California accepted $1.42 billion in broadband grant funding from the Trump administration while rejecting a condition that would require the state to stop enforcing its net neutrality law and other telecom regulations.

The National Telecommunications and Information Administration (NTIA) imposed the condition as part of the $42 billion Broadband Equity, Access, and Deployment (BEAD) program. States must agree not to enforce rate regulations or net neutrality rules on internet service providers receiving BEAD money. California is slated to deploy broadband to 270,571 locations and may ultimately receive up to $1.86 billion from the program.

The California Public Utilities Commission (CPUC) sent a letter to NTIA Administrator Arielle Roth stating it "cannot be bound by any terms or conditions that are unconstitutional or not authorized by law" and does not waive challenges to the condition's legality. CPUC President John Reynolds wrote that the commission cannot prevent other California agencies from enforcing state laws.

Reynolds said California will not distribute any BEAD funding to internet service providers until the state and federal agency resolve their disagreement. If the NTIA refuses to change its position, California could sue the Trump administration on constitutional grounds.

The NTIA responded that "the terms and conditions of the award constitute the entire agreement" and no part of the CPUC's letter is incorporated into the award. An NTIA spokesperson told Ars today that the agency does not appear likely to change course.

Section 50 of the BEAD rules specifies that states must commit not to enforce laws regulating broadband service rates, terms, conditions, or net neutrality rules against subgrantees for up to 14 years. ISPs could face lawsuits from California or simply refuse to follow state consumer protection laws.

Public Knowledge, a consumer advocacy group, said the Trump administration's demand is "brazen and meritless" and has no basis in the Infrastructure Investment and Jobs Act that established BEAD. Stanford Law professor Barbara van Schewick told Ars that California's letter puts the state's legal position on record before contracts with providers are signed.

California was the last state or territory to return its final award agreement. All 56 states and territories have now signed.