The Trump administration formally notified California on August 31 that it would receive a $1.42 billion grant to bring broadband access to 270,000 households and businesses. The money was authorized by the 2021 infrastructure law signed by President Biden.

But accepting the award would require Gov. Gavin Newsom’s administration to stop enforcing California’s leading broadband affordability, reliability, net neutrality, and throttling protections for 14 years. The restriction would cover all state broadband laws applied to any internet service provider receiving the funding, including future laws.

The requirement, called Condition 50, was inserted into the Broadband Equity, Access, and Deployment program by the National Telecommunications and Information Administration. Most of California’s funding is scheduled to go to Comcast, AT&T, Verizon/Frontier, Amazon through its Kuiper satellite service, and SpaceX’s Starlink.

Federal officials hold enormous leverage because communities need broadband 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.”

Newsom has until November 1 to accept the money and its restrictions after receiving a one month extension. Sources told the Prospect that the governor was expected to decide this week, while spokesperson Anthony Martinez said the administration would provide more information when available.

Condition 50 is part of a broader Trump administration push to use federal money to influence state policy. The administration has tied rural hospital assistance to state health care changes, threatened homeland security grants over voting policies, and delayed Medicaid grants over alleged fraud.

Telecommunications companies have spent years trying to escape California’s rate regulation and open internet protections through the legislature and federal courts. After losing a similar battle in New York, industry trade groups asked the Justice Department to examine federal options for preempting state regulations.

Nearly every state and territory has accepted BEAD funding with Condition 50, with only California and Illinois yet to sign. California faces unusually high stakes because its Public Utilities Commission has actively exercised authority over broadband.

The commission established a pilot Affordable Connectivity Program offering plans as low as $20/month for residents with low incomes and baseline service standards. It has also imposed conditions on corporate mergers, financed municipal internet networks, monitored discriminatory pricing, and required backup power in fire prone areas.

California also enforces the nation’s strongest net neutrality law after a federal appeals court struck down the national open internet standard. The state law prevents providers from blocking websites, slowing internet traffic, or favoring their own services by exempting them from data limits.

The battle carries a sharp public safety history. During a major 2018 wildfire in Santa Clara County, Verizon throttled emergency internet service used by firefighters and said service could not be restored unless they moved to a more expensive plan.

California responded with a 2019 law restricting providers from throttling first responders during public safety emergencies. Telecommunications companies later tried three times and failed to invalidate the state’s net neutrality protections in federal court.

The industry also pursued relief through Sacramento. In June, the state Assembly passed legislation that would have removed telecommunications authority from the Public Utilities Commission, but the state Senate stopped the measure and it was withdrawn.

Condition 50 offers corporations another route around California’s rules. The NTIA argues that state rate regulation and net neutrality requirements threaten the financial viability of BEAD projects, while van Schewick calculated that the federal restrictions would remain effective for 14 years.

The financial consequences could dwarf the federal award. Van Schewick estimated that if only 20% of eligible households joined the state’s service program for residents with low incomes, participants would save approximately $4.2 billion over a decade.

Harold Feld of Public Knowledge calculated that Condition 50 could erase between $5 billion and $16 billion in rate regulation benefits. That estimate does not include the value of public safety requirements, net neutrality protections, and other California policies.

Advocacy organizations have urged Newsom to reject the award and challenge Condition 50. They argue that the Infrastructure Investment and Jobs Act requires funded providers to comply with applicable federal, state, and local laws, making a forced suspension of state enforcement inconsistent with the statute.

Van Schewick believes California may retain a legal path only if Newsom refuses the grant. Accepting it could turn any dispute into a fight over an individual award, allowing the NTIA to terminate the funding if it found California in violation.

Rejecting the grant would offer no guarantee of success, but it could permit a broader challenge to the federal policy. California must weigh connecting 270,000 households and businesses against surrendering regulatory authority and potentially raising costs for millions of families.

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