The debate on regulating how ISPs manage online use has largely been focused on the online activities of consumers, but mortgage executives and their technology vendors believe the regulation of Internet access could affect the daily operations of the lending industry as well, leaving smaller players with fewer financial resources at a competitive disadvantage when it comes to loan processing speed and costs.
The Federal Communications Commission picked up the debate on Net neutrality at a Dec. 21 meeting, ultimately voting to approve a new policy intended to ensure Internet openness, regulate Internet service providers and open the door for tiered pricing of broadband access.
But the debate won’t end with the commission’s 3-2 political party line vote. In Congress, lawmakers are taking sides on the divisive policy and even Democratic proponents of the policy acknowledge the Net neutrality debate will ultimately end up being decided by courts.
While the data in electronic loan documents are not large files, they are repeatedly accessed by many users during origination and underwriting. Cumulatively, accessing those documents can use tremendous volumes of bandwidth. If ISPs begin to dictate how much bandwidth a company or individual uses based on specific online activities, smaller companies with less financial resources for network access would be at a competitive disadvantage, according to Jorge Sauri, founder and chief technology officer of Austin, Texas-based MortgageDashboard, a Web-based loan origination system provider.
A more worrisome concern to businesses like mortgage lenders is if an ISP implemented a “packet routing priority” strategy, it would let providers sell faster Internet connections to those willing to pay for it, as well as give preferential treatment to certain Web applications and services, Sauri said.
“It would be like creating toll roads on the Internet,” he said. “The only way that you’re going to get technological advancement and bring about new technologies is with unfettered Internet access.”
Greater adoption of software-as-a-service applications and cloud computing-based data storage has made high-speed Internet connectivity of great importance to the financial industry. Sauri said it’s possible that the next generation of mortgage origination software could include some peer-to-peer functions—based on the same file-sharing technology that’s been targeted by ISPs with blocked or intentionally slowed connection speeds, a tactic known as throttling. Sauri said without open Internet protections in place, businesses’ Web-based software could be a target for throttling.
“If someone developed a SMART Doc application based on peer-sharing software, the ISPs could require the developer to register it with them and likely pay a fee,” Sauri said. “And how many times are you going to apply and pay a fee to all the different ISPs?”
Randy Allen, vice president of enterprise infrastructure at Dallas-based Fairway Independent Mortgage Corp., said if ISPs are given the power to prioritize network activity, it would drive businesses to very costly private networks. He estimates the cost to be double the expense at speeds half as fast as access over public connections, though the restricted connections are more secure.
“In essence, you’re buying access time and you’ll have a whole stream of providers coming out with all these business provisions to buy the ability to have your packets prioritized over consumers and small businesses,” Allen said. “At this point, with all the other regulatory concerns in our industry, to have to go to our CFOs and ask for double the amount for half the service, that becomes problematic.”
Fairway uses a SaaS model loan origination system with an off-site hosting center connected directly into the company’s ISP vendor. It’s costly, but necessary to its operation, which Allen estimates will originate $4 billion in mortgages in 2010.
“Any sort of hiccup in Internet speed or access can cost us tens of thousands of dollars per hour,” he said.
The philosophy of Net neutrality is that all users should have equal access to the Internet and all data should be allowed to indiscriminately transfer across the Internet. Any user’s access is limited only by the finite limitations of the physical lines, which can be augmented to boost performance.
In 2009, Congress mandated the FCC devise a strategy to expand the availability and capacity of broadband Internet access in the United States—called the National Broadband Plan. That plan includes provisions to develop open Internet rules.
Earlier this year, the FCC began holding meetings to discuss open Internet rules with a variety of stakeholders including ISPs, consumer advocates and members of the academic community. Those discussions have culminated in FCC chairman Julius Genachowski’s proposal.
Under the plan, ISPs would be allowed to regulate and manage use and activity on their networks, but under new transparency requirements to disclose those activities. ISPs would also be allowed to price services based on usage—opening the door for providers to charge customers more to use bandwidth-heavy activities like streaming video or less for other activities, like checking e-mail. The policy would prohibit ISPs from blocking or throttling connections to legal applications or accessing the Internet with certain devices.
Genachowski said his proposal to regulate ISPs will “protect Internet freedom and openness,” but he faced opposition from Republican commissioners on a number of points, including questions about the commission’s authority to take action and opposing arguments both for and against increased levels of Internet regulation.
Even his fellow Democratic opponents were not entirely enthralled with the proposal, calling for increased regulation beyond what they consider to be a weak set of rules.
In Congress, Sen. Al Franken, D-Minn., spoke out against the proposal on the Senate floor just days before the vote, saying it would be the first time the FCC has ever allowed discrimination on the Internet.
“Maybe you like Google Maps. Well, tough. If the FCC passes this weak rule, Verizon will be able to cut off access to the Google Maps app on your phone and force you to use their own mapping program, Verizon Navigator, even if it is not as good. And even if they charge money, when Google Maps is free,” Franken said. “And if corporations are allowed to prioritize content on the Internet, or they are allowed to block applications you access on your iPhone, there is nothing to prevent those same corporations from censoring political speech.”
The fear businesses have overrelaxed or eliminated Net neutrality regulations is that once the FCC lets ISPs dictate that all data packets are not created equal, even if a company pays for higher connectivity, once the data has left its connection, there’s no way to ensure a fast, unobstructed transfer.
Currently, users are only as fast as their weakest link from end to end in a transmission. A company may have hyper-fast Internet access, but if the downstream content—like a mortgage company’s SaaS LOS—is a slower connection, the overall speed of the transmission is limited.
“With Net neutrality, you can pipe up the volume on either side to accommodate that demand,” Allen said. “With the lack of net neutrality, whatever high-speed Internet you’ve got at the point of entry could be limited at all access points.”
