Silence of the App Users

Although I am involved in the Android app market, I haven't talked about Android apps in this blog for some time. I was recently compiling some statistics of one app that's been out in the market for over a year, and I suppose it is no surprise that what my stats show are not unlike what other app developers typically encounter: silent users.

You'll get an idea of what I mean if you look at the following numbers gleaned from this free app that has garnered downloads well into the six figures:

• Rated the app: 0.6%
• Emailed us: 0.01% (includes complaints, questions and compliments)
• Posted a review: 0.05% (or about 1 in 10 of those who rate the app)

To sustain my anonymity I have left the app unnamed and kept all the figures as percentages rather than actual numbers. I will only say that the app is useful but not terribly complex to use. Some use it only once or a few times, and whether they like it or not, for them it's enough and they then uninstall it. That's fine by me, and I even expect it. About 1 in 3 keep it for the long haul, which I consider quite good for this particular app. We only put it out there to gain experience with the mobile app market and its users, and especially to learn something about what works and what doesn't work in this slice of the market.

You also learn that people who use apps are a diverse lot who often judge apps in what I can only describe in a very subjective, egocentric manner. (This is meant as an observation, not an insult.) For example, if a user doesn't like what the app reports in response to info entered by the user, the user will often rate the app poorly. If they don't like the phone or network performance, they rate the app poorly as well: perhaps they do this in frustration since there is no way to rate the phone itself or the carrier.

Because the app does make what I can only describe as judgments about the user, they don't like this even if the information is correct. In retaliation some seem to see the app, phone or the developer (or perhaps all three) as things that are safe to lash out at, anonymously; I have seen user angst in both public and private feedback and, trust me, some of these comments are things I would rather not know! Perhaps app feedback works in the manner of ELIZA, the ancient software psychoanalyst that, despite its transparent primitiveness, still managed to get some people to empty their souls to the machine even when they fully understood that it was a mindless automaton.

Although I don't have complete analytical data, I will conclude by making the following general observations about many users:

• They do not read instructions or any of the help provided;
• They do not know they can use the Menu button to bring up additional features and options; and
• If it is at all possible to mess up the simplest operation, they will (and occasionally blame the app developer).

It's been a lot of fun and educational, and also useful to our future business plans.

Bank Regulation - Pros & Cons and Ways & Means

After my earlier article on bank bonuses I had intended to follow up with another to look into the impact of regulations and limited competition on consumer banking fees. Then last week President Obama presented a template for banking reform in the US, which goes well beyond the recent attempt to claw back bonuses. This event changed my plan by giving me the opportunity to contrast the situation here in Canada the one developing in the US, and how it all relates to the broader regime of government regulations in any industry, not only banking.

Back when I was deeply involved in telecommunications regulations, my eyes were opened to the reality of how government intervention in the form of regulations can easily result in unintended outcomes. The reason this occurs is because, generally speaking, the government becomes just one more "market force" among a multitude of others, and the industry adapts to it like any other. That adaptation will always be one that ultimately promotes the objective of any corporation: to make money for its owners. In other words, a company will test a new regulatory regime to find the attributes that can be turned to the company's advantage. Frankly, to expect anything different is naive. Coming up with effective regulation -- that which achieves the intended outcome -- isn't easy.

The first thing to understand about regulation is that the government's capacity to enforce regulations is finite: there do not exist infinite resources to pursue ideal outcomes from regulatory compliance. This is true even if the regulations are crafted with a deep understanding of the targetted industry, which is often absent. Politicians and bureaucrats in the public sphere often fail to grasp the fine details of motivations of, and tools available to private corporations. Worse, regulations (or their removal) that are driven by ideology often go awry.

