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As shoppers stay away, small stores seek refuge online

Inside Telecom Staff

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As shoppers stay away, small stores seek refuge online

NEW YORK (AP) — For small retailers across the country, the coronavirus outbreak has turned an already challenging business environment into never-ending uncertainty.

Amy Witt might have 20 customers on a good day in her Dallas women’s clothing store, and then none the next.

“It’s a rollercoaster we ride every day,” says Witt, whose store, Velvet Window, reopened May 1 after being closed since March. “We’re doing everything we can to cover expenses and keep the store stocked with inventory.”

Many of Witt’s older customers are still shy about going into stores, especially since the virus has resurged in Texas. As she reopened the store in May, Witt told The Associated Press  she planned to use services like private shopping hours to encourage reluctant customers to come in. The strategy has helped but sales remain well below Witt’s expectations. She hopes to boost sales by selling at an outdoor market where shoppers can feel more comfortable.

Still, Witt is grateful to be open — there are empty stores in the shopping center where Velvet Window is located.

Small retailers, especially those selling non-necessities like apparel, are still struggling months after state and local governments lifted shutdown orders aimed at containing the virus. With the virus far from under control in many areas, however, consumers worried about getting sick are staying home and doing their purchasing online or, if they venture out, going to big stores like Walmart and Target where they can do one-stop shopping.

The weak sales and erratic customer traffic have forced store owners to be creative in hopes of persuading customers to stop in rather than order from a big online retailer. But for some owners, disappointing sales and an uncertain outlook have forced them to close their stores for good and stake the future of their businesses on the internet.

Washington was one of the first epicenters of the virus, and one of the first states to shut down its economy. Ambika Singh felt the impact immediately: Her company, Armoire, rents clothing to professional women. Her customers, suddenly stuck at home, no longer needed outfits for the office, dinners and business trips.

Singh has permanently closed her two stores in Seattle, knowing they couldn’t be sustained. She’s adapted her online business to meet customers’ rapidly changing needs — they wanted different clothes, like luxury loungewear or more dress shirts to look business-like on videoconferences even as they wore sweatpants

Having lost customers due to the weakened economy, Armoire’s revenue is down about 35% from February, which was its best month ever. One of Singh’s biggest challenges now is marketing to new customers as she tries to replace the shoppers who left.

“As we’ve lost the physical connection with customers, can we rebuild?” she says.

The internet has been a refuge for many retailers during the pandemic, says Carlos Castelan, managing director of The Navio Group, a retail consultancy based in Minneapolis. He noted that Shopify, a company that hosts e-commerce websites, had a 71% increase in new stores in the second quarter compared to a year earlier.

“They’re urgently setting up these e-commerce models to serve their customers,” he says.

The most recent retail sales tallies from the government show sales at clothing sellers, which tend to have physical locations, fell nearly 36% from May through July. But online and other non-traditional retailers saw their sales soar 26%.

Small retailers have also learned to be more customer-friendly. They’re using, for example, texts to communicate with shoppers and making pickups easier by setting aside dedicated parking spaces so people can grab and go, Castelan says. And stores are letting shoppers know they are trying to keep everyone safe.

“The primary driver has been as much about convenience and safety. That’s more the story rather than merchandising,” he says.

The internet has been a lifeline for Antonelli’s Cheese Shop. The Austin, Texas, store remained open during the government-ordered shutdown, but many consumers stayed home, sharply reducing store traffic. The shop also sells to restaurants, which stopped ordering as they were forced to close. The shop’s business is still down 20%.

Owners John and Kendall Antonelli say they’ve managed to survive by taking the events they normally run on their premises, like cheese tastings, and putting them online. They’ve had as many as 150 people take part in a tasting, with many people ordering cheese in advance and picking it up curbside. More recently, with fewer people sheltering at home, they’ve been more likely to get 50 people, but that is still about double the number of attendees they had pre-pandemic.

The Antonellis revamped their website so local customers can order a la carte instead of pre-selected packages — that’s more expensive for the store, but it keeps people happy and shopping.

The Antonellis have learned that several cheese shops in other cities have gone out of business, so they know they too could be at risk.

“We are potentially considered one of the success stories — and what I mean by that is we’re still operating,” Kendall Antonelli says.

Business has been slow since Mallory Shelter’s Washington, D.C., jewelry store reopened in June. Shelter, whose store bears her name, responded to the pandemic and shutdown by pouring her marketing efforts into her website. It now accounts for 75% of her revenue, up from 8% before the virus struck, but her overall revenue is down by half. She also has changed her product mix, focusing more on custom items that can have a more personal meaning for buyers.

