Can Micropayments Even Work? (2007)

Editor's Note: this is a post from my old Serendipity weblog, "Pawprints of the Mind," which was originally posted over 13 years ago, on 2007-05-13. The text below is reproduced verbatim from the original post.

(This is not entirely academic, as a current goal of my day job essentially amounts to implementing a micropayment system.)

I am beginning to believe that the fundamental problem behind micropayments as a viable option for widespread payment is that credit cards are effectively already micropayments. We're just spoiled by cash. Physical currency is limited by reality. There's not a limitless supply to steal, nor can it be readily created. Undetectable counterfeits cannot be manufactured by poking a few bits inside a computer. Rather, it's difficult to produce high-enough quality counterfeits, which is why good counterfeits only come in $100 notes. The run-of-the-mill counterfeiters are stuck trying to figure out how to make a passable $20 out of card stock or ordinary paper, because anything bigger is subject to too much scrutiny for their materials. (Even then, a local supermarket tests all those, pushing the bar down to $10.)

In essence, I suspect the cost of doing business with a credit card company is mostly the cost of implementing imaginary money securely. The more credit processing costs, the fewer shops join in, and the less of the currency marketshare the creditor ends up with. On the other hand, the services can't be priced so low as to be unprofitable. Not to mention, the more that people use their cards, the more interest the creditor can collect at little extra cost, as all the billing and accounting framework was already in place for that cardholder anyway. Charging less makes economic sense for them, even if they were a monopoly.

A credit card company ends up shaving a few percent off transactions made through them. Micropayments want to be the same thing, only smaller: shave a few percent off penny-sized transactions and make up for it by volume. But the micropayment competes with the credit gateways, if one of the main ways of getting money into the system is to purchase microcurrency on a credit card. Inside the system, the shaving has to be high enough to make up for the transaction cost of the microcurrency being bought and sold, as well as the real costs of doing the transaction and turning a profit.

And if micropayments are essentially equivalent to real currency, then they're also equivalently desirable for fraud, stealing, and counterfeiting: something the large creditors are spending plenty of money on for the best and brightest to counteract. This brings up another point: micropayments probably won't have the same amount of consumer trust as credit cards, because personal liability is legally limited to $50 on the cards. This is not the case for micropayments, which is going to make people not want to have too many of them at one time. That in turn limits the total amount of microcurrency that can be circulated, and restricts the market for higher-priced microsales.

Is it possible to best Visa and MasterCard at their own game?

State of the Linux Desktop (2009)

Editor's Note: this is a post from my old Serendipity weblog, "Pawprints of the Mind," which was originally posted nearly 12 years ago, on 2009-05-18.  History since then has unfolded differently in some details, but the broad strokes seem to be accurate.  The text below is reproduced verbatim from the original post.

The Linux desktop is a curious thing. Years ago, the annual prediction was that that year was finally going to be the Year of the Linux Desktop, and Windows would be kicked out of market dominance for good. World domination by open source, and all that.

Linux has come a long way since then. Monitors can be largely auto-configured, fonts can be anti-aliased, CDs can be burned without fiddling with ide-scsi, USB works without having to care about your kernel version, and even media keyboards and mice with tilt-wheels seem to work these days.

But the "desktop" has come a long way since then, too. Various OS X versions introduced technologies like Display PDF, Quartz Extreme, Exposé, and other things that Windows Vista copied with WPF and Aero. Linux eventually duplicated them in Compiz, Beryl, Compiz-Fusion, or something. Somewhere in there. It kinda-sorta works now, if you don't want thumbnails of minimized windows.

Now that Linux has joined the current decade, Microsoft is readying Windows 7, with features like thumbnails of windows on the taskbar (with Aero), the 'recent documents' of an application available from the taskbar button, and so forth. Apple certainly has their own plans. And both of them have decent sound and MIDI support, where starting up one audio application is actually not likely to silence another's sound.

So, the "Linux Desktop" is still behind, and always has been. One problem here seems to be that it's not about innovation. It's about copying everyone else's modern technology with ancient components. It's about solving problems again that already have better solutions in other systems, just to see how closely Linux can approximate them with its decades-old core design.

And then someone, or maybe a few people, whine about the solution and come up with an alternative. The alternatives vie for dominance, and the rest of the desktop world moves on while the Linux landscape settles into one predominant choice, if they're lucky. If they're unlucky, you get things like the KDE/Gnome situation.

Due to Linux's philosophy about neither inventing wheels nor including batteries, there's a large number of components with their own maintenance and release schedules, and most of them target "current" versions of other components. For any given complex program, there's a relatively small window of time between the components it uses being released, and becoming obsolete with future releases. Every time components break compatibility, a new version of all programs dependent on them have to be released to deal with the changes. The more changes dealt with, the more complex the program becomes, so compatibility with older versions also gets cut out after a time.