Now let's get specific: regulatory cost is approximately proportional to the number of companies regulated. What this means is that fewer companies in a sector can be much cheaper to regulate than many small ones, where the sector's size is equivalent. If the government is serious about regulatory compliance, they will benefit from making it difficult for additional companies to enter businesses that fall within those regulations. If they do allow entry, the available resources will have to be spread more thinly, resulting in poorer enforcement. In the present era, governments of all persuasions are biased toward reduced spending on regulations. This explains why many industries are now 'self regulating' -- an oxymoron if there ever was one.

When it comes to banking, the government has strong motivations to keep the sector functioning smoothly. Like it or not, the modern economy is so closely tied to the banks that a weakness in one frequently engenders a weakness in the other. Intense regulation of the financial sector is made easier by having fewer banks, building high barriers to entry, and not allowing banks to enter a variety of financial businesses. The last restriction has been gradually eased over the years, allowing banks to offer insurance products, mutual funds and investor services. Other financial services like investment banking remain mostly in the domain of non-bank companies. In contrast, this separation does not exist for most of the United States' largest banks. (There are other factors which lead to differences between the two countries' banks, but those are outside the scope of this article.)

For Canadians, the price of our banks' financial health has been less bank competition, and high service fees. As I've mentioned before this isn't necessarily bad for us since we can choose to invest in the banks and share in their profits. The challenge for the government is how far to let bank profits rise before public pressure makes it politically advantageous to take remedial steps. Again, regulations cost money and further entrench government in the banks' operations. It is now becoming particularly galling for many Canadians since we pretty much have no choice but to use bank services for the majority of the goods and services we purchase, and this also goes for the merchants on the other side of the transactions. Further still, the government prefers to have transactions done this way since it makes it more difficult for people to avoid paying taxes on their purchases, sales and investments. It will be interesting to see if the Conservative government will step in to more-stringently regulate bank fees, which is not what they would prefer to do if they can avoid it by getting the banks to adopt voluntary measures.

To move onto my second point, how can regulations can be written to achieve separations among financial businesses. I lightly touched upon this a few paragraphs earlier, but it deserves closer scrutiny. These separations are a blunt weapon in the hands of government and often have consequences far from the ones intended. Here are three of the most popularly-implemented separations regulations in increasing order of strength.

• Co-marketing: Now that RRSP season is upon us, if you visit your bank to make a contribution you will almost certainly be presented with the option (or even pressured) to shift some or all of those dollars to mutual funds operated by the bank's investment business. This is an example of co-marketing, where an agent for one line of business attempts to generate sales for another. The other business does not have to be within the same corporation; it can be one the bank is representing and is remunerated via a finder's fee or other commission. A particularly egregious example during the dot-com era was when stock analysts (buy side) often became shills for the same bank's investment banking arm (sell side) by highly rating stock issues and then promoting those to their retail customers as good investments based on those inflated ratings.
• Accounting: Accounting separations allows for regulated business lines to be operated within a single corporation if they maintain a separate set of books for each. If you've never encountered this idea before it may at first seem puzzling, yet it can sometimes work when the regulators have adequate oversight. In the case of the dot-com problem described above, the investment bankers, analysts and retail investor managers only reported a profit-loss account of their combined operations. For example, there was no indication on the books when an analyst received a bonus derived from the underwriting fee after having given a high rating to a poor investment product; only the overall revenue and expenses were shown. With accounting separation, schemes like this can be prevented by making the compensation visible: any flow of money between the investment banking business to the analyst and retail investment management operation(s) will show up on the books. The books can then be used to regulate the corporation's operations to prevent these conflicts of interest, thus protecting the bank's customers.
• Structural: In its weakest form, structural separations would take the previously-described accounting silos and place them into separate corporate subsidiaries. At its strongest, the businesses would be fully separated by dividing the corporation's lines of business into fully independent companies, each with its own share capital, assets and liabilities. The broken-up corporation loses the benefits of scale and business line synergies, while the government's enforcement costs are lower than for accounting separations and the risk of compromises to the so-called Chinese walls they require. For the bank's customers it's a trade-off: they no longer have a one-stop shop for all their financial needs, but they do benefit from a lower amount of potential conflicts against their best interests.

