It sounds like California and NTIA are at an impasse over releasing the $1.42 billion in BEAD funds to the state to support broadband infrastructure grants, with the controversy involving net neutrality.
Before diving deeper into the details of the dispute, let me provide the context behind the disagreement. California passed net neutrality legislation in September 2018. The California net neutrality rules are similar to what eventually was approved by the FCC. The U.S. Department of Justice and others immediately sued California over the legislation, which put implementation of the law on hold. The California law was finally upheld in January 2022 by a unanimous ruling of the U.S. Ninth Circuit Court of Appeals.
The FCC under Chairperson Jessica Rosenworcel adopted federal net neutrality rules in April 2024. You may recall that the docket had millions of comments filed by the public, the most ever for an FCC proceeding. The FCC ruling was also challenged in court. In January 2025, the U.S. Sixth Circuit Court of Appeals ruled that the FCC lacked the legal authority to order net neutrality, partially based on the Supreme Court’s Loper Bright decision that said that federal agencies didn’t have the authority to make major rulings that had not been directed by Congress. The new FCC Chairman Brendan Carr did not appeal the court ruling since reversing the net neutrality ruling was high on his agenda for the FCC. The court relieved the FCC from having to vote on the issue.
The final step for flowing federal grant funds to states is for the state to sign an agreement before the money flows. There are thousands of grants every year that flow between federal agencies and states, and the grant agreements between states and the federal government are routine and noncontroversial. However, NTIA added a requirement to the BEAD grant agreement that says that a state must agree to not impose any net neutrality rules on any BEAD winner – not just for BEAD-funded areas, but statewide.
On November 2, California Public Utilities Commission (CPUC) President John Reynolds told NTIA that the CPUC does not interpret the federal grant conditions in the BEAD agreement to require California to forfeit its legal rights or to stop enforcing an existing state law. He said that California will sign the BEAD grant agreement as long as the net neutrality provision doesn’t apply. NTIA responded almost immediately and said that California has to sign the agreement as written and that there are no exceptions to what has been offered in the agreement. This means BEAD funding is at an impasse and won’t flow to California ISPs until this issue is resolved.
For some more context, the original BEAD legislation did not require that BEAD recipients follow net neutrality. However, NTIA under the Biden administration added the net neutrality requirement after the FCC approved net neutrality rules. After the courts struck down the FCC’s net neutrality rules, NTIA under the Trump administration removed the requirement that BEAD recipients must follow net neutrality.
However, NTIA went one step further and said that states had to agree not to enforce state net neutrality laws in order to get the BEAD funding. All other states have agreed to the NTIA agreement. It was clear to everybody in the industry that NTIA added this provision specifically for California, since it was the only state that has serious state net neutrality rules. NTIA was teeing up this battle with California from the start.
What’s interesting about this fight is that ISPs, even the big ones, have not done anything blatantly in violation of net neutrality rules in many years. In a time of social media attention and heightened competition, ISPs don’t want to get painted as discriminating against customers or their internet traffic. This fight, instigated by NTIA, is clearly not about net neutrality, since that is not a big problem. This is a political fight, and another way for the administration to stick it to California.
There is a very good chance that the issue will not be resolved. It’s hard to see NTIA or California give in on the issue. It’s always possible this will go to court, but that would likely take years. What I find most ironic about this dispute is that the courts ruled that the FCC couldn’t implement net neutrality rules. It seems even less likely that courts would side with NTIA for arbitrarily making a backdoor regulatory ruling that is far outside of its congressional mandate.
Meanwhile, the practical consequence is that California BEAD projects will not get funded by the NTIA. My bet, if that happens, is that California will fund the grants, and in doing so will impose other state rules like the requirement to have low prices. The state might even put in more money than what came out of the Benefit of Bargain rules and might fund more fiber.