internet providers seeking government funds. Although California told the federal government it would accept the money, it is reserving the right to challenge the condition imposed by the US. The state could delay or cancel plans to distribute broadband grants depending on how the process unfolds.
The National Telecommunications and Information Administration (NTIA) decided last year that states must agree not to enforce any rate regulation or net neutrality rule on ISPs that receive money from the $42 billion Broadband Equity, Access, and Deployment (BEAD) program. California had to decide whether to accept its share of the fund despite that restriction.
State officials argue that California should be able to obtain the money and keep enforcing its laws because the Trump administration’s demand would violate the state’s constitutional rights. The California Public Utilities Commission (CPUC) made its view clear in a carefully worded letter yesterday to Assistant Secretary of Commerce and NTIA Administrator Arielle Roth.
“The CPUC cannot be bound by any terms or conditions that are unconstitutional or not authorized by law and it expressly does not waive or concede any arguments or challenges concerning the legality, interpretation, or applicability of any term or condition,” CPUC President John Reynolds told Roth.
Reynolds’ letter also said the CPUC cannot prevent other California agencies from enforcing state laws, suggesting that the attorney general would maintain the right to punish misbehaving Internet providers.
California fighting “preposterous demand”
Reynolds’ letter acknowledged that the NTIA may not agree with the CPUC’s stance and said the state thus will not distribute any funding to ISPs until after the state and federal agency sort out any differences. If the NTIA refuses to change its position, California could sue the Trump administration on the grounds that the condition is unconstitutional.
The NTIA does not appear likely to bend. “As noted in the Department’s response to CPUC, the terms and conditions of the award constitute the entire agreement between NTIA and CPUC. No part of the letter outlining CPUC’s concerns is incorporated into or made part of the award,” an NTIA spokesperson told Ars today.
Consumer advocacy group Public Knowledge supported CPUC’s position. The Trump administration’s demand to preempt state laws is “brazen and meritless,” the group said.
“This administration’s preposterous demand that industry be given a blanket waiver from affordability requirements, net neutrality and privacy protections, and any other commitments to connect and serve Americans has no basis in the Infrastructure Investment and Jobs Act (IIJA), which established BEAD. And, as the commission points out, the NTIA has no authority to alter California state law or require California agencies to not enforce the law,” said Raza Panjwani, senior policy counsel at Public Knowledge.
The CPUC voted to ratify the funding plan in September. But Reynolds said in yesterday’s letter to the Trump administration that his agency’s acceptance of the funds is “based on the CPUC’s best understanding of the effect of Section 50” of the BEAD terms and conditions. Section 50 of the BEAD rules says each state:
shall commit that it will not enforce any law, regulation, order, contracting requirement, or other enforceable obligation that directly or indirectly regulates the rates, terms, and conditions of broadband Internet service… or imposes net neutrality rules, open access, or other utility-style rules on broadband Internet service, against a Subgrantee or its affiliates anywhere it provides service within the State (i.e., both BEAD and non-BEAD locations), while that Subgrantee has any subgrant that is still within its period of performance, extended period of performance, or federal interest period.
The BEAD rules specify that a net neutrality rule is one prohibiting ISPs from “blocking content, throttling speeds, imposing data caps, or engaging in paid prioritization.” ISPs obtaining BEAD funding could be exempt from such laws for up to 14 years.
California calls US rule “vague and ambiguous”
Reynolds’ letter said the NTIA-imposed condition is “vague and ambiguous as to its scope and its relationship to Section 47 U.S.C. § 1702(g)(2)(A)(i) of the BEAD statute,” the US law that created the BEAD program. He wrote:
The CPUC does not interpret Section 50 to require the CPUC to waive, release, or otherwise forfeit any rights, claims, arguments, or defenses concerning potential implications of Section 50 that may violate applicable laws. Further, the CPUC’s acceptance of funds under this award should not be understood as agreement either to refrain from compliance with mandatory legal duties or obligations, or to constrain other State of California entities in the exercise of their authorities to enforce state law, which is outside the scope of the CPUC’s authority. Moreover, California’s net neutrality law expressly provides that “any waiver of the provisions of this title is contrary to public policy and shall be unenforceable and void.” Likewise, many of the CPUC’s own programs that touch on broadband Internet access service are mandated by the California Public Utilities Code, and are neither discretionary nor waivable.
The NTIA today updated its BEAD progress dashboard to reflect that California has signed its final agreement with the federal agency. California was the last state or territory to turn in its final agreement.
“All 56 states and territories have signed and returned their award agreement, finalizing the process,” the NTIA’s updated dashboard page said.
ISPs could insist state laws are invalid
California could face legal problems if and when it distributes the money, which is to be given to Internet service providers in exchange for deploying broadband in unserved and underserved areas. ISPs could insist that they don’t have to follow state law and sue California, or simply decide to violate consumer protection laws and defend against any lawsuits the state attorney general might file against them.
Reynolds apparently hopes to avoid that outcome by holding discussions with the NTIA to resolve any disagreement over the enforceability of California state law.
“To the extent that NTIA and the CPUC disagree about the CPUC’s obligations under Section 50 and other terms and conditions, the CPUC will execute any subgrant agreements if and when the CPUC and NTIA are able to resolve such disagreements and any other applicable conditions are met,” Reynolds wrote. “To that end, we will direct our staff to work diligently and cooperatively with NTIA staff to find such a solution.”
Whether California’s strategy works “depends on what happens next,” Stanford Law professor Barbara van Schewick, a longtime proponent of net neutrality and other telecom regulations, told Ars today.
“The letter doesn’t change the terms of California’s award: Condition 50 is still in it, and only a court or NTIA agreeing in writing can take it out,” she said. “The letter puts California’s position on the record before any contracts with providers are signed and preserves California’s legal arguments against Condition 50.”
Attorney General Rob Bonta’s office declined to comment when contacted by Ars today. A spokesperson for California Gov. Gavin Newsom said California is not giving up its right to enforce state laws against Internet providers.
“California is accepting federal broadband funding to bring high-speed Internet to hundreds of thousands of homes and businesses, many of them in rural and underserved communities,” a governor’s spokesperson said in a statement provided to Ars. “We’re ready to get these projects built with our local and federal partners. Connecting these communities is the goal, and so is protecting them. California’s laws, including our net neutrality protections, still stand.”
Net neutrality and throttling laws
California’s net neutrality law prohibits ISPs from blocking or throttling lawful traffic and says ISPs may not require fees from websites or online services to deliver or prioritize their traffic to Internet users. The first Trump administration lost an attempt to preempt state net neutrality laws, and California defeated ISPs that challenged the state law in court.
California also has a law that prohibits mobile providers from throttling first responders during emergencies. That law was passed in 2019, a year after Verizon throttled an “unlimited” data plan used by Santa Clara County firefighters during a wildfire. Local wildfire-preparedness groups warned that the BEAD condition could prevent California from enforcing the throttling law and requirements for battery backups on cell towers.
According to van Schewick, “California has strong arguments that Condition 50 is illegal. Congress designed BEAD to get broadband built while making sure the providers who take the money follow the law: the statute directs states to ensure funded providers can carry out their work ‘in compliance with all applicable Federal, State, and local laws.’”
But van Schewick said the letter is just an initial step. “The real test comes the first time a BEAD provider blocks a competitor’s app, throttles firefighters, or walks away from a price commitment,” she said. “If the state enforces its laws when that happens, the letter will have protected Californians. If the state looks the other way, Condition 50 will have worked exactly as the providers intended, without a single court ever ruling on it.”