In my telecommunications experience, co-marketing does work most of the time since it is so obvious when it occurs. That makes it easy for knowledgable consumers to complain and for the government to slap wrists. The market provides much of the needed oversight so it can be very cost-effective to enforce. Accounting separations were an impenetrable labyrinths within which the government rats chased the corporate rates, never quite catching them and always getting lost in an endless maze of twisty passages. Customers were totally out of the picture and so had to rely entirely on the government's commitment to enforcement. In other words, the complexity and gaming strategies it encourages ensure that it rarely achieves the desired objectives.

Structural separations are effective but very controversial. The business sector hates them because they imperil their ability to compete, especially on the global stage where their competitors are often not so constrained. Governments are wary of the approach since it alienates the business sector (and may even imperil politicians' futures) while being a bit difficult to explain to the electorate. It takes a lot of political capital and a strong stomach to go through with this in an industry with the prominence, strength and necessity as that of banking and finance.

Let's now look at some of what Obama had to say about this in his speech last week:

"...to benefit from taxpayer-insured deposits, while making speculative investments..."

"In recent years, too many financial firms have put taxpayer money at risk by operating hedge funds and private equity funds and making riskier investments to reap a quick reward.

And these firms have taken these risks while benefiting from special financial privileges that are reserved only for banks."

"...this kind of trading often puts banks in direct conflict with their customers' interests."

Clearly, he understands the problem. So what does he propose to do about it?

"Banks will no longer be allowed to own, invest or sponsor hedge funds, private equity funds or proprietary trading operations for their own profit unrelated to serving their customers."

Part of the uncertainty following his speech was due to the lack of detail with respect to how he intends to regulate the banks, in particular whether the government will pursue accounting or structural separations. Even so, the banks are already preparing to game the forthcoming regulatory changes. My guess is that he will initially push for structural separations -- simpler and lower cost to the government -- but that Congress will push back. I have too little insight into US politics to guess at the outcome. Perhaps there will be a compromise with higher-cost accounting separations similar to what was done after the lessons learned from the dot-com bust.

Either way the US conversation is unlikely to impact Canadian banking. It has been suggested that there will be financial industry refugees fleeing for the freer regulatory environment in Canada, but I doubt it. These people know very well that the current regulatory regime in Canada is weak only because of the social contract between government and the banks. Once that contract is broken the government will have to act, and the result could very well be stricter than the one that will eventually be implemented in the US because of our relative comfort with the idea of government intervention. Beyond more debates about bank fees, Canadian banking will most likely remain stable, conservative and highly profitable.

New Startup Fund

I was surprised when I stumbled across this article about Terry Matthews spearheading a new fund for technology firms. This should be positive for Ottawa even though the article states that the fund will invest in firms throughout Canada.

It is of course too soon to know exactly what stages of companies will be targetted by the fund, especially whether it would invest in angel rounds. Yet knowing Terry's continuing interest in fomenting activity at the earliest point in a company's life-cycle I have some hope that the fund will address this gaping hole in the present startup situation here in Ottawa. Angel financing is critical to getting many excellent product concepts off the ground and running sooner and more effectively. Too many now die in the bud or move too slowly because the founders can't afford to leave their salaries behind to focus their energies on their nascent businesses.

All I can do is wish him luck with closing this $100 million fund. I know people and ideas that could use this fuel to build momentum for their dreams.

