Trump Administration Could Nullify California Internet Protections

On August 31, the Trump administration sent formal notice of a $1.42 billion grant to California to supply broadband access to 270,000 households and businesses, as authorized in the 2021 infrastructure law signed by President Biden. But if California Gov. Gavin Newsom accepts the award, the state must also agree to not enforce its nation-leading standards for broadband affordability and reliability for 14 years, forgoing mandatory low-income plans and other benefits that save consumers billions of dollars, as well as the strongest net neutrality and anti-throttling laws in the country.

This requirement, known as “Condition 50,” was inserted by the National Telecommunications and Information Administration (NTIA) into the terms and conditions of the Broadband Equity, Access, and Deployment (BEAD) program a year ago. The enforcement restrictions don’t just apply to BEAD projects, but to all state broadband laws and regulations on any internet service provider (ISP) that receives funding, including any laws passed in the future.

The majority of California’s BEAD funding is scheduled to go to Comcast, AT&T, Verizon/Frontier, Amazon (through its Kuiper satellite service), and SpaceX’s Starlink. 

The Trump administration has strong leverage to free these large companies from regulation because broadband is such a fundamental lifeline for the 21st century, and communities need access. “Everybody wants more people to be connected,” said Barbara van Schewick, director of the Stanford Center for Internet & Society. “The problem is that the Trump administration has turned this into a poison pill.”

The Newsom administration has until November 1 to decide whether to accept the grant and the restrictions, after receiving a one-month extension on taking the offer late last month. Sources tell the Prospect that the governor is expected to make a decision this week. 

“We will definitely let you know when we have more to add on this,” said Anthony Martinez, a spokesperson for Gov. Newsom, when asked about the decision. 

The situation is the culmination of a long-running effort by the telecom industry to shake free of California’s rate regulation and open internet laws, which they could not accomplish through the legislature or the courts. After losing a similar fight in New York, trade groups for the telecom industry asked the Justice Department last May to “thoroughly examine every possible tool in the federal government’s toolbox, including any and all ways in which the Commission can take regulatory action to preempt harmful state regulations.” Condition 50 became that tool.

It’s one of many ways the Trump administration is attempting to use federal dollars to control state policies. It has conditioned rural hospital assistance on changing state health care policies. It has threatened to withhold state homeland security grants unless they change voting policies or give voter rolls to the Justice Department. And it has held up Medicaid grants to states it alleges have permitted fraud.

“There is no limit to how much Trump’s people will screw over their own voters in order to get some small gain for the monopolies or their own pocketbooks,” said Christopher Mitchell, director of the Community Broadband Networks Initiative at the Institute for Local Self-Reliance. “California is in a difficult position. They need those funds to connect the most rural regions, but accepting the conditions from the White House will harm millions of other people.”

But some public advocates think Newsom has a way out, a legal option that would only be viable if he doesn’t accept the funds.

BEAD FUNDING WITH CONDITION 50 has already been accepted by all U.S. states and territories except two; only Illinois and California have yet to sign. But California has the most to lose. Van Schewick explained that 33 states and D.C. already explicitly prevent public utility regulations from extending to broadband, and in the others, utility commissions have either formally disclaimed or failed to utilize that authority. “For those states, signing Condition 50 cost them nothing,” van Schewick said. 

But the California Public Utilities Commission (CPUC) is allowed to regulate broadband as a utility and has used that power to become “a public defender in the regulatory space,” as a June Prospect story explained. 

The CPUC has established a pilot state Affordable Connectivity Program as low as $20/month for low-income residents, with baseline quality standards. It has attached conditions to ISP mergers (Verizon-Frontier, Charter Spectrum-Cox Communications) requiring the merged companies to add low-income plans, upgrade networks, broadly provide access, and limit pricing for residents without competitive alternatives. It provides low-cost financing to municipalities building their own internet networks and polices discriminatory pricing statewide. It requires backup power in fire-prone areas to ensure internet functionality for emergency alerts to residents.

Read: A California Democrat is trying to gut the state’s broadband watchdog

And it regulates the state’s net neutrality laws, now the strongest in America after a federal appeals court struck down the national open-internet standard. That law prevents ISPs from favoring their own services by exempting them from data caps, or from blocking or discriminating against the internet speed of any website or app.

All of this would be unenforceable for 14 years if Newsom accepts the grant, something the telecom industry has been plotting for nearly a decade.

