Should ISPs be regulated like banks?

Let us, for a moment, draw comparisons between U.S. Internet service providers and U.S. bank lenders. Both data providers and lenders wield great power to influence productivity and economy. Chicago Tribute columnist Phil Rosenthal went so far to suggest that a lack of net-neutrality could make the rich richer and the poor poorer by allowing data providers to squeeze customers, charging variable rates that would inevitably cause poorer customers to suffer. A similar thinking goes that unchecked U.S. bank lenders would tend toward lending discrimination which would deny loans to groups of people based on socioeconomic limitations.

Net-neutrality advocates want the government to enforce fairness in data distribution in a similar manner that the government regulates banks to ensure all classes have access to equal lending practices.

There was a time when no mandate was in place for the government to regulate the banking system, but following early twentieth century financial crises, monetary policy regulation became a priority for U.S. congressman, and the Federal Reserve was created. As part of the Federal Reserve Bank’s core mission, “Our primary objective is to maintain a safe and competitive U.S. and global banking system.” It’s the application of the last two adjectives that could eventually inspire a similar mandate for the U.S. Federal Communication Commission (FCC) to step in and regulate Internet Service Providers (ISPs). Safe and Competitive.

But not yet for the Internet. The U.S. District Court of Appeals for the D.C. Circuit recently tossed out net neutrality in favor of self regulation by data providers, in effect telling the FCC it has limited authority to regulate broadband. Some think that those who believe data should be provided on equal terms without discrimination are missing the point of a free economy. The Wall Street Journal Editorial Board wrote that data caps are “good old-fashioned exercises in price discrimination.”

Just as airlines bring more people into the air by not charging every passenger the same, so broadband operators are adopting convoluted pricing schemes. These aim to segregate customers according to how much bandwidth they are willing to pay for. As happens in the air, the result is an opportunity to create more customers and more traffic. – WSJ.com

Startups and website entrepenuers are among those claiming the new ruling will hurt them most. “Most startup companies cannot afford to pay ISPs for faster broadband or better quality, and therefore the already established companies will have an unfair advantage,” wrote Gabrielle Meyer. Competition is being suppressed.

But safety is not yet a topic mentioned in context to net-neutrality. If there were a catastrophic data disruption among our nation’s ISPs, the FCC would immediately receive that mandate they’re looking for, charged with the unenviable task of ensuring not only the fair distribution of data, but one that provides it equally. Internet Blackout soothsayers will warn that safety of our ISPs should be a concern, and that regulation now could help prevent a major outage that would have devastating impact on economies. But, at least for now, the mandate is on hold.