Buzz Word Alert: Fragmentation

For those of us active in the mobile applications sector, we are now being repeatedly bombarded with a new term: fragmentation. As with any new term, and especially one with a "legacy" definition, there is confusion on just what it means. Let's look at its most popular meanings with respect to mobile phones:

• Platform OS: Many commentators say that the diversity of mobile phone operating systems (OS) is fragmenting the market. Assuming that fragmentation is bad (for this particular use of the term), there is an argument which platform will eventually win -- iPhone, Android, WebOS, etc. -- and therefore end the fragmentation.
• Device Vendor OS Variants: Manufacturers that license the OS from another company often are able to customize the platform with their own user interface and functional components. Of course you can't do this with iPhone and Blackberry since they keep their platforms for their devices, but it is getting very popular with Android. This type of fragmentation is supposedly bad since it may confuse users and increase app developer angst, and will occasionally require additional work by app developers.
• OS Versions: Not all devices run the same version of the platform OS at the same point in time. This is especially true with Android since new platform versions must be integrated by each device vendor with their hardware-specific drivers and their unique functional components. This type of fragmentation is not new, but Android is making it more visible than it has been in the past. For example, various Symbian versions have coexisted in the market, especially since whatever version was built into the device was there for the lifetime of the device.

Apart from the confusion over its meaning, is fragmentation really a bad thing? I believe that if you look at these definitions more closely you'll find that fragmentation is merely an unfortunate synonym for a well-known phenomenon: competition. In other words, fragmentation's entry into our lexicon is entirely superfluous and therefore unwelcome.

Multiple OS's in the market? That's competition. Multiple variants of licensed OS's by device vendors? That, too, is competition. It is even necessary if device vendors want to differentiate their products when their competitors have access to the same core technology -- both hardware and software. Multiple OS versions in the market? Ok, that isn't competition, but it's a business challenge that is not materially different from other examples in the software business, such as the many versions of Microsoft Windows.

I could suggest that we drop this use of fragmentation from our vocabulary, but no one will listen to me. Commentators like new buzz words since it gives them something to say to people who are vaguely aware that something potentially bad, or at least controversial, is going on in the mobile sector. With luck it's only a fad that will fade before too many more months have passed.

My only prediction is that, over time, competition will drive fragmentation problems out of the market, by forcing solution or by product extinctions. As in the PC world, it is also highly unlikely there will be a winner-take-all OS; some will, of course, pass into history. Competition -- not fragmentation -- does that.

Commodities, Gold and Bubbles

I've been getting increasingly annoyed with the mindless drivel that passes for market commentary whenever gold and market bubbles are discussed. It seems that commentators and other market pundits gleefully declare that gold, housing, or whatever is in a bubble, ready to explode higher or ready to crash. You can usually find this in nearly any random set of articles on gold. The only thing consistent across all these pronouncements is their unwavering (and often pugnacious) certainty in their position. Whether they truly believe what they're saying is another matter.

Despite all the noise, the question does matter: what is gold, or any commodity for that matter, going to do, and how should one invest for maximum benefit and lowest risk? I don't claim to know the answer although I do invest in commodities, including the gold sector, and I won't promote any particular view. Instead I think it is useful to review just what it means to talk about bubbles in the context of the commodities market.

Many investors like investing in commodities since they are generally less subject to the intricacies of business and consumer dynamics. These include: fads, competitive offerings, mismanagement and turnaround artists, pricing uncertainties and so forth. In other words, unless you have your hand on the pulse of a specific industry there is a perception of additional risk when investing in typical businesses that produce goods and services. I doubt whether this is true, but that's another story.

Accepting this assumption, we can talk about the three general classes of price movements: cyclic, secular and bubble (a crash is nothing more than an inverse bubble). Commodities are generally seen to be a cyclic, where the cycle time can be a decade or more and mirrors the cycle of recession and growth phases in the broader economy. In other words, if the economy is expanding, commodity prices tend to ascend, and decline during recessions.

In the adjacent fictional cyclic and secular charts I show lines for the (long-term) median and price bounds within which the price can be found 95% of the time. When a cyclic commodity makes a secular change, it simply moves to a different median; it's shown as going higher, but it could also go lower, and not necessarily outside the old cycle's 95% bounds. A bubble is very different, in that it's a one-shot affair with no cyclical behaviour, and the final median after the bubble could end up anywhere, including below the pre-bubble median.

