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#deepweb | Google’s New Messaging App To Unify Gmail, Drive, And Hangouts…And Other Small Business Tech News

Source: National Cyber Security – Produced By Gregory Evans KRAKOW, POLAND – 2019/01/23: In this photo illustration, the Google Hangouts logo is seen displayed … [+] on an Android mobile phone. (Photo Illustration by Omar Marques/SOPA Images/LightRocket via Getty Images) LightRocket via Getty Images Here are five things in technology that happened this past week […] View full post on AmIHackerProof.com

Financial tech firms disagree on ban of customer data screen-scraping – Naked Security

Source: National Cyber Security – Produced By Gregory Evans For years, financial technology (fintech) companies have used screen-scraping to retrieve customers’ financial data with their consent. Think lenders, financial management apps, personal finance dashboards, and accounting products doing useful things: like, say, your budgeting app will use screen-scraping to get at the incoming and outgoing […] View full post on AmIHackerProof.com

#nationalcybersecuritymonth | Is Congress Finally Ready to Take On Cybersecurity? | Tech Law

Source: National Cyber Security – Produced By Gregory Evans

The United States Congress made some significant progress this session when it comes to data privacy, but cybersecurity remains a blind spot for lawmakers.

Congress currently is considering a
national privacy law that mirrors legislation enacted in the European Union. It would allow people to access, correct and request the deletion of the personal information collected from them. Though there are several ideas as to the final form the bill should take, a path became clear during the Senate Commerce Committee’s
privacy hearing last month.

Congress also seems willing to address the consequences of new technologies. Last month it passed the National Quantum Initiative Act, which is expected to disperse US$1.275 billion for quantum research over the next four years. Some have argued that this newfound enthusiasm for tech might be used
to fix the impeachment process.

When it comes to cybersecurity, though, Congress is still in the dark ages. Efforts to pass a privacy law often are seen as addressing both data privacy and cybersecurity, but in reality, they do not. Companies and consumers have been forced to take matters into their own hands, reflected in the recent announcement that Facebook
has banned deepfakes, and the rising use of VPNs among the general population.

Privacy Means Nothing Without Security

This oversight with respect to security could have huge consequences for the efficacy of data privacy legislation. Though data privacy and data security are separate concerns, there is an inherent link between them. Security has been overlooked in the current proposed law, as well as in similar legislation — like Europe’s GDPR and the Australian privacy bill
passed two years ago.

To understand how privacy and security are linked, consider an app that collects location data from its users. The types of data privacy law proposed (or already in force) would impose strict requirements on the company behind this app, such as telling its users what it is collecting, and what it does with the data. If the app is not properly secured, however, and the information is stolen or leaked, strong privacy policies will be of little comfort to users.

This oversight is apparent in almost all the legislation on data privacy in the U.S. The
Information Transparency & Personal Data Control Act, which was introduced in the House last spring, contains a passage that requires lawmakers and tech companies “to protect consumers from bad actors in the privacy and security space,” but it doesn’t include any further details. The
Consumer Online Privacy Rights Act goes a little further, but only two of its 59 pages give vague cybersecurity requirements for private companies.

Even the
United States Consumer Data Privacy Act of 2019 provides only the broad instruction that companies should “maintain reasonable administrative, technical, and physical data security policies and practices to protect against risks to the confidentiality, security, and integrity of sensitive covered data.”

A Lack of Leadership

At best, the failure of Congress to tackle cybersecurity has left the data of millions of Americans unprotected. At worst, it represents a lack of leadership that has left responsible companies completely confused as to what their legal, moral and ethical responsibilities are when it comes to protecting user data.

In this context, there has grown a huge and unregulated market for cybersecurity tools and services, each claiming to offer class-leading protection against cybercrime. For companies, website security is now a major component of
website maintenance costs. This is because CEOs are acutely aware of the risks of cybercrime, a form of criminality that
will cost the global economy $6 trillion a year by 2021, according to Cybersecurity Ventures’ annual report.

