The AI Preemption Executive Order's BEAD Strategy Faces Steep Legal Hurdles
On Dec. 11, 2025, the White House tied AI policy to broadband money. Section 5(a) of the "Ensuring a National Policy Framework for Artificial Intelligence" executive order directs the Commerce Department to make states with "onerous" AI laws ineligible for a large pool of BEAD funds. The hook: NTIA's approval authority under 47 U.S.C. § 1702(e)-(f).
The problem is simple: the BEAD statute is about connecting locations, not policing state AI laws. Even if you stretch the text, the major questions doctrine and federalism clear-statement rules likely snap it back.
What Section 5(a) Tries to Do
The order tells Commerce to issue a policy notice that conditions eligibility for "remaining" BEAD funds on a state's AI rules. The theory claims AI applications drive demand for high-speed networks, so state AI restrictions undermine BEAD's mission. The order cites BEAD's "public interest" and "purposes of this Act" language to justify the move.
That's a big reach for a broadband infrastructure program.
Quick Refresher: How BEAD Is Built
Congress created BEAD as a $42.45 billion formula grant to close the digital divide. Each state's allocation is set by formula based on unserved and underserved locations. NTIA approves state proposals but must evaluate them against specific statutory criteria.
Spending is constrained to six categories in § 1702(f): deployment, anchor institutions, mapping/planning, multifamily infrastructure, adoption/devices, and a catch-all for uses necessary to facilitate program goals. If a state can't use its allocation or misses deadlines, unused money gets reallocated by formula. Congress-not NTIA-controls the core distribution.
Why the "Remaining Funds" Exist
In June 2025, NTIA rolled out "Benefit of the Bargain" reforms. It stripped program add-ons (like fiber preferences and rate controls), reopened competition to fixed wireless and satellite, voided some prior approvals, and rescinded many nondeployment uses.
The result: a pooled "remaining funds" bucket estimated at over $21 billion. Section 5(a) targets that bucket.
Reviewability: A Narrow Door, Not a Locked One
BEAD decisions are exempt from the APA and funneled to the U.S. District Court for D.C. with a very tight review standard focused on corruption and misconduct. The administration may argue this chokes off statutory challenges.
States will counter that ultra vires actions aren't shielded, and constitutional claims can't be boxed out. Expect early litigation to test whether courts will reach the merits despite BEAD's bespoke review provisions.
The Core Statutory Fight
Can NTIA condition BEAD funds on state AI policy under § 1702(e)-(f)? The administration leans on "public interest," "effectuates the purposes," and the catch-all in § 1702(f)(6). It argues AI rules affect the value of networks, so they're fair game in approvals.
The better reading is tighter. "Public interest" is cabined by § 1702(f)'s connectivity-focused categories. Approval authority checks whether proposed uses fit the program-not whether state legislatures pass agency-approved AI laws.
Structure matters. Congress fixed allocations by formula and mandated that unused funds be reallocated by the same formula. If NTIA can deny access on AI-policy grounds, it can sidestep that formula. Courts rarely bless a general grant of discretion that swallows a specific distribution scheme.
The catch-all doesn't save it. Courts read such clauses in light of the listed items. AI policy is categorically different from deployment, mapping, and adoption activities. Without a limiting principle, the agency could condition funds on crypto policy, privacy rules, or any downstream application-an open-ended claim of power the statute doesn't support.
Why Ambiguity Still Sinks Section 5(a)
Even if the text were ambiguous, three canons cut hard against the executive order:
- Major questions doctrine: Agencies need clear congressional authorization to decide issues of vast economic and political significance. Using $21 billion in broadband funds to influence national AI policy fits that bill. BEAD never mentions AI. Ambiguity isn't enough.
- Spending Clause clear-statement rule: Funding conditions must be stated unambiguously so states can choose knowingly. BEAD doesn't clearly authorize conditioning funds on AI laws.
- Federalism clear statement: Displacing traditional state police powers (disclosure, liability, consumer protection) requires unmistakably clear statutory language. It isn't there.
Constitutional Claims: Important, But Likely Secondary
Under South Dakota v. Dole, conditions must serve the general welfare, be clear, be related to the program, not violate other constitutional limits, and not be coercive. The administration has plausible arguments on welfare and coercion-these are one-time amounts that look far smaller than the Medicaid threat in NFIB v. Sebelius.
Relatedness and notice collapse into the statutory question. If a court buys the statutory theory, relatedness follows. If it doesn't, the constitutional notice problem follows, too. Either way, the statute does most of the work.
What Executives and Legal Leaders Should Do Now
- Map exposure: Quantify your reliance on BEAD nondeployment funds. Model delays or denials and the downstream effects on build schedules, workforce, and vendor commitments.
- Audit state AI posture: Inventory current and pending AI laws in your state. Flag provisions likely to be labeled "onerous" and draft contingency paths (defend, amend, or carve out).
- Contract for flexibility: Add clauses that address federal policy shifts, allow tech-neutral solutions, and sequence milestones to minimize stranded costs.
- Prepare for litigation timelines: Expect fast filings in D.C., preliminary injunction motions, and potential pauses. Avoid irreversible spend until early rulings land.
- Coordinate internally: Keep boards, budget officers, and legislative liaisons aligned. Don't signal policy rollbacks solely to chase uncertain funds.
- Engage on the record: If Commerce issues a policy notice, submit comments with evidence. Document how your projects advance BEAD's statutory aims regardless of state AI rules.
What to Watch Next
- The Commerce policy notice: definitions of "onerous," scope (nondeployment vs. broader), and any attempt to expand beyond the remaining-funds pool.
- Early court rulings on reviewability and whether judges reach the merits.
- State strategies: lawsuits, statutory tweaks, or refusals to adjust AI laws.
- Congressional activity to clarify BEAD or curb executive discretion.
Sources
Bottom line: Section 5(a) tries to use broadband dollars to shape state AI policy. The statute doesn't clearly allow it, and the canons that matter here demand clarity. Expect aggressive litigation and plan for funding volatility.
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