And sometimes, a sweeping change comes through, and no compatibility is maintained between the two versions: App 2.0 will run on Foo 3.0 and newer, and App 1.4 will only run on Foo 2.5 and below.

From a software developer's point of view, then, supporting Linux is a risky proposition. You have to either watch the work in progress on the entire stack, and guess what will be completed and be important to your application, or you end up being taken by surprise when one of your components updates and your application doesn't run on an ever-growing range of Linux systems until you have time to update it.

Apple and Microsoft may have their own problems, but they have the clout and the guts to say, "We need to migrate to doing things this way, and it'll be good for at least 5 years." Look at Windows 95–Me, or NT4–XP. Whereas the rate of change in Linux effectively limits compatibility to about a year at the most. So most serious software gets developed for other platforms, and most serious users are on those platforms as well. Then familiarity begets desire for those platforms over Linux.

In short, Linux is sort of the Perl of operating systems: messy and aging. People working on Linux desktop technologies seem to be doing it to prove that they can. And secretly, they hope to get horses fast enough to put that Ford guy out of business.

Broadband Asymmetry

Someone, somewhere on the intertubes, recently asked: “Why are we seeing 10:1 speed asymmetry?”

I’m pretty sure the speed asymmetry started for good technical reasons: through some signal magic, companies could deliver 48+ Kbps down and 33 Kbps up. ADSL took advantage of the technological landscape of the time (browsing and email were asymmetric) to deliver faster speeds where the customers cared, and indeed, my first DSL services were (if memory serves) in the 1.5/0.38 Mbps area, only a 4:1 asymmetry. My current service is ADSL at 9.3:1 (7.0/0.75), which is both notably closer to 10:1, and hasn’t qualified as broadband since the 4/1 Mbps definition went into effect.

Even though YouTube made video hit the web in a big way—they were there at the crossover point between better codecs and better bandwidth, plus some cleverness* on their part—most traffic was still downstream. The video being delivered was much larger than the return traffic that acknowledged receipt of the video.

The restricted upload rates are thus firmly grounded in historical reality, and they persist today because, I suspect, of two reasons.

One, there’s obviously a chicken-and-egg problem where uploads are less frequent because upload rates are low, and the rates are lower because uploads are less frequent. There’s a natural tendency for uploads to be less frequent anyway (how many funny cat pictures do you look at per picture you upload?) but low upload rates discourage actual upload usage in and of themselves.

Two, I think ISPs are rewarded if they keep upload rates low. Settlement-free peering has traditionally required each side to send “about equal” traffic as the other. If an ISP strongly encourages downloads through 10:1 or more asymmetry, then they will never come close to sending “about equal” traffic out of their network... and they can demand payment from anyone who wants access to their customers, such as Netflix.

I still believe that ISPs should be charging their own customers enough to support their own customers’ data requests including adequate network investment, but that doesn’t invalidate the reality.

As for 10:1 specifically, I can only speculate. It may be, that’s simply the size where sending email and uploading to Facebook “doesn’t seem to take too long” for users. And if more people sent more video to Facebook, then ISPs may reshuffle their plans to provide more upstream “so you can Facebook.” Regardless, in the absence of an obvious technical reason, I must assume it serves a specific marketing purpose.

* At one time, they showed 320-pixel video in a 425-pixel player. Although scaling technically hurts quality, it crossed the gap between “small” and “nicely sized,” looking much better on 1000-pixel browsers.

On the Windows XP EOL

I discovered that some problems people had connecting to our shiny new SHA-256 certificate in the wake of Heartbleed were not caused by “Windows XP” per se, but by the lack of Service Pack 3 on those systems.

SP3 itself was released in 2008, meaning that SP2 had a two-year “wind down” until it stopped receiving support in 2010. That means everyone who had problems with our certificate were:

1. Using an OS that has been obsoleted by three further OS versions if you include Windows 8.
2. Using an OS that had reached its actual end-of-life after ample warning and extensions from Microsoft.
3. Using a version of that OS which had been unpatched for nearly four years.

Combine the latter two, and you have people running an OS who never installed the SP3 update during its entire six-year support lifetime, which is longer than Windows 7 had been available.

In light of this, I can see why businesses haven’t been too worried about the end-of-life for Windows XP. It’s clear that those affected are not running SP3 on those systems, meaning they were already four years into their own unpatched period.

