Economics and incentives: terminal services licensing vulnerability

Or: “Don’t confuse the interests of the user with those of the software vendor.”

Researchers recently identified one of the zero days used by the ultra-sophisticated malware Flame, likely created by nation states for the express purpose of industrial-espionage. It turns out to be  yet another PKI vulnerability that allows attackers to create malicious code seemingly signed by MSFT. Carrying the MSFT signature is the ultimate seal of approval for software on Windows. Such applications typically get unique privileges or are given a free-pass on security checks due to the implicit trust placed in their pedigree. In response MSFT swiftly moved to revoke the issuing certificate authorities associated with these forged signatures. (The cruel irony, as pointed out by many commentators, is that Windows maintains those trust roots via Windows Update.)

While PKI vulnerabilities in Windows have devastating consequences, they are not new. Moxie’s find in 2002 regarding the failure to check key usage properly during chain validation was equally damaging, although it was reported the old-fashioned way by a security researcher instead of being reverse-engineered out of malware in the wild. What is unusual about this case is that a large chunk of the problem can be attributed to operational errors in the way MSFT handled licensing. My former colleague Ryan Hurst gives a great breakdown of the root-causes behind the security advisory #2718704 . Consistent with other epic failures of security on this magnitude, it was not a single isolated mistake but a series of engineering incompetence, poor design judgment and operational laziness (in choosing the path of least resistance for managing a new certificate authority) that culminated in the current crisis.

There is a different way to look at this vulnerability in terms of incentives. It’s axiomatic that software is not perfect– not in functionality or in security. Once this is acknowledged, the problem becomes one of managing risks rather than trying to eliminate the completely. Given that every piece of code we deploy might harbor some unknown but catastrophic vulnerability, the question comes down to whether the benefits derived from that application outweigh the risks.

Case in point: web browsers are one of the most closely scrutinized and heavily targeted pieces of software. In the most recent Pwn2Own competition at CanSecWest in Vancouver BC, every single major web browser was successfully exploited. Yet few security professionally would realistically  suggest that users stop visiting websites altogether. (More cautious among us may advise disabling a few bells-and-whistles such as Flash– a notoriously buggy component whose main “value proposition” is the promise of animated hamsters on every web page.) The benefits of the web applications are so compelling and obvious that we have invested massively in building more resilient browsers, so that users can continue to accrue those benefits with lower risk.

That brings up the question of what great value users derive from the software implicated in the latest debacle: Terminal Services Licensing Server. That calls for a slight detour into the arcane world of Windows pricing for enterprises. Most home users’ experience with Windows software licensing is thankfully limited to occasionally entering the 25-letter product activation code when installing a new copy of the operating system. (There is also the occasional false-positive nag when the OS decides that its environment has changed because the user installed some new hardware for example, and subtly accuses the user of pirating software.) Each such key corresponds to one license, either included as part of the purchase of the machine or perhaps of buying a new copy of the OS at retail price.

Enterprises have far more complex models when it comes to paying for software, especially “server class” software where a set of centralized, shared machines is offering applications– such as printing, file sharing or remote desktop– to a population of users. In these scenarios the enterprise pays not just for installing the server, but also for each user connecting to that server to access its functionality.

It’s instructive comparing this with an open-source model: licensing schemes appear to be fundamentally incompatible with “free” software models, where the adjective is used in the sense of rights accorded the user rather than monetary terms. A vendor could not charge users more to run that software on a machine with 16 processors compared to 4, or to serve a thousand users instead of a hundred. Any such artificial restrictions would be “edited” out of the source code in a matter of minutes. Open-source software is only limited by the capabilities of the hardware it runs on and fully “saturates” them to their full potential. Proprietary software on the other hand can be artificially throttled to implement “price discrimination” where two customers can end up paying a different amount for the exact same service. (Note the software distributed is identical whether it is set to serving 10 or 100 users. One could argue that scaling the application to handle the higher load itself is a cost for the developer. In that case this extra cost is being recouped by over-charging the heaviest users and under-charging the lower volume ones.)

The catch is, doing that requires additional machinery. Left to its own devices, software will run at full speed and service all requests. It takes extra effort to slow it down or limit it to only doing its job after the check has cleared. This is where the likes of Terminal Services Licensing comes in. Its mission in life is to make sure that a Windows server  product only does its “serving” to those clients that have paid for it. This is undoubtedly valuable to MSFT, in terms of enforcing the desired pricing model and collecting additional revenue. From the customer perspective, it could go either way. Economically it may lead to a more efficient outcome for the enterprise if paying based on actual server demand measured in real-time is cheaper than trying to estimate peak load and buy licenses upfront. Of course it could also be construed as nickel-and-diming these users: pay several thousand dollars for the server and then pay another $10-$50 for each client.

The Flame zero-day incident shows that economics is not the only dimension to this problem. Confronted with the risk of getting the enterprise 0wned, the prudent CSO would opt for paying more for software upfront, instead of worrying about one more useless component that creates additional opportunties for attack without any redeeming value– if they had the choice. All but the largest enterprises lack bargaining power when negotiating such deals. In fact lack of meaningful choice is a recurring theme: licensing software is proprietary (although the protocol has been disclosed, compliments of the consent decree) and there are no “better” or “more secure” alternatives that can be deployed as alternative.

More importantly, the flaws in Terminal Server Licensing create negative externalities for everyone,  due to the way MSFT implemented licensing by granting sub-ordinate CA status to enterprises. If some enterprise were to mismanage its signing privileges, it is no surprise that its own users can be compromised. That part is expected, and even creates proper incentive for each enterprise to secure its own signing infrastructure. But due to the stunning design flaw, malware signed by one misbehaving enterprise certificate authority (or “licensing server” to use the preferred terminology of software toll-extraction) can be used to every other enterprise and even home users who have no business accessing any server software.

That is a suboptimal risk tradeoff.


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