Now take a look at the US$-denominated gold ETF for the past 5 years. Which of the three charts does it most resemble? Can you tell? No? Well, neither can I. The lesson is that textbook charts are best left in textbooks and are not to be trusted. However, beyond that simple retort, there are a few things to consider in how a real commodity chart differs from the ideal, due to, in part: time-frame, price bias, and cycle time.

Commodity cycles of more than a few years mean little to me since I don't hold anything that long. There are other cycles of shorter duration that are more important to my investing. This is possible since there is more than one cycle superposed on any one chart, and so it can be helpful to distinguish among them. If you do have a longer time-frame in mind, go ahead and ignore the shorter cycles, including those of several hours duration! Outside factors such as currency exchange rates and inflation give the median and bounds of a cycle a bias in an up or down direction, and they too vary over time, although their cumulative effect is usually upward.

Ultimately, what we see in these charts is more noise than signal, and that is true of pretty much any price chart of interest to investors. The larger trends are only visible in retrospect and by smoothing out the fluctuations within which, in most cases, we buy and sell.

To finish off this article, let's look at what happens when price approaches the upper 95% line. In a cycle you expect that the price will soon drop -- not necessarily soon -- since the price excursion is extreme and there will be a reversion to the mean. However, if it is a secular move, or even a bubble, betting on the cycle continuing is a mistake. Except you cannot know which it will be -- that's the dilemma. Look at the smaller fluctuations shown in the highlighted area. If you are buying or selling at that time, what are you and every other market participant thinking? Everyone has their own projection of what will happen, perhaps very strong convictions, except that you cannot possibly which way the price will break.

None of this tells us which way gold will go, and that is as it must be. Those price quotes are nothing more than the measure of the psychology and outlook among millions of people, including you and me. They include long-term investors, sector funds, speculators and professionals using gold as a hedging instrument. Amateur or professional, none of us can predict the future with certainty, therefore be skeptical of pundits and headlines and proceed with caution.

Evening Star

For casual sky watchers, today is noteworthy since Venus now sets after sunset and so becomes an evening star. It will be in this favourable viewing position until October. Because Venus is the 3rd-brightest celestial object in the sky (the Moon and the Sun are brighter), it is very noticable no matter where you live, even in brightly lit urban centres.

Venus was actually in superior conjunction this past Monday (January 11), when it was opposite the Sun as seen from the Earth. Since it passed slightly south of the Sun, it continued to set before the Sun at the latitude of OttawaNepean for a few more days (see diagram). By the end of January it will have moved far enough eastward to be apparent to anyone looking to the southwest in the early evening. A good time to see Venus for the rest of the winter will be while you're commuting westward after work.

Since the ecliptic is tilted steeply upward in the west during early winter evening, Venus will climb in altitude above the horizon very quickly as the days go by. This increases its visibility so that it is very easy to for everyone to appreciate without going to any special effort. Enjoy the view.

Bank Bonuses, Competition and Regulation

Bonuses paid to bank employees -- executives and investment bankers -- have become a contentious issue in many countries, especially in the US and in the UK, though much less so in Canada. However, there is a message for those of us who use banking services in Canada (everyone!). I'll come to that after a brief survey of what's going on.

While bank-employee bonuses have been high for many years, it is now a matter for public and political debate since governments (and therefore taxpayers) kept these private companies solvent during the financial crisis. Even where the bank boards and managements are now willing to reign in these multi-million dollar bonuses, they feel compelled to pay since they will otherwise lose their key employees (those responsible for generating the lion's share of investment banking revenue) to competitors that either did not receive a bailout or have already repaid their government bailouts.

Many of these high-value employees have already switched employers, and some of them are suing for previously-promised bonuses. There are also good arguments for better ways to structure pay and bonuses, and also why these attempts annoy those receiving the bonuses. It's a real mess.

