The Federal Communications Commission is moving closer to a plan to regulate online and mobile providers like other utilities, which would impede their ability to act as Internet gatekeepers and block or limit access to specific sites.
The effects of the FCC plan — assuming it is approved at a scheduled vote on Thursday — will likely not be immediately felt by banks, and the financial industry has stayed out of the debate. But experts say keeping the Internet open would afford financial institutions future benefits similar to other online players. Net neutrality would prevent a carrier from "throttling" sites of institutions offering similar products, as well as from charging certain banks a higher price for faster online service.
"They would be prohibited from doing anything that could be viewed as discriminatory toward competing applications provided by banks," said Brooks Harlow, a principal at Lukas Nace Gutierrez & Sachs. "To our knowledge, this hasn't been an issue yet. But one of the concerns is that an Internet service provider that has its own payments applications might in some way favor its applications at the expense of competitors."
The FCC's plan has received strong backing from Chairman Tom Wheeler, but some commission members had pushed either to narrow the rule's scope or delay the vote, according to published reports.
A recent FCC fact sheet said the rules would essentially subject mobile and broadband carriers to a similar regulatory regime used for landline. Internet providers would be banned from blocking access, impairing lawful traffic, creating "fast lanes" or favoring the content of affiliates. The plan would reclassify broadband service as a telecommunications service under Title II of the Communications Act.
Many say net neutrality is not needed since telecom giants do not appear to be exploiting their control of web channels. But financial institutions may still watch the FCC vote closely since wireless carriers have already dabbled in the payments sphere.
T-Mobile offers a prepaid card, while some overseas wireless carriers let users make money transfers with their phones. Before Apple Pay was announced, AT&T, T-Mobile and Verizon Wireless had partnered on Softcard, a similar payments service. Google announced this week it was buying technology and intellectual property rights from Softcard, even though the carriers behind the joint venture had previously tried to block Google Wallet from their phones.
Some experts said the lack of open Internet rules could prove problematic for banks in the future if carriers look to have a bigger presence in the financial services space.
"This is a very divisive issue," said one financial services industry representative who spoke on the condition of anonymity. "There are those on the carrier side who say this is a solution in search of a problem. And there are those on the content side who say, yes, but in the future this could be a very real issue and the regulatory regime today is not positioned to address it."
Harlow said it is not entirely clear what the FCC order would characterize as discriminatory, but he said some activities that a carrier could technically conduct today to compete with an online service may be outlawed going forward.
"What if you seek to go to the JPMorgan Chase mobile banking site, and just before you get there you get a popup ad for Softcard?" he said. "Would that be discriminatory? That might be the kind of thing that you couldn't do under Title II that you could probably get away with today.
"In theory, banks will have unimpeded access to their customers over the Internet carriers' networks. The question is: do they already have that? Are they really gaining anything? … Now instead of it being a best practice, it becomes law."
But some suggest that even without net neutrality, telecom carriers would never interfere with web access to a legal site for competitive reasons, out of concern for losing customers.
"They would probably consider it a mistake to try to disadvantage financial institutions in any way in the delivery of financial products and services to consumers because that could rebound on the carrier in a negative way," said Andrew Lorentz, a partner at Davis Wright Tremaine.
Still, some point to the potential for Internet providers to interfere with competition between banks by offering faster service for individual financial institutions.
"If a large depository institution wants to cut a special deal with a telecom carrier regarding the access of customers to a service, and if you go to one bank it's going to be faster than if you go to another bank, then the financial services experience gets far more complicated," said Kevin Petrasic, a partner at Paul Hastings.
Petrasic said some institutions have worried that upcharges for faster service could result in barriers to entry in the future. "What net neutrality will do, assuming it gets resolved, is take that concern off the table," he said.