California may gut state net neutrality law to comply with Trump admin demand

Trump admin broadband grants forbid states from enforcing net neutrality laws.

California is on the verge of accepting $1.86 billion in federal broadband grant funds, despite the Trump administration telling states they cannot enforce net neutrality rules on any Internet service provider that gets a piece of the grant money.

When the Trump administration overhauled the $42 billion Broadband Equity, Access, and Deployment (BEAD) program last year, it ruled that states must agree not to enforce any rate regulation or net neutrality rule on ISPs that receive funding. This is particularly problematic for California, which previously won a yearslong court battle to defend its state net neutrality law.

Similar to federal net neutrality rules repealed during the first Trump administration, California’s law prohibits ISPs from blocking or throttling lawful traffic and says ISPs may not require fees from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. While the first Trump administration lost its attempt to preempt state net neutrality laws, the second Trump administration is trying to achieve a similar result by making federal broadband money conditional on whether states agree not to enforce net neutrality.

Trump’s National Telecommunications and Information Administration (NTIA) says each state participating in BEAD must exempt ISPs from net neutrality rules and price regulations in all parts of the state, not just in areas where the ISP is given funds to deploy broadband service. The exemption from state laws and rules would apply for up to 14 years.

Under BEAD, each US state and territory receives an allotment that it can distribute to ISPs in exchange for deploying broadband to unserved and underserved areas. California and Illinois are the only states that haven’t finalized their funding, according to the BEAD progress dashboard maintained by the National Telecommunications and Information Administration (NTIA). Tomorrow, the California Public Utilities Commission (CPUC) is scheduled to vote on a resolution to ratify the state’s final BEAD plan.

Vote is “beginning of the end”

California could try to continue enforcing its net neutrality law even while accepting the federal funding, a strategy that would involve another long court battle over its right to regulate broadband providers. This would be difficult, as the Trump administration is requiring states that accept grant funding to commit that they won’t enforce net neutrality rules.

A CPUC spokesperson told Ars that tomorrow’s vote is a “procedural requirement” to ratify the state proposal submitted to the federal government in December 2025. But nearly 30 advocacy groups that focus on access to technology are treating the vote as a significant milestone and urged state leaders to defend California’s net neutrality law in a letter yesterday.

One of the letter signers is Paul Goodman, legal counsel for the Center for Accessible Technology. He told Ars in a phone interview that tomorrow’s CPUC vote is much more than a procedural step.

“It’s the beginning of the end,” Goodman said. Winning a court battle would become much more difficult after the state accepts the money, he said. Goodman said the CPUC should delay the vote and that California should file a lawsuit arguing that the NTIA-imposed condition is illegal.

In addition to net neutrality, Goodman said California may be giving up other regulatory authority over companies, like AT&T and Verizon, because the NTIA requirement forbids rate regulation and “utility-style rules on broadband Internet service” in general.

US forbids enforcement anywhere in the state

The advocacy groups’ letter was sent to Governor Gavin Newsom, Attorney General Rob Bonta, CPUC President John Reynolds, and the other CPUC commissioners.

“While our organizations recognize the significance of BEAD funding—and the role it will play in advancing critical broadband infrastructure buildout across the State—we strongly stand against allowing for the presumption of preemption of the State’s net neutrality laws in order to accept BEAD funds,” the groups said.

The NTIA’s BEAD rules say 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 NTIA said the exemption from state laws must extend statewide, because “applying net neutrality and rate regulation at non-BEAD locations could raise compliance costs and threaten the overall financial viability of the Subgrantee, increasing the risk of default for the Subgrantee at BEAD locations and jeopardizing the success of the entire BEAD program.”

Goodman said the exemption from state laws would last for up to 14 years. This is because ISPs receiving grants would have four years to deploy the required broadband networks, and the extended period of performance lasts another 10 years.

Groups: Accepting US terms would set dangerous precedent

The letter to state leaders said the California decision to accept BEAD money under these conditions “would set a dangerous precedent for the federal government to use federal funding as a cudgel that forces states in line with its agenda… If California were to allow this funding to be used as leverage, there is no telling what other resources the administration would confidently seek to exploit.”

The groups urged California leaders to “defend the hard-won protections that have brought us this far” and pledged “to support California leadership in defending our state’s values and the progress it has made on closing the digital divide.”

Goodman told Ars that upon receiving BEAD money, AT&T could tell California that it can’t regulate the price of AT&T’s copper landline phone service or require AT&T to serve everybody who wants phone service, Goodman said. AT&T is already trying to get out of state obligations related to its basic phone service in California, as we’ve reported.