One article drew a comparison between employees receiving large bonuses and professional athletes: they are the very best at what they do and so deserve large payments. Of course, as the article notes, athletes' performances are more measurable than that of bankers: you cannot simply look at a few numbers -- especially profit and deal flow -- and conclude that these bankers have ability. Too often they are merely in the right place at the right time. That is, when the corporate world is replete with equity offerings (including IPOs), bond issues and M & A, the deals will be there and there are only so many firms with the abilities and connections to do the work.

It is also worthwhile at this point to mention the two major avenues these companies have for making money: fee for service and debt. Fee for service is the simplest one to understand. The bank performs a service and they get paid. The transaction ends there since the bank has no direct tie to the payers success or failure. Examples include the previously-described financing deals, and a wide range of consumer banking and transaction fees, merchant fees for credit card transactions, and mutual fund management fees. In all these cases the banks gets their revenue from the transaction, not whether the transaction benefits the customer; their interest in the customer is limited to getting return business, including keeping customers' money in their mutual funds. Poor performance is often countered with more marketing, not better performance! Bonuses and compensation paid from these profitable businesses have little to do with how their customers fare.

The debt business is more interesting since the bank is betting on the customer's ability to pay the interest and eventually repay the principal. This is as true for residential mortgages as it is for corporate financing. Here is where there is a need for some ability and hard work to manage risk in a perpetually uncertain economy and future, and of course researching each debtor's ability to perform. Banks manage and hedge their risk very carefully, most of the time; the recent financial crisis shows how they can be very, very wrong.

So far what I've written is very uninteresting in that it is (or should be) well understood by everyone. I now want to bring the discussion around to the ongoing role of government, especially here in Canada.

One aspect to the large compensation these bankers demand and get that is like the case for athletes is its artificiality. Athletes can only get their high salaries because we the viewing public is willing to pay to see them perform. Stop that and salaries must implode. That is the motivation behind salary caps in professional leagues, in that many have finally tested the limits of the public's willingness to pay: as popular as sports are, the revenue they can garner is finite. The other limiting factor is scarcity: if you flood the market with more teams and leagues, the finite revenue available must be spread more thinly.

Scarcity in the corporate world is simply one of competition. With more competition, prices trend downward, driven by ordinary supply and demand. In investment banking the possibility of competition has been limited in part by closed relationships among the key market enablers. This makes it difficult for a new company to get into investment banking by starting from scratch; new outfits are therefore typically started by individuals and teams that already have those connections. If you want to do an IPO for your company, going to the banker with better connections means you do the deal faster, easier and at a higher offering price, and so you are willing to pay the fee they demand.

In consumer banking there is also scarcity, but this scarcity is artificially maintained by heavy government regulation. It is very difficult for a new bank to get registered to operate in Canada. Lack of competition keeps fees for services high. Government balances this undesirable trait against the stability and reliability of the country's banking system, which -- whether we like it or not -- determines to a great extent our economic well-being. Seen in that light, high banking fees and high bank profits are the price of economic stability and access to credit.

If the government were to allow more banks to enter the market, competition would certainly drive down prices. It would also raise the cost of regulation and raise the risk of something going wrong (bank crisis or failure). Regardless of ideological leanings, no federal government has been eager to open the gates; they are fine with the status quo. There have been exceptions of course, such as Amex Bank of Canada.

Also, personal bonuses are less controversial in Canada since our investment banking sector is smaller and more disciplined. Like with athletes and entertainers, ambitious and capable bankers go south to work in the US. The current governor of the Bank of Canada, Mark Carney, is one example. Further, we all have the ability to tap into bank profits, ex-bonuses, by investing in those companies.

This latest financial scare has likely only firmed up confidence in the status quo of Canadian banking. We can expect banking fees to be a continuing source of complaint for the foreseeable future.

SaaS Reliability

Blogs, Twitter and the media go wild every time a major provide of web (or cloud) services -- we can reasonably label all of these as SaaS -- has an outage. The most recent object of attention is Salesforce, the top provider of SaaS CRM (customer relationship management). Others in the news in the past months have included: Google's Gmail, Microsoft Bing, RIM email, Twitter, among many others.