A big question is whether her in-store business will recover in time for the holiday season that starts three months from now.

“This is the month when I’m preparing for the holidays. But that looks really hard when you don’t know if you’re going to be open, if there’s going to be another wave of the virus or what people’s spending will be like,” Shelter says.

By JOYCE M. ROSENBERG AP Business Writer.

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Russian hack of US agencies exposed supply chain weaknesses

Inside Telecom Staff

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Russian hack of US agencies exposed supply chain weaknesses

The elite Russian hackers who gained access to computer systems of federal agencies last year didn’t bother trying to break one by one into the networks of each department.

Instead, they got inside by sneaking malicious code into a software update pushed out to thousands of government agencies and private companies.

It wasn’t surprising that hackers were able to exploit vulnerabilities in what’s known as the supply chain to launch a massive intelligence gathering operation. U.S. officials and cybersecurity experts have sounded the alarm for years about a problem that has caused havoc, including billions of dollars in financial losses, but has defied easy solutions from the government and private sector.

“We’re going to have to wrap our arms around the supply-chain threat and find the solution, not only for us here in America as the leading economy in the world, but for the planet,” William Evanina, who resigned last week as the U.S. government’s chief counterintelligence official, said in an interview. “We’re going to have to find a way to make sure that we in the future can have a zero-risk posture, and trust our suppliers.”

In general terms, a supply chain refers to the network of people and companies involved in the development of a particular product, not dissimilar to a home construction project that relies on a contractor and a web of subcontractors. The sheer number of steps in that process, from design to manufacture to distribution, and the different entities involved give a hacker looking to infiltrate businesses, agencies and infrastructure numerous points of entry.

This can mean no single company or executive bears sole responsibility for protecting an entire industry supply chain. And even if most vendors in the chain are secure, a single point of vulnerability can be all that foreign government hackers need. In practical terms, homeowners who construct a fortress-like mansion can nonetheless find themselves victimized by an alarm system that was compromised before it was installed.

The most recent case targeting federal agencies involved Russian government hackers who are believed to have sneaked malicious code into popular software that monitors computer networks of businesses and governments. That product is made by a Texas-based company called SolarWinds that has thousands of customers in the federal government and private sector.

That malware gave hackers remote access to the networks of multiple agencies. Among those known to have been affected are the departments of Commerce, Treasury and Justice.

For hackers, the business model of directly targeting a supply chain is sensible.

“If you want to breach 30 companies on Wall Street, why breach 30 companies on Wall Street (individually) when you can go to the server — the warehouse, the cloud — where all those companies hold their data? It’s just smarter, more effective, more efficient to do that,” Evanina said.

Though President Donald Trump showed little personal interest in cybersecurity, even firing the head of the Department of Homeland Security’s cybersecurity agency just weeks before the Russian hack was revealed, President Joe Biden has said he will make it a priority and will impose costs on adversaries who carry out attacks.

Supply chain protection will presumably be a key part of those efforts, and there is clearly work to be done. A Government Accountability Office report from December said a review of 23 agencies’ protocols for assessing and managing supply chain risks found that only a few had implemented each of seven “foundational practices” and 14 had implemented none.

U.S. officials say the responsibility can’t fall to the government alone and must involve coordination with private industry.

But the government has tried to take steps, including through executive orders and rules. A provision of the National Defense Authorization Act barred federal agencies from contracting with companies that use goods or services from five Chinese companies, including Huawei. The government’s formal counterintelligence strategy made reducing threats to the supply chain one of five core pillars.

Perhaps the best-known supply chain intrusion before SolarWinds is the NotPetya attack in which malicious code found to have been planted by Russian military hackers was unleashed through an automatic update of Ukrainian tax-preparation software, called MeDoc. That malware infected its customers, and the attack overall caused more than $10 billion in damage globally.

The Justice Department in September charged five Chinese hackers who it said had compromised software providers and then modified source code to allow for further hacks of the providers’ customers. In 2018, the department announced a similar case against two Chinese hackers accused of breaking into cloud service providers and injecting malicious software.

“Anyone surprised by SolarWinds hasn’t been paying attention,” said Rep. Jim Langevin, a Rhode Island Democrat and member of the Cyberspace Solarium Commission, a bipartisan group that issued a white paper calling for the protection of the supply chain through better intelligence and information sharing.

Part of the appeal of a supply chain attack is that it’s “low-hanging fruit,” said Brandon Valeriano, a cybersecurity expert at the Marine Corps University. A senior adviser to the solarium commission, he says it’s not really known just how dispersed the networks are and that flaws in the supply chain are not uncommon.