Back in 2018, telecoms tried to stop California’s net neutrality bill in Sacramento, spending $6 million on lobbying and making robocalls to seniors claiming that their phone bills would increase. But their timing was terrible. That summer in Santa Clara County, where firefighters battled what was then the largest wildfire in state history, Verizon “throttled” emergency internet service, which was used to coordinate the containment effort. When urged to allow services to be restored, Verizon said they could not until the firefighters switched to a more expensive plan.

A law passed in 2019 explicitly restricts ISPs from throttling first responders during a public safety emergency. That complemented the net neutrality law, which passed over ISP objections the year before. The telecoms then tried three times in federal court to invalidate net neutrality; they failed.

The ISPs also tried to stand down the CPUC’s muscular rate regulation and anti-price gouging efforts. In June the state assembly quietly passed a bill that would have stripped all telecommunications authority from the CPUC, authored by a recipient of significant campaign contributions from the industry. But the state Senate shut that bill down and it was withdrawn.

The NTIA’s Condition 50 is the third route for telecoms to squash California’s internet regulations. The NTIA asserts that “state laws and regulations that specifically target broadband internet service—such as rate regulation and net neutrality laws—undermine the financial viability” of BEAD projects. The restrictions hold for the duration of the “period of performance” or “federal interest period.” Van Schewick has calculated this to equal 14 years.

Because of the elimination of federal rate regulation and open-access protections, no other entity is available to step in to block telecom discrimination or price-gouging. Corporations would get a double benefit: grant funding to connect more paying customers, and cuts to regulations that they have sought for years.

“In some ways, this is a refreshing reminder of the corruption we used to deal with,” Mitchell said. “Trump’s people at NTIA are acting on behalf of monopolies like Comcast, Charter Spectrum, and AT&T rather than just stealing money for themselves from the public.”

Van Schewick highlighted the $20/month plan for low-income Californians that the CPUC mandated in merger reviews. Roughly 5.8 million households qualified for a since-shuttered federal version of this benefit, and half of those eligible signed up. If only 20 percent of eligible households enrolled in state low-income service, it would save them approximately $4.2 billion over a decade, three times as much as the $1.4 billion grant.

Harold Feld of the advocacy group Public Knowledge calculates the total rate regulation benefits that would be wiped out under Condition 50 at “somewhere between $5 billion and $16 billion.” And that doesn’t include the public safety mandates, net neutrality rules, and other benefits to California.

IN SEPTEMBER, THE CPUC, ACTING AS THE AGENT of the governor, agreed procedurally to accept the award. But the governor must make the final call. Internet advocacy groups like Demand Progress, Fight for the Future, the Electronic Frontier Foundation, and many groups with a particular focus on expanding broadband access have urged Gov. Newsom to reject the award.

California has a good legal argument to challenge Condition 50, van Schewick and other advocates argue. The Infrastructure Investment and Jobs Act states that ISPs receiving BEAD funding must be “in compliance with all applicable Federal, State, and local laws.” Forcing a decade-plus pause on enforcement of state laws is inconsistent with this text. “Normally an agency can only adopt conditions that Congress authorizes,” van Schewick said.

But to protect the law and ensure speedy deployment of funding—something that obviously didn’t work five years later—Congress limited judicial review of any decisions made by NTIA in implementing the BEAD program. They exempted it from the Administrative Procedure Act, including the public comment period for any rules. And any challenges to NTIA decisions cannot be challenged in state court. They must go through federal district court in Washington, and can only be overturned in instances of corruption, fraud, or misconduct. 

Van Schewick believes there is still a legal path—as long as Newsom doesn’t agree to the award. “I don’t think that those limits on judicial review cover attacks on general policies,” she explained. Courts have said in other contexts that such limits only apply to individual decisions. If Newsom accepts the award, any fight over Condition 50 would be waged over that individual grant, and NTIA could terminate the entire grant by finding California in violation of the terms. 

But if Newsom rejects the award, Condition 50 could be challenged as a brazen attempt to pre-empt California policies, in contradiction of the federal statute. There wouldn’t be a guarantee of success, of course, but a victory would protect diminishing California’s internet rules while getting the funding to build out broadband access.

That adds weight to Gov. Newsom’s decision. Getting 270,000 households and businesses connected in California may not be worth the cost of giving up regulatory authority to the Trump administration and spiking internet costs for millions of families. Plus, the White House will have further confirmation that they can use the leverage of the federal purse to bring state laws to heel.

“CPUC has invested all this time and effort into selecting recipients” for the BEAD grants, van Schewick said. “I totally get that. But it’s a really bad deal.”