What’s Going On?

In 2021, President Biden signed the Infrastructure Investment and Jobs Act (IIJA), which allocated over $42 billion to the new Broadband Equity, Access, and Deployment (BEAD) Program to ensure high-speed Internet access for every American.[1] That money was allocated across 56 states and territories responsible for selecting the providers that will build connectivity to unserved and underserved locations.

After President Trump’s second inauguration, his administration implemented several changes to the BEAD Program. Among them are two new conditions on state funding.

First, the National Telecommunications and Information Administration (NTIA), announced that it would prohibit states from regulating broadband rates or imposing network neutrality rules on broadband providers,[2] even after several federal courts held that such rules fell within the states’ traditional, lawful powers. NTIA has since asked states to sign amended “Notices of Award”—documents governing BEAD grants—that purport to implement this prohibition statewide, even in locations not subsidized by BEAD (e.g., places with existing service).

Second, Executive Order No. 14,365 directs the Secretary of Commerce to identify “onerous” state laws regulating AI systems,[3] singling out Colorado’s prohibition against biased AI systems used for discriminatory purposes as an example.[4] The Executive Order then declares that any state with an onerous law will be deemed ineligible for certain “nondeployment” BEAD funds. As of April 2026, the Commerce Secretary has yet to release this “naughty list” of AI laws.

Both conditions are unlawful.

The BEAD Statute

To start, both conditions are inconsistent with the text of the IIJA and other statutory provisions.

NTIA claims that 47 U.S.C. § 1702(h)(5)(D)—which prohibits NTIA from “regulat[ing] the rates charged for broadband service”—allows it to prevent states from issuing network neutrality rules and broadband rate regulations. But that statutory prohibition applies only to NTIA, and not to the states. Indeed, IIJA requires that states implement a “low-cost broadband service option” that “shall apply” to the providers selected to deploy service with the state’s BEAD funds.[5] This requirement, together with the express provision limiting the prohibition against rate regulation to NTIA only, both confirms that states retain their traditional regulatory power to set rates and demands that they exercise that power. New York’s BEAD proposal, for example, adopted a low-cost option that conformed to its own state law requiring broadband carriers to offer service to qualifying low-income consumers at no more than $15 per month.[6]

On AI, the Executive Order claims that 47 U.S.C. § 1702(e)—which allows NTIA to approve state proposals that serve the “public interest”—empowers NTIA to withhold nondeployment funds from states that have enacted “onerous” AI laws (as adjudged by the Secretary of Commerce). But § 1702(e)’s public interest inquiry is best understood as confined to BEAD’s policy context, asking whether the state’s proposed use of the funds advances the statute’s goals. AI sits well outside BEAD’s scope: BEAD targets broadband infrastructure, not software applications. The same goes for the agency’s approval powers under 47 U.S.C. § 1702(f), which likewise emphasizes broadband connectivity. Moreover, IIJA establishes a specific formula for allocating nondeployment funds to states with approved plans.[7] NTIA must follow this statutory method and cannot evade it by selectively denying states the funds guaranteed to them under IIJA. Hence, while NTIA may reject a state’s proposal on the merits—because, say, it plans to award funds to providers that cannot satisfy the statute’s standards for broadband service—it cannot use these funds to demand compliance with unrelated policy preferences. Otherwise, NTIA’s public interest inquiry would metastasize into what Brian McGrail has assailed as a “freewheeling assessment of state policy.”[8]

Preempting Preemption

These statutory limits, moreover, underscore the absence of any federal power (absent new congressional action) to preempt state AI and broadband regulation.

Several federal courts affirmed the states’ powers to regulate broadband rates and issue network neutrality rules.[9] Specifically, these courts have explained that federal authorities lack the power to regulate broadband—and, without the power to regulate, the federal government lacks the power to preempt state rules. Moreover, these courts have explained that such rules fall within the states’ traditional powers over communications services—powers which Congress has expressly preserved in 47 U.S.C. § 152(b). Put simply, NTIA cannot invoke a law that strips it of the power to regulate broadband rates as a basis for preempting state broadband regulation: Where it “lacks the authority to regulate, it equally lacks the power to preempt state law.”[10]

The same is true for AI. Federal agencies lack the power to regulate broadband because broadband has been deemed an “information service” under the Telecommunications Act of 1996, and federal jurisdiction over “information services” is quite limited. And while there is no case law (yet) on AI’s regulatory status, the statutory text makes clear that “artificial intelligence is [a] quintessential ‘information service.’”[11] Hence, the Federal Communications Commission has no power to “initiate a proceeding” to preempt state AI laws—the Executive Order’s exhortations to the contrary notwithstanding.[12] NTIA, likewise, cannot leverage its power over BEAD—which, again, is focused on broadband deployment—to preempt state regulation of AI.