Even the National Security Agency
has warned that cybercriminals are “becoming more sophisticated and capable every day in their ability to use the Internet for nefarious purposes.” Yet many companies
fail to take basic precautions, such as deleting expired accounts.

The Future

To be fair to Congress, crafting a data security law that covers every private company is complex. Today, data is unlikely to be held by one company in one place, and assigning responsibility for protecting it has become a difficult issue. Any such law, therefore, would have to take into account the widespread adoption of cloud storage,
SaaS business models, and other forms of distributed data storage and processing. In this context, it’s understandable that most
state-level laws on data security require companies only to take “reasonable” security practices, without specifying what those are.

On the other hand, there finally does appear to be an appetite in Congress to address these issues. An increasing number of data protection laws cover individual industries, such as
healthcare and
financial institutions, and the FTC has brought some data breach-related
enforcement actions under its relatively weak and vague
consumer protection powers.

Looking to the future, these industry-specific laws could form an excellent model for a national data protection law, as could state-level legislation. The state most mentioned in this regard is New York, which arguably has the most comprehensive requirements. Financial services companies in the state must meet more than 10
specific requirements, which include encryption of nonpublic information, penetration testing, vulnerability assessments, and oversight of service providers’ cybersecurity.

New York also offers another lesson for Congress. In order to draft and enact the new law, the state convened an expert panel that brought together lawmakers, cybersecurity professionals, and the CEOs of major companies.

The development of an effective data protection law at a national level is going to require the same level of expertise and consultation. This is why some have suggested that a
federal Department of Cybersecurity is the way forward. Such a department could bring together responsibilities that currently are fragmented across a huge number of departments.

Lacking even a basic indication from the government as to what constitutes adequate cybersecurity, many people are taking cybersecurity into their own hands. VPNs — security tools that encrypt user data in transit — are experiencing explosive growth. Just a few years ago, they were regarded as semi-legal tools that enabled consumers
to get around Netflix geo-blocks or
avoid cryptocurrency bans. Now, they are used by a significant proportion of the populace.

Whatever the outcome of these new legislative initiatives, data protection is no longer an issue that Congress can ignore. Protecting consumer data is important for the economy. At the broadest level, ensuring data security is also critical to the efficacy of data privacy legislation that already has been passed. That is to say nothing of the reputation of Congress, which would be severely damaged if it should fail to take leadership on one of the most important issues facing the U.S. today.


Sam Bocetta has been an ECT News Network columnist since 2019. A freelance journalist specializing in U.S. diplomacy and national security, Bocetta’s emphases are technology trends in cyberwarfare, cyberdefense and cryptography.

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#nationalcybersecuritymonth | The Great U.S.-China Tech Divide

Source: National Cyber Security – Produced By Gregory Evans In terms of technology, the world had been unifying for years. Now it is reverting back to the likes of the VHS-versus-Betamax era, with much bigger consequences. Imagine two countries with completely different sets of hardware and software for the internet, electronic devices, telecommunications, and even […] View full post on AmIHackerProof.com

#nationalcybersecuritymonth | TECH & CYBER BRIEFING: CES Debates Breaking Up Big Tech

Source: National Cyber Security – Produced By Gregory Evans

Should big tech be broken up? That question was raised at CES this week following months of discussion and antitrust inquiries from lawmakers and regulators in Washington.

The subject of both a tech think tank panel and a Federal Trade Commission-focused panel at CES this week is timely given ongoing investigations by the Department of Justice and the FTC into anti-competitive behavior of companies including Facebook, Amazon, Google and Apple. The House Judiciary Committee is also conducting its own tech antitrust probe.

Robert Atkinson, president of the think tank Information Technology and Innovation Foundation, said in a panel yesterday he was against the idea of a break-up. “The simple fact that big technology companies are big, is not a problem in itself, in fact it’s a benefit,” he said. Atkinson said large tech companies, such as Alphabet and Amazon, are among the top investors in research and development in the world and without their size, they couldn’t innovate.