These failures are not too surprising since no matter how well you construct your service, failures can and will occur. You can make everything redundant, rigourously test new hardware and software variants, geographically-distribute hosting sites, hire the best people in the business and implement catastrophe plans that anticipate the most unlikely events, both natural and man-made. When all is said and done, what you have accomplished is a reduction of the probability of an outage, or the duration of an outage when it does occur; however, reducing the probability to zero is impossible.

Outages of one type or another have been going on for as long as we have been using technology. It is simply unavoidable. The reason these recent cases are prominent is because each service has many millions of users. Therefore, when an outage occurs, large segments of the population are impacted at the very same time and they talk to each other about it. When the outage affects only one company or a small number of people, you are unlikely to hear about it unless you are directly affected. After all, what do you care if there was a power failure in, say, Owen Sound, unless, of course, you happen to live or work there?

There are voices of reason among the clamouring hordes, although you may have to dig to find them. Here is one who I think gets it right:

"...they shouldn’t distract us from the fact that most corporations and private institutions are equally, if not more susceptible to similar operational problems.

The only difference is that the IT staff within corporations and private institutions only have to support and report to a single customer,..."

Not only that, other than medium to large organizations, companies generally don't have the budget to build a top-notch IT department and network that has all the knowledge and attributes needed. Quite sensibly, more and more companies are moving to SaaS for the same reason they moved to outsourcing in the past: they shift non-core support or other specialized tasks to companies that are focused on those areas. They are then free to focus on their core business. It's efficient and effective, and everyone wins -- the company, its customers and their suppliers -- when it's done right. If it's done wrong they will lose business and will therefore have an incentive to try again.

Despite the Chicken Littles who cry that the sky is falling whenever one of these large outage events occurs, we are better off with SaaS and outsourcing. Hopefully the media will eventually tire of this silly scare game and move on to another irrational obsession.

Datapac's Demise

I'll start the new year with a look back at the national data network that predated the internet: Datapac. The most surprising thing to me about the recent demise of Datapac was finding out that it was still operational into 2009. I knew that for the longest time it continued to be used for point of sale (POS) and bank machine (ATM) transactions, but I hadn't thought about it for years. It seems they kept using it by paying attention to the maxim that tells us: if it ain't broke, don't fix it. Like the SS7 telephony signaling network, Datapac was very difficult to hack into since there were no or few connections to outside networks from which attackers could attempt entry.

Datapac is (or was) an X.25 network. X.25 was the closest we came to publicly-accessible data networks before the internet was opened to the public. It was never cheap so its use was pretty much strictly commercial. Like IP, X.25 is a packet-oriented protocol. There were many X.25-based network around the world, and they were interconnected through gateways that had to (usually) be manually navigated to reach a desired destination: the X.25 address space was small and the various networks did not and could not coordinate assignments.

Datapac has some special significance to me since I worked with it back in the late 1970s when it was shiny and new. I wrote a software package that interconnected my employer's one Datapac connection to any of multiple stations in a time-sharing minicomputer installation, making this valuable resource widely-accessible to authorized users within the company. For a young, fairly-inexperienced programmer this was a tremendous learning opportunity. That was my first exposure to highly-concurrent software design, including interrupt drivers and low-level resource contention, in a live commercial environment. It also taught me communications protocols, which came in very useful later in my career.

X.25 itself became obsolete years ago as the technology improved. An important attribute of X.25 is its ability to get the data through when the communications links are noisy and unreliable. With the wide deployment of digital carrier systems and increasingly-sophisticated modems, the overhead of X.25's data link protocol became superfluous. Doing away with that overhead was one of the design goals of Frame Relay.

Of course today pretty much all communications protocols other than IP are in decline. Nevertheless, it is important to occasionally look back on what came before and reflect on what those earlier generations of technology gave us. In its time, Datapac served its purpose, and it served it well. The torch has been passed.