Unconstitutional Commandeering and Coercion

Federal authorities, lacking the power to regulate and to preempt state regulation, are also prohibited from commanding or coercing states to conform to their preferred policies. While Congress may enact laws that regulate private actors—and those laws may have preemptive effect—it may not directly regulate the states.

Under the anticommandeering doctrine, the federal government may not issue direct orders to state governments. But that is just what the Trump Administration is trying to do here. For example, in Murphy v. NCAA, the Supreme Court held the Professional and Amateur Sports Protection Act (PASPA) unconstitutional, explaining that by restricting state legislatures from authorizing sports betting, PASPA posed an “affront to state sovereignty” by “unequivocally dictat[ing] what a state legislature may and may not do.”[13] Just as PASPA unconstitutionally sought to prohibit state legislatures from authorizing sports betting, the Trump Administration unconstitutionally seeks to prohibit state legislatures from regulating broadband rates, network neutrality, and AI. Such commands to state governments—whether contained in a statute, regulation, or executive order—violate the Tenth Amendment’s anticommandeering doctrine.

Likewise, NTIA cannot use BEAD funds to substitute indirect coercion for the direct commands it lacks the constitutional authority to issue. As the Supreme Court explained in the portions of NFIB v. Sebelius focused on Medicaid funding conditions, the Spending Clause prohibits coercing states into adopting federal policy. Because this risk is especially acute in spending contexts, where federal authorities may attempt to implement policies they cannot impose directly,[14] the Court explained that grant conditions may be “impermissibly coercive” when they lack a sufficient nexus to the program’s federal interest and when they “pass the point at which pressure turns into compulsion.”[15] Here, the AI-related conditions are quite distinct from BEAD’s broadband deployment goals. So too is NTIA’s insistence on making state rules conform to federal preferences in locations where BEAD has no role to play. And where the Court has upheld conditions on funds amounting to “less than half of one percent” of a state’s budget,[16] the funds at risk here are several multiples of that. The total BEAD allocations subject to the prohibitions on broadband regulation average about four percent of a state’s budget—and in some instances exceed NFIB’s ten percent benchmark.[17] Even the nondeployment funds at risk under the Executive Order on AI can add up to three percent.[18] Although NFIB involved a threat to an existing funding stream, BEAD funds are subject to these new conditions only after states spent years and substantial resources preparing for the program. Given the size and significance of these grants, the disconnect between BEAD’s goals and the new conditions, the absence of federal regulatory authority over broadband and AI, and the sudden midstream imposition of new conditions after relying on the program’s promises, these new conditions add up to an unlawful attempt to coerce the states to adopt the Trump Administration’s preferred regulatory program.

Bottom Line

The bottom line is that these conditions are unlawful. That’s why lawmakers on both sides of the aisle have pushed back against the Trump Administration’s demands,[19] and why states should not accede to these terms. If they do, states may undermine their powers to regulate these fast-moving technologies for years to come.

Tejas N. Narechania is a Professor of Law at the University of California, Berkeley, School of Law. His scholarly focus is on the institutions of technology law and policy (including, for example, telecommunications regulation, platform governance, and intellectual property), among other subjects.  He is also a Faculty Co-Director of the Berkeley Center for Law & Technology. Before joining Berkeley Law, Professor Narechania clerked for Justice Stephen G. Breyer of the Supreme Court of the United States (2015–2016) and for Judge Diane P. Wood of the U.S. Court of Appeals for the Seventh Circuit (2011–2012). He has advised the Federal Communications Commission on network neutrality matters, where he served as Special Counsel (2012–2013). He has a J.D. from Columbia Law School, where he earned the Ruth Bader Ginsburg Prize and was the Executive Notes Editor of the Columbia Law Review. He also has a B.S. (Electrical Engineering and Computer Science) and a B.A. (Political Science) from the University of California, Berkeley.

Sources and Further Reading

• Harold Feld, Can the FCC Preempt State Laws on AI? No—Especially Not With Broadband As Title I, Public Knowledge, Sept. 19, 2025, at https://publicknowledge.org/can-the-fcc-preempt-state-laws-on-ai-no.
• Charlie Bullock, Legal Issues Raised by the Proposed Executive Order on AI Preemption, Institute for Law & AI, Nov. 2025, at https://law-ai.org/legal-issues-raised-by-the-proposed-executive-order-on-ai-preemption.
• Brian McGrail, The AI Preemption Executive Order’s BEAD Strategy Faces Steep Legal Hurdles, Lawfare, Jan. 21, 2026, at https://www.lawfaremedia.org/article/the-ai-preemption-executive-order-s-bead-strategy-faces-steep-legal-hurdles.

Endnotes

The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.

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