His remarks mirrored those of Christine Wilson, a commissioner at the Federal Trade Commission, who said in an earlier FTC session that proposals from Sen. Elizabeth Warren (D-Mass.) and others to break up large, successful companies because they are large and successful “is not an approach that I would embrace.”

FTC Commissioner Rebecca Slaughter defended the intent behind some of the break-up proposals. “What they are doing is saying that we are concerned about the effects across the market, and in the market, and on consumers, of the market power that particularly large companies have, and how they are using that market power,” Slaughter said during the FTC session. “So it may be that either more regulation or breaking up is an appropriate way to remedy those concerns.”

Charlotte Slaiman, senior policy counsel at non-profit Public Knowledge, also raised the alarms over big tech’s dominance. “I am very concerned about the power of big tech, which I define as dominant digital platforms,” she said in yesterday’s panel. She did agree that antitrust laws are not necessarily well-suited to address the network effects that have led to big tech’s growth, but said new laws are needed to remedy consumer harms that are the result from dominant tech, including a federal privacy bill.

She also contested Atkinson’s premise that tech companies’ large R&D spending is the best way to measure innovation. A small company that is trying to gain market share is going to do much more disruptive innovation, she said. “A company that is already doing well, that is very comfortable in its market position, is going to do some innovation on the margins,” she said. But if a large companies discovers a great innovation that could potentially limit their market power, they might want to sit on that versus innovate, she added.

Sen. Rosen Talks STEM Bill, Tech Innovation: Sen. Jacky Rosen (D-Nev.) wasn’t able to make it to CES in Las Vegas this week due to the Senate schedule, but in a phone interview praised the state’s tech sector and highlighted STEM and tech legislation she’s pushing in Congress.

“I’m proud that Nevada is leading the nation in innovation and software job growth,” Rosen told Bloomberg Government. “I will continue to support legislation, like my bipartisan Building Blocks of STEM that was recently signed into law, to ensure that the Silver State is educating and training the workforce of tomorrow.”

Rosen and Victoria Espinel, president and CEO of BSA The Software Alliance, co-authored an opinion article yesterday in the Las Vegas Sun noting that Nevada has the fastest growing software job sector in the country.

Rosen’s bill (S. 737), signed into law by President Donald Trump late last year, expands STEM education initiatives at the National Science Foundation for young children and creates new research grants to increase the participation of girls in computer science.

She also highlighted her bipartisan Mapping to Save Moms’ Lives Act (S. 3152), which she released this week. That measure would require the Federal Communications Commission to map remote areas with internet service gaps and high rates of poor maternal health outcomes.

“In Nevada we have real frontier land, particularly in northern Nevada,” she said. “We know about 5G, we have places with no ‘G,’ We have to get everybody connected.”

She said she is working on legislation with Girls Who Code, a nonprofit that trains girls in computer coding, to require schools that receive federal funding for computer science programs to provide information on demographics in the classroom. “So many school districts say, ‘We have computer science education.’ But are we sure that we’re making it accessible, available and open or recruiting everybody to do that or just a select group,” she said.

Rosen has experience with technology, having worked as a computer programmer and software developer for numerous companies in Nevada, including Summa Corporation, Citibank, and Southwest Gas.

Happening on the Hill

Legislation & Letters:

  • House Lawmakers Unveil Bill to Revamp Children’s Privacy Law: A bipartisan House bill announced yesterday aims to modernize children’s privacy laws by raising the age of parental consent and protecting the geolocation and biometric data of minors. The measure, introduced by Republican Rep. Tim Walberg (Mich.) and Democratic Rep. Bobby Rush (Ill.), would update the Children’s Online Privacy Protection Act of 1998, known as COPPA. The bill would raise age of parental consent protections for children from age 13 to 16, and affirm the law applies to children’s privacy on mobile apps. Sens. Josh Hawley (R-Mo.) and Ed Markey (D-Mass.) introduced a similar bill to update COPPA in the Senate last March. See the House bill text here.
  • Wyden, Others Ping FCC on Wireless Scams: Sen. Ron Wyden (D-Ore.) and five House and Senate members yesterday asked the FCC to protect consumers from scammers hijacking phone numbers to steal bank and other personal information. “As the primary regulator of the wireless industry, the FCC has the responsibility and authority to secure America’s communication networks and protect consumers who rely on those networks. To that end, we urge the FCC to initiate a rulemaking to protect consumers from SIM swaps, port outs and other similar methods of account fraud,” the members wrote.