“The problem is we basically don’t know what we’re eating.” Valeriano said. “And sometimes it comes up later that we choke on something — and often we choke on things.”

WASHINGTON (AP) — By ERIC TUCKER

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Google’s parent deflates internet-beaming balloon company

Inside Telecom Staff

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Google's parent deflates internet-beaming balloon company

Google’s parent company is letting the air out of an internet-beaming balloon company that was providing online access from the stratosphere.

The plan to shut down Loon was announced late Thursday, ending what started out nine years ago as one of Google’s secret projects in its so-called “moonshot factory,” a division now called X. Google, Loon and X all are owned by Alphabet Inc., which draws upon Google’s digital advertising empire finance risky ideas like internet-beaming balloons and another high-profile flop, internet-connected glasses.

As reflected by its name, Loon was viewed as a crazy idea from the start. Yet Google’s hopes for the project were a lofty as the high-flying balloons themselves when the company finally took the wraps off the project in New Zealand in June 2013.

The ambitious goal at that time was to launch thousands of massive balloons 12 miles (20 kilometers) into the stratosphere in order to bridge the gaping digital divide between the world’s 4.8 billion unwired people and their 2.2 billion plugged-in counterparts.

Since then, more countries that had little or no internet access now have gotten more ways to get online partly because of the explosive growth of smartphones during the past decade.

That made it even more challenging for Loon to find a way to make money, culminating in the decision to deflate it.

“The road to commercial viability has proven much longer and riskier than hoped,” Astro Teller, the head of the X division, wrote in a blog post.

Alphabet doesn’t disclose the results of other companies besides Google. The group of other far-flung companies that include self-driving car pioneer Waymo, health services venture Verily and drone delivery gambit Wing are clumped together with Loon and others in a division known called “Other Bets.” Those operations have suffered a combined $12 billion in operating losses since 2016 while Google has produced a combined operating profit of $140 billion during the same period.

Loon’s balloons had been working with telecom providers to provide internet access in Kenya and will continue to do that until March, according to Teller. Because it has been working with other companies on that access, Loon expects little or no disruption to the Kenyan customers’ internet access.

To help Kenya expand its internet access, Alphabet is will give $10 million to nonprofits and businesses aimed at advancing that cause.

Most of the employees working at Loon will be laid off with severance packages while some others will be offered jobs at X, Google or Alphabet, Teller said. He didn’t disclose how many of Alphabet’s 132,000 employees, — most of whom work within Google — are at Loon.


SAN RAMON, Calif. (AP) — By MICHAEL LIEDTKE AP Technology Writer

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Iran, pressured by blackouts and pollution, targets Bitcoin

Inside Telecom Staff

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Iran, pressured by blackouts and pollution, targets Bitcoin

Iran’s capital and major cities plunged into darkness in recent weeks as rolling outages left millions without electricity for hours. Traffic lights died. Offices went dark. Online classes stopped.

With toxic smog blanketing Tehran skies and the country buckling under the pandemic and other mounting crises, social media has been rife with speculation. Soon, fingers pointed at an unlikely culprit: Bitcoin.

Within days, as frustration spread among residents, the government launched a wide-ranging crackdown on Bitcoin processing centers, which require immense amounts of electricity to power their specialized computers and to keep them cool — a burden on Iran’s power grid.

Authorities shuttered 1,600 centers across the country, including, for the first time, those legally authorized to operate. As the latest in a series of conflicting government moves, the clampdown stirred confusion in the crypto industry — and suspicion that Bitcoin had become a useful scapegoat for the nation’s deeper-rooted problems.

Since former President Donald Trump unilaterally withdrew in 2018 from Tehran’s nuclear accord with world powers and re-imposed sanctions on Iran, cryptocurrency has surged in popularity in the Islamic Republic.

For Iran, anonymous online transactions made in cryptocurrencies allow individuals and companies to bypass banking sanctions that have crippled the economy. Bitcoin offers an alternative to cash printed by sovereign governments and central banks — and in the case of Iran and other countries under sanctions like Venezuela, a more stable place to park money than the local currency.

“Iranians understand the value of such a borderless network much more than others because we can’t access any kind of global payment networks,” said Ziya Sadr, a Tehran-based Bitcoin expert. “Bitcoin shines here.”

Iran’s generously subsidized electricity has put the country on the crypto-mining map, given the operation’s enormous electricity consumption. Electricity goes for around 4 cents per kilowatt-hour in Iran, compared to an average of 13 cents in the United States.

Iran is among the top 10 countries with the most Bitcoin mining capacity in the world — 450 megawatts a day. The U.S. network has a daily capacity of more than 1,100 megawatts.

