California is accepting $1.86 billion in federal broadband grant money while refusing the condition attached to it: that the state stop enforcing its net neutrality law and other telecom rules. The standoff could put the state, the federal government and internet providers into court.
The money comes from the $42 billion Broadband Equity, Access, and Deployment (BEAD) programme. The National Telecommunications and Information Administration (NTIA) decided last year that states must agree not to enforce any rate regulation or net neutrality rule against ISPs receiving BEAD funds — "Section 50" of the award terms. The clause can exempt funded providers from such rules for up to 14 years, the length of the federal interest period.
The California Public Utilities Commission (CPUC) is taking the money and disputing the condition. In a letter sent Monday to NTIA Administrator Arielle Roth, CPUC President John Reynolds wrote that the commission "cannot be bound by any terms or conditions that are unconstitutional or not authorized by law" and "expressly does not waive or concede any arguments or challenges" about their legality. He added that the CPUC cannot stop other California agencies from enforcing state law — a signal that Attorney General Rob Bonta's office would keep the right to pursue misbehaving providers. Bonta's office declined to comment.
Until the disagreement is resolved, California says it will not distribute any funding to ISPs. The NTIA appears unlikely to bend: "the terms and conditions of the award constitute the entire agreement between NTIA and CPUC," a spokesperson told Ars Technica, adding that no part of the state's letter is incorporated into the award. On Tuesday the agency's dashboard showed all 56 states and territories had signed final agreements — California, the last holdout, included.
Consumer group Public Knowledge called the demand "brazen and meritless", arguing it has no basis in the Infrastructure Investment and Jobs Act that created BEAD. Stanford Law professor Barbara van Schewick thinks California has strong arguments, since Congress directed states to ensure funded providers work "in compliance with all applicable Federal, State, and local laws". But she warns the letter is only a first 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."
That is not hypothetical in California. In 2018 Verizon throttled a Santa Clara County fire department "unlimited" plan during a wildfire; the state passed a law in 2019 barring carriers from throttling first responders during emergencies. Wildfire-preparedness groups have warned that the BEAD condition could also undercut that law and rules requiring battery backups on cell towers.
The incentive for providers is obvious: take the money, then argue that state law no longer applies to them. Governor Gavin Newsom's office says the opposite is true. "California is accepting federal broadband funding to bring high-speed Internet to hundreds of thousands of homes and businesses," a spokesperson said. "California's laws, including our net neutrality protections, still stand."
What happens next is not settled by a letter. As van Schewick put it, if the state enforces its laws when a provider misbehaves, the letter will have protected Californians; if it looks the other way, the condition will have worked exactly as intended, without a single court ever ruling on it.