Happening Next Week:

  • Facial Recognition: The House Oversight and Reform Committee on Wednesday holds the third installment in a series of hearings on facial recognition, focusing on “ensuring commercial transparency and accuracy.”
  • Future Industries: The Senate Commerce, Science and Transportation Committee plans a hearing Wednesday on industries of the future. Witnesses include National Institute of Standards and Technology Director Walter Copan, National Science Foundation Director France Cordova, U.S. Chief Technology Officer Michael Kratsios, and FCC Commissioners Jessica Rosenworcel and Michael O’Rielly.

Industry and Regulation

Business Group Chief Urges Congress to Step Up on Privacy, Labor: Congress should move past gridlock and take the reins on issues such as privacy, where liberal states have enacted new laws, the leader of the U.S. Chamber of Commerce plans to say in a Thursday speech. “Washington’s inability to make progress on data privacy is resulting in a patchwork of state rules and regulations that will stifle the free flow of goods and services across state borders,” chamber Chief Executive Officer Tom Donohue said in prepared remarks.

As part of his annual “State of American Business” address, Donohue expressed worry about state-by-state approaches, particularly regarding data protection and worker classification in the gig economy, according to excerpts provided by the chamber, one of the most influential and highest-spending business associations in Washington. Read more from Ben Brody.

Apple Stole Tech for Watch, Masimo Claims: Apple is accused of stealing trade secrets and improperly using Masimo inventions related to health monitoring in its Apple Watch. Masimo, which develops signal processing technology for health-care monitors, and its spinoff, Cercacor Laboratories, claim in a lawsuit that Apple got secret information under the guise of a working relationship and then hired away key employees, including Michael O’Reilly, who became vice president of Apple’s health technology efforts. The business segment that includes the Apple Watch, Apple TV and Beats headphones is the company’s fastest-growing category and generated more than $24 billion in sales in the fiscal year that ended in September. Read more from Susan Decker and Mark Gurman.

New DHS Cybersecurity Assistant Director Starts: Bryan Ware earlier this week stepped into a top cyber role at Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency that was vacated by longtime assistant director Jeanette Manfra, according to a statement yesterday. Ware steps into the position just as the U.S. faces potential Iranian cyber attacks following its assassination of a top general. Sam Kaplan will fill Ware’s former position at the department later this month, Michaela Ross reports.

More Headlines:

To contact the reporters on this story: Rebecca Kern in Washington at rkern@bgov.com; Giuseppe Macri in Washington at gmacri@bgov.com

To contact the editors responsible for this story: Zachary Sherwood at zsherwood@bgov.com; Brandon Lee at blee@bgov.com

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#cybersecurity | #hackerspace | Tech Lessons From Star Wars Movies

Source: National Cyber Security – Produced By Gregory Evans My family recently saw “Star Wars: The Rise of Skywalker” in a local movie theater, and we were not disappointed. The characters, action, plot, and almost everything else we experienced, met or exceeded our high expectations. As we were leaving the theater, almost everyone had an […] View full post on AmIHackerProof.com

#deepweb | Tech Companies Gave Consumers Great Bargains. That Free Ride Is About to End.

Source: National Cyber Security – Produced By Gregory Evans

On bikes and scooters, messengers with bright orange satchels whipped and weaved through Manhattan’s teeming streets. Their bags held snacks, DVDs, and diapers for a start-up called Kozmo.com, which promised deliveries in under an hour. It was the year 2000. And it all seemed magical.

The real magic, it soon turned out, was Kozmo’s ability to raise more than $250 million in funding despite running a money-losing operation. As the dot-com bubble burst later in 2000, a planned initial public offering was canceled. Kozmo was liquidated in April 2001. Among the investors left holding the bag were
Amazon.com
(ticker: AMZN) and the venture-capital arm of SoftBank Group (9984.Japan).

