The mystery of who and what killed the California Affordable Home Internet Act is coming into view.
As a California lawmaker hinted when the bill was abruptly withdrawn in June, the evidence seems to be pointing to the new leadership now directing the National Telecommunications and Information Administration (NTIA) – the agency administering the $42.5 billion federal BEAD program to expand Internet access.
In a recently released FAQ published by the NTIA this week, a corroborating clue has emerged.
And what may be the smoking gun is a bullet buried on page 48, under section 3.29, after the question: "May an Eligible Entity (states) require a specific rate for the low-cost service option (LCSO) when required by state law?”
NTIA's answer:
“No. The IIJA prohibits NTIA or the Assistant Secretary from engaging in rate regulation. Because the Assistant Secretary must approve the LCSO in the Final Proposal, the rate contained may not be the result of rate regulation. The RPN (Restructuring Policy Notice) addressed this fundamental flaw in the BEAD NOFO. The RPN eliminated BEAD NOFO requirements dictating price and other terms for the required low-cost service option.”
“Per the RPN, states may not apply state laws to reimpose LCSO requirements removed by the RPN. More specifically, the RPN ‘prohibits Eligible Entities from explicitly or implicitly setting the LCSO rate a subgrantee must offer’ (BEAD Restructuring Policy Notice, p.7). Violation would result in rejection of the Final (BEAD) Proposal (emphasis added).”
Modeled on New York’s Affordable Broadband Act, when California Assemblymember Tasha Boerner abruptly withdrew her proposed legislation (AB 353) – which initially sought to require Internet service providers (ISPs) operating in the state to offer a $15/month low-cost option for income-eligible households – she blamed it on the Trump administration. At the time, Boerner said she was told by NTIA officials that if the law was passed, it would jeopardize California’s $1.8 billion BEAD allocation.
When Boerner first posted an explanation on her Facebook page and later told Ars Technica the bill had been withdrawn because “there were hints at what would happen,” NTIA had not yet published the recently released FAQ.
The development could have widespread ripple effects for broadband affordability advocates in multiple states where bills have been filed in state legislatures similar to New York’s Affordable Broadband Act.
The New York law went into effect in January after the Supreme Court ended years of legal challenges by industry titans, allowing the constitutionality of the New York law to stand. Even after the Supreme Court declined to intervene in an Appellate Court decision that upheld the law, opponents of the bill asked the Supreme Court to reconsider. The Justices refused – for a second and final time.
It was thought to be a watershed moment for digital equity proponents, as state lawmakers in California, Maryland, Massachusetts, Minnesota, and Vermont filed their own versions of a broadband affordability law, prodded by the demise of the Affordable Connectivity Program (ACP) and the ongoing concerns of constituents about affordability and the rising cost-of-living.
But Big Telecom and its fight against affordable broadband legislation would not go quietly. Even after losing in the courts, industry lobbyists pleaded with the Trump administration to block state efforts to enact similar laws, which raises the question: is the BEAD Restructuring Policy Notice and the recently released FAQ an attempt to carry out the wishes of the big monopoly ISPs?
Legal Questions and ‘Scare Tactics’ Persist
The FAQ cites the BEAD Restructuring Policy Notice issued in June, which among several new rule changes, “hereby eliminates the non-statutory requirements … related to the BEAD low-cost broadband service option (LCSO).”
While the FAQ seeks to clarify questions around the new BEAD spending rules, it is still unclear to ILSR how NTIA could legally withhold BEAD funds as a result of ABA-like laws being passed by states because 1) not all ISPs are participating in the BEAD program and 2) even the ISPs that are applying for BEAD grants, most – if not all – already have existing networks that pre-date the infrastructure law and are in no way tied to BEAD funding.
Perhaps the central legal question at stake is: does the NTIA have the authority to preempt state laws?
Clearly, the Trump administration interpretation of the infrastructure law’s explicit call for a low-cost option is that “low-cost service options” can only be “proposed by the subgrantees themselves (ISPs).”
In other words, the ISP’s get to decide what an “affordable” service plan costs, not states.
Still, it’s one thing to say a specific low-cost service option can’t be imposed on an ISP for areas where service is tied to a BEAD grant. It’s another thing to say that state laws can’t be applied to the bulk of areas where ISPs have existing networks that were built prior to – and/or without – BEAD funding.
Digital equity advocates in California, who had been pushing state lawmakers to pass an affordable broadband bill, say the new BEAD rules are a smokescreen to hide a lack of willingness to address the affordability problem head-on.
Natalie Gonzalez, Director of Digital Equity Los Angeles (DELA), noted that linking “existing infrastructure and existing subscription packages is a pretty far reach,” telling Ars Technica that "from our standpoint as advocates, and being on the calls with the CPUC [California Public Utilities Commission], our interpretation is that the rules simply just eliminate any new builds” from having an affordable option as a requirement.