Goodman said the BEAD money could also jeopardize a merger condition that requires Verizon to offer $20-per-month broadband service to people with low incomes in California. Goodman said the savings for people with low incomes from those required Verizon plans would dwarf the money California is due to receive for BEAD.

Of the $1.86 billion in BEAD money for the state, California is slated to spend about $1.4 billion to deploy broadband to 270,571 locations.

Law professor: US is overriding Congress’ intent

The NTIA-mandated exemption to state laws throughout the country would also apply to any other ISP receiving BEAD funding, such as SpaceX’s Starlink satellite division.

“Roughly 69 percent of California’s BEAD funding flows to five large, national providers: Comcast ($400 million), AT&T ($331 million), Verizon/Frontier ($173 million), Amazon’s Kuiper satellite service ($55 million), and SpaceX’s Starlink ($22 million),” Stanford Law professor Barbara van Schewick wrote today.

According to van Schewick, another casualty of the BEAD restriction would be a 2019 California law that prohibits mobile providers from throttling first responders during emergencies. The law was passed after Verizon throttled an “unlimited” data plan used by Santa Clara County firefighters during a wildfire.

“Those protections exist for a reason: left to their own devices, Internet providers have put profits over public safety before. California is now being asked to sign away those protections for fourteen years,” she wrote.

California would have a good case because the federal BEAD law says funded providers must follow state and local laws, van Schewick wrote. “A federal agency can’t use fine print in a grant to override what Congress wrote into the statute,” she wrote, adding that Newsom “should refuse to sign away California’s net neutrality, affordability, and public-safety protections and go to court to get the money the way Congress intended: with every state protection intact.”

State agency: Vote is “procedural”

In a statement to Ars, a CPUC spokesperson said the resolution to be voted on tomorrow is a “procedural requirement to ratify the Dec. 19, 2025 CPUC draft California Final Proposal submitted to the Federal Government.” The NTIA approved the plan on July 17, 2026, after multiple rounds of revisions, the statement said.

“The Resolution adopts the now-approved California Final Proposal only. It does not address subgrantee agreements, or the conditions the NTIA requires be included in subgrantee agreements,” the CPUC told Ars.

We contacted the offices of the governor and attorney general yesterday afternoon and will update this article if we get any response. We also contacted Democratic State Senator Scott Wiener, who authored the net neutrality bill that was enacted by California in 2018, and haven’t heard back.

The BEAD law enacted by Congress and President Biden in 2021 requires ISPs that receive grants to offer “low-cost” plans to people with low incomes, but the Trump administration told states that they cannot set the rates of those plans. That means ISPs themselves get to pick the price of the mandated low-cost broadband offerings.

Last year, California Assemblymember Tasha Boerner proposed a bill requiring ISPs to offer $15 broadband plans to people with low incomes. But she dropped the proposal after Trump administration officials warned that setting rates would jeopardize the state’s access to broadband grants.

Suing US would be “enormously” difficult

Goodman said that once California accepts the money, the state attorney general would only be able to challenge the Trump administration’s requirements in the US Court of Appeals for the District of Columbia Circuit. The DC Circuit court “can really only review that decision for basically fraud or corruption, which is a really high bar to prove,” he said.

Goodman said that if California takes legal action before finalizing the agreement with the Trump administration, it could sue the US in the Ninth Circuit Court of Appeals.

“Right now, the California AG could sue saying, ‘Hey, these general terms… are illegal. You can’t require us to do that.’ [The state] could sue here in California and the Ninth Circuit has a sort of favorable view of that claim, so [the state would have a] pretty good view of success,” Goodman said.

In the DC Circuit, “it’s a much, much harder push,” he said. “Not impossible, but enormously more difficult.” He said the CPUC has a deadline at the end of this month to sign the agreement with the NTIA, but the state “can get a 30-day extension and then challenge the case in court.”

On the other side of the country, New York may have to stop enforcing an affordable broadband law that requires ISPs to offer $15- or $20-per-month service to people with low incomes. New York defended the law in court against broadband industry lobby groups and won that battle less than two years ago but has agreed to take $664.6 million of BEAD money from the Trump administration.

New York Governor Kathy Hochul said in an April 2026 press release that closing the digital divide requires bringing broadband to every household in the state and ensuring “that it remains affordable when it gets there. New York is showing the rest of the nation that both are possible through its landmark Affordable Broadband Act and commitment to reaching the final 1 percent of unserved or underserved households.”

But with New York having accepted the BEAD funding, it may be unable to enforce the Affordable Broadband Act on ISPs that receive grants. We contacted the offices of Hochul and New York Attorney General Letitia James yesterday and will update this article if we get a response.