Two decades later, Kozmo-like businesses are raising huge sums of money and delighting consumers. New movies get streamed straight to TVs, car service shows up instantly, and meals and goods arrive with the push of a button. Companies like
Amazon
and SoftBank are still footing the bill.

Each new service undercuts the incumbents.
Uber Technologies
(UBER) and
Lyft
(LYFT) are cheaper than city cabs. A month of content from
Netflix
(NFLX) costs less than one movie ticket; and Amazon makes every day feel like Black Friday.

But now we are on the precipice of another Kozmo-like reckoning. WeWork’s failed IPO—and a sudden focus on profits—has forced venture capital to rein in its voracious appetite. Investors have begun to feel the pain of a more discriminating market.

Consumers are likely to be next. Their free lunch—fueled by technology and generous private capital—is coming to an end. As the spigot turns off in both public and private markets, consumers will probably see changes from ride-sharing to food delivery that pinch their pocketbooks.

Billionaire investor and owner of the National Basketball Association’s Dallas Mavericks Mark Cuban says it will be difficult for many companies to adapt to the new reality. And it will be painful for consumers who have grown accustomed to great tech and low prices.

“It’s hard to sustain the growth rates that IPO investors look for, and it’s even harder to retrain customers to accept higher and profitable pricing after [companies’] subsidizing the cost for so long,” Cuban tells Barron’s in an email.

Several customers of these start-up services agree. “There is a tipping point,” says Kristen Ruby, president and founder of the Ruby Media Group, who spends $30 to $40 on food delivery multiple times a week. “Consumers will be put over the edge if the fees continue to get any higher.”

Andy Bachman, a rabbi who works as executive director of a New York City organization called the Jewish Community Project Downtown, says he orders with Seamless or
Grubhub
(GRUB) a couple of times each month. “Many people in the city who have more disposable income, they’re not going to have a problem with a small rise in delivery price,” he says. “But a normal family like ours, we’d stop using it.”

For much of the past decade, investors poured billions of dollars into start-ups, choosing to judge success by scale. Profits were for another day. Then, investors started to fear that the day might never come.

First came the weak performance of the unicorn IPOs. The share prices of hotly anticipated new stocks like Uber and
Pinterest
(PINS) have tumbled by more than 30% from their summer highs. The direct listing for
Slack Technologies
(WORK) has also proved to be a disappointment.

The turning point was the failed IPO of WeWork, the shared office-space company. At its peak, the company was worth $47 billion in the private market. Its IPO filing—which detailed huge losses and bewildering managerial decisions—triggered a reawakening among investors who suddenly remembered lessons from the internet bubble. WeWork was forced to shelve its offering and ultimately needed a bailout from SoftBank to stay solvent.

“The WeWork IPO process instilled a level of discipline in the market that hadn’t been there for a while,” says Mario Cibelli, manager of hedge fund Marathon Partners Equity Managment. “From the summer to the fall, you have gotten into a completely different environment. That exit opportunity that a lot of the private companies would be eyeing essentially dissipated. The public markets are demanding a different kind of risk profile and behavior.”

Jim Chanos, the short seller best known for predicting the collapse of Enron, blames SoftBank and its $100 billion dollar Vision Fund for fueling many of the unsustainable strategies. The Japanese company was WeWork’s largest investor.

“It’s very clear now that SoftBank got swept up and led the vanguard on this and maybe didn’t spend the time they should have on the business models,” says Chanos, the founder and managing partner of Kynikos Associates. “The whole WeWork thing was silly from the beginning.”

SoftBank declined to comment on the criticism over its business-model analysis of WeWork. But in an investor presentation in November, SoftBank said that it was now telling companies to focus on generating free cash flow (a measure of profitability) and that they should aim to be “self-financing.” It also started a new “no rescue package” policy for its portfolio companies.

“SoftBank figured that out a little bit late,” Chanos says. “Maybe these companies should have a path to profitability.”