In speaking with ILSR this week, Gonzalez added:
“ISPs are already getting lots of money to expand their service area. This funding is for construction and new networks. To use this argument and loop in rate regulation as a whole is a wild distraction.”
“Trying to lump incumbent providers and new BEAD funded construction builds together with a broad ‘rate regulation’ claim is not only misleading, it's also not based on facts. Nothing has been published on any legal analysis showing that affordability requirements for consumers are linked to BEAD's construction funding. (These are) scare tactics to avoid accountability while receiving public money.”
Reviving Affordability or Killing Attempts to Fix It?
The bipartisan infrastructure law that established the BEAD program specifically called for BEAD grant recipients to offer a low-cost option, recognizing that the most often cited reason households do not have home Internet service was affordability.
Although universal broadband access is given bipartisan lip service, in the run-up to the 2024 election GOP leaders not only blocked bipartisan attempts to save the ACP – which offered 23 million income-eligible households a $30/month voucher to help pay for Internet service – U.S. Sen. Ted Cruz led the charge in routinely criticizing NTIA rules under the Biden administration.
In a letter sent to then NTIA Assistant Secretary Alan Davidson, Cruz characterized the BEAD program as being riddled with “unlawful and onerous bureaucratic obstacles” and specifically referred to the low-cost service option (LCSO) as an “imposition of statutorily-prohibited rate regulation.”
That letter came after NTIA offered a detailed rebuttal, noting how the Infrastructure Investment and Jobs Act (IIJA) explicitly stated Congress’ intent – that “[t]he persistent ‘digital divide’ in the United States is a barrier to” the nation’s “economic competitiveness [and the] equitable distribution of essential public services, including health care and education.”
“Accordingly,” NTIA wrote in its rebuttal, “it is essential that networks constructed using BEAD Program funds be accessible and affordable to all Americans. Consistent with the IIJA, NTIA is not setting rates, and nothing in (the) BEAD Program NOFO regulates rates. The requirement that subgrantees offer an affordable service tier for qualifying low-income subscribers is not rate regulation. Rather, it is a grant condition, as required by the statute, for participants of the BEAD Program to receive these federal funds (emphasis added).”
Still, after the election, Cruz issued a written warning to NTIA of “Big Changes Ahead for Multi-Billion-Dollar Broadband Boondoggle.” The warning foreshadowed a major change of course, which would be cemented by Arielle Roth, a Sen. Cruz staffer and policy director of telecommunications for the Cruz-led Senate Commerce Committee. As close observers expected, Roth was tapped to be the new NTIA boss to the delight of telecom industry giants.
Roth – who has criticized the BEAD program for having a “woke social agenda” loaded with “left-wing priorities” – also questioned “how wise (it) would be” to resurrect the popular ACP program, making the counterfactual argument that it had “a failed record in connecting unserved Americans and was vastly oversubscribed” – while ignoring actual evidence the program generated benefits that far exceeded its costs as well as analyses that showed it also helped increase broadband adoption.
Will New York Hold The Line?
Given the attack on efforts to make broadband more affordable for the millions of Americans who cite affordability as a leading reason why they don’t have home Internet access, this apparent effort to hamstring states’ ability to tackle the problem seems more like an empty threat than a strong legal position.
But, perhaps that’s the NTIA gambit here: be purposively murky about the legal authority to withhold BEAD funds because of state laws – with the hopes that it will be enough to dissuade states from pursuing affordable broadband legislation. It seems to have worked so far in California.
As we wrote in July, it seems the only way to get a definitive answer about the legal uncertainty is for a state to pass a New York-style broadband affordability law that prompts NTIA to withhold BEAD funds, and then to follow that up with a lawsuit to adjudicate the matter, even though that prospect alone may be enough to convince states not to risk losing BEAD funding or engage in the legal fight it would take to bring clarity to the issue.
As for New York, which is expected to receive $664 million in BEAD funds, no one is saying (publicly) what the new NTIA rules will mean for the Empire State’s existing law which requires ISPs in New York with 20,000 or more subscribers to offer income-eligible households a $15/month plan.
Ars Technica is raising similar questions, reporting this week how the NTIA said that as of July 21 all 50 states had submitted “corrections” to comply with the new guidance, “which likely means that states removed proposals for specific prices.”
Ars Technica goes on to report how they (as well as ILSR) were unable to get clarity from New York Attorney General Letitia James and Gov. Kathy Hochul, though New York Assemblymember Amy Paulin told the outlet she was “hopeful that it would be enforced on ISPs that receive BEAD funds.”
“The NTIA rule that removed affordability requirements really comes into play in states without mandates (every state except NY). It's our understanding that any BEAD awardee would have to comply with the Affordable Broadband Act regardless of federal subsidy.”
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