And if they “just happen” to get viruses and need cleanup, that just seems to be part of “having computers in the business.” Even if the machines were up-to-date, there would still be a few 0-days and plenty of user-initiated malware afflicting them. There’s little observable benefit to upgrading in that case… so little, in fact, that the business has opted not to take any steps toward it in half a decade.

The Facets of Net Neutrality

In its original conception, "Network Neutrality" as I understood it was about a lack of privilege amongst competing traffic sources: that Google, Viacom, the atheism reddit, the Anglican Council, and the Time Cube site would all be subject to equal traffic slowdowns in the face of congestion.  A bit of thought would suggest that treating individual packets equally was not, in fact, desirable: you probably don't want your VOIP call and each individual P2P connection to be subject to the same rules, really.  You'd rather the call got through even at the expense of delaying a few packets of your (or your neighbor's) download.

Certain large ISPs have been trying to twist it to mean they can charge on both sides, for content providers to be allowed to send data to "their" customers, though the customers are already paying (quite profitably for the companies) for their own access.  They would be charging everyone for access, so it's "neutral," right?  This is an anti-neutrality stance trying to co-opt the word so that it sounds like a good thing.

Pro-neutrality forces (in the first sense) argue that requiring content providers to pay for carriage, or for "premium" speeds, would completely destroy the internet as we know it.  Also, many of them believe they are preserving existing neutrality, but this turns out to be incorrect.  A content delivery network (CDN) essentially is an implementation of pay-for-speed, because the content provider pays for their content to be stored closer to end-users, which reduces load time for those users.  Although the end-user's ISP doesn't receive payment directly, the content provider's payment to the CDN also funds the overall system by paying for the CDN's own connectivity at the ends, and infrastructure in the middle.

I think the value of the Internet is in two things: uniformity of access for end-users, and fair division of capacity.  Uniformity of access is simply that any connection should be able to carry packets from any content provider, so that the view of "the Internet" from any one ISP is the same view as from any other.  Otherwise, "the Internet" would cease to have meaning, as it reverted to the days of online services like CompuServe, Prodigy, and AOL.

Fair division of capacity is exactly what it says on the tin, that speeds and latencies should be balanced among customers of an ISP.  I shouldn't be able to start a download and prevent Netflix from delivering video to my neighbor, and a bunch of people on 6Mbps connections shouldn't be able to deny service to 1.5Mbps subscribers.

The real emotional punch that gets brought into neutrality discussions seems to come from the leonine terms the ISPs would like to apply: around one-tenth of the current (often secret) usage limits, for as low as six-tenths of the price, as in Time-Warner's experiment last year. Though the current arrangement is apparently profitable and growing more so over time: the cost of carriage is falling faster than inflation is diluting revenues.  The fear is that ISPs will establish these terms "in order to build out next-generation networks" and then not follow through on that investment, artificially limiting their service and allowing inflated payments that do nothing but lift the artificial restriction—in order to offer what is on the market today.

Promises, after all, are cheap.

This fear is only exacerbated by the incumbent ISPs' wars against municipal broadband.  City-owned networks are being opposed in many states as 'unfair' competition.  In at least one case, the city in question embarked on its network building course because the ISP claimed they would never offer higher speed.  Yet as soon as the city decided to offer higher speed itself if nobody else was going to, the ISP frantically began upgrading their infrastructure, hurrying to complete it before the city's project was finished, so they could argue that the city network was 'unnecessary' due to the ISP offering its (new) high-speed service.

This fear is further exacerbated by the regular broadband reports showing that countries with more competition amongst ISPs, regardless of urbanization, have the fastest speeds and highest limits on data transferred, where applicable.  If larger companies truly did have more efficiency and more benefit to the customer as they claim, then the average US broadband connection should meet—or exceed—the average connection in Japan.  Instead, large companies' performance suggests they are the major impediment to improved service.

For the Internet to continue its course of innovation and convenience for the American consumer, protection of uniformity of access and fair division of capacity are sorely needed.  Placing these responsibilities into the hands of existing large ISPs who have been actively demonstrating their complete lack of commitment to the principles, or their customers, except when threatened en masse with an alternative network, is clearly the wrong course of action to ensure the result.  It is putting the fox with feathers stuck in its teeth in charge of the hen house.

Dealing with Ambiguity

Apple and their fans tend to view their products as the top of the market, with price and attitude to match (and this is helped by their competitors trying to undercut them with unrefined but cheap ripoffs).  Yet they clearly market heavily, which suggests according to the Advertising Curve that there's room above Apple for a better product, for even more money.

Which naturally leads to the question: considering an Apple product like the iPod Touch, what would be better, and in particular, enough better that you could actually sell them?