On Tehran’s outskirts and across Iran’s south and northwest, windowless warehouses hum with heavy industrial machinery and rows of computers that crunch highly complex algorithms to verify transactions. The transactions, called blocks, are then added to a public record, known as the blockchain.

“Miners” adding a new block to the blockchain collect fees in bitcoins, a key advantage amid the country’s currency collapse. Iran’s rial, which had been trading at 32,000 to the dollar at the time of the 2015 nuclear deal, has tumbled to around 240,000 to the dollar these days.

Iran’s government has sent mixed messages about Bitcoin. On one hand, it wants to capitalize on the soaring popularity of digital currency and sees value in legitimizing transactions that fly under Washington’s radar. It authorized 24 Bitcoin processing centers that consume an estimated 300 megawatts of energy a day, attracted tech-savvy Chinese entrepreneurs to tax-free zones in the country’s south and permitted imports of computers for mining.

Amir Nazemi, deputy minister of telecommunications and information, declared last week that cryptocurrency “can be helpful” as Iran struggles to cope with sanctions on its oil sector.

On the other hand, the government worries about limiting how much money is sent abroad and controlling money laundering, drug sales and internet criminal groups.

Iranian cryptocurrency miners have been known to use ransomware in sophisticated cyber attacks, such as in 2018 when two Iranian men were indicted in connection with a vast cyber assault on the city of Atlanta. On Thursday, British cybersecurity firm Sophos reported it found evidence tying crypto-miners in Iran’s southern city of Shiraz to malware that was secretly seizing control of thousands of Microsoft servers.

Iran is now going after unauthorized Bitcoin farms with frequent police raids. Those who gain authorization to process cryptocurrency are subject to electricity tariffs, which miners complain discourage investment.

“Activities in the field are not feasible because of electricity tariffs,” said Mohammad Reza Sharafi, head of the country’s Cryptocurrency Farms Association. Despite the government giving permits to 1,000 investors, only a couple dozen server farms are active, he added, because tariffs mean Bitcoin farms pay five times as much for electricity as steel mills and other industries that consume far more power.

Now, miners say, the government’s decision to close down major Bitcoin farms operating legally seems designed to deflect concerns about the country’s repeated blackouts.

As Tehran went dark last week, a video showing industrial computers whirring away at a massive Chinese cryptocurrency farm spread online like wildfire, prompting outrage about Bitcoin’s outsized thirst for electricity. Within days, the government closed that plant despite its authorization to operate.

“The priority is with households, commercial, hospitals and sensitive places,” said Mostfa Rajabi Mashhadi, spokesman of Iran’s electricity supply department, noting that illegal farms sucked up daily some 260 megawatts of electricity.

Although Bitcoin mining strains the power grid, experts say it’s not the real reason behind Iran’s electricity outages and dangerous air pollution. The telecommunications ministry estimates that Bitcoin consumes less than 2% of Iran’s total energy production.

“Bitcoin was an easy victim here,” said Kaveh Madani, a former deputy head of Iran’s Department of Environment, adding that “decades of mismanagement” have left a growing gap between Iran’s energy supply and demand.

Bitcoin “mining’s energy footprint is not insignificant but these problems are not created overnight,” he said. “They simply need one trigger to spiral out of control.”

A sharp drop in supply or spike in demand, like this winter when more people are staying home because of the coronavirus pandemic, can upset the balance of a grid that draws mostly from natural gas. Authorities reported that households have increased their heating gas usage by 8% this year, which Tehran’s electric supply company said led to “limitations in feeding the country’s power plants and a lack of electricity.”

Sanctions targeting Iran’s aging oil and gas industry have compounded the challenges, leaving Iran unable to sell its products abroad, including its low-quality, high-sulfur fuel oil known as mazut. If the hazardous oil isn’t sold or shipped it must be swiftly burned — and it is, in 20% of the country’s power plants, according to environmental official Mohammad Mehdi Mirzai. The smoldering fuel blackens the skies, particularly when the weather cools and wind carries emissions from nearby refineries and industrial sites into Tehran.

During the power blackouts, thick layers of pollution coated mountain peaks and hovered over cities, with readings of dangerous fine particulate pollution spiking to over 200 micrograms per cubic meter, a level considered “dangerously” unhealthy.

As the government publicized its clampdown on Bitcoin farms, miners balked at all the blame over their energy guzzling. Many warned that despite its potential to become a cryptocurrency utopia, Iran would continue to fall behind.

“These moves harm the country,” said Omid Alavi, a cryptocurrency consultant. “Many neighboring nations are attracting foreign investors.”


TEHRAN, Iran (AP) — By NASSER KARIMI and ISABEL DEBRE

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