The shift in sentiment has hit private markets, too. In the third quarter, start-ups received $27.5 billion in new venture capital during the third quarter, down 17% from the previous quarter and the lowest total in nearly two years, according to Dow Jones VentureSource.

Some of the start-ups won’t survive the new environment, while established businesses will be forced to raise consumer prices.

Internet TV is a good lesson for what consumers can expect. Virtual cable bundles, or virtual MVPDs (multichannel video programming distributors), hit the market roughly three years ago, promising to allow cord-cutters to get the best of live TV at a fraction of the cost of cable. At first, YouTube TV, Hulu Live TV,
Sony
PlayStation Vue, and DirecTV Now (currently called AT&T TV Now) all offered live-TV packages streamed over the internet for just $30 to $40 a month.

The low prices didn’t last. Craig Moffett, MoffettNathanson’s telecom analyst, says the virtual bundlers wrongly assumed that the business would have the winner-take-all economics akin to Google and
Facebook.
But content businesses are weighed down by a cost structure that doesn’t scale like native web businesses.

“The math never made any sense,” Moffett says. “The programming costs alone were north of $30 for those packages. After customer-service and customer-acquisition costs, there was simply no way anyone was going to make money.”

Faced with rising losses, Moffett notes, the internet TV services were forced to replicate the same price increases that drove people to cut the cord in the first place. As the prices went higher, subscriber growth sputtered. In October, Sony announced that it would shut down its Vue service in January. AT&T TV Now, meanwhile, raised its price so high—$65 a month, from the initial $35—that customers started to defect. Net subscriber losses for the service totaled nearly 700,000 in the past four quarters, according to MoffettNathanson. Internet TV now looks much like cable TV—both in cost and subscriber trends.

“Everybody initially hoped they would be able to grab market share and build a position that would give them more negotiating leverage and eventually be profitable to raise prices,” Moffett says. “In retrospect, neither of those assumptions held water.”

Moffett thinks the virtual-cable story could be repeated in other markets.

So what can consumers expect to happen in the ride-hailing, food-delivery, and streaming-video-subscriptions markets in the near future? Here’s a breakdown by industry:

Ride-Hailing

With stocks of the major U.S. ride-hailing players—Uber and Lyft—battered in recent months, consumers should expect to see a wave of price increases in the coming year.

Wall Street data indicate that the ride-hailing firms can get away with higher prices. Canaccord Genuity says its latest price tracker shows that Lyft and Uber fares were up 6% on average since May, adjusted by ride class. Last month,
Barclays
released an analysis of New York City ride-hail data, suggesting that demand for the service was inelastic. The firm found that when per-ride pricing rose 23% because of a congestion surcharge, it resulted in only a 10% decline in volume.

There are strong signals that a sea change is already under way. On Lyft’s last earnings call, the company’s chief financial officer said there was “increasing rationality” in the market, noting that average ride prices were higher year over year, adjusted for type of ride. Moreover, the company’s September-quarter adjusted margin on earnings before interest, taxes, depreciation, and amortization, or Ebitda, improved 32 percentage points, to a negative 13%, from the prior year. Lyft has said that it expects to be profitable by late 2021.

Marcelo Lima, a hedge fund manager at Heller House whose firm owns Lyft shares, sees a brewing duopoly in the U.S. ride-hailing space. He is more optimistic about Lyft than Uber because of the former’s North American focus. “I like the focus of Lyft; it’s a clear story,” he says. “They have a good chance of reaching very good economics soon.”

Uber, meanwhile, is being held back by its other money-losing units, like autonomous driving and food delivery.

What kind of actual price changes can consumers expect in the near term? Mike Puangmalai, a private investor who spent eight years as an analyst at Relational Investors, says, “For a $25 trip, don’t be surprised if it’s $30 this coming year. I do think prices will go up.”

Food Delivery

Uber’s willingness to lose money has thrown the nascent food-delivery business into disarray. Four well-funded players—DoorDash, Uber Eats, Grubhub, and Postmates—have been trying to outdo one another with wider networks and better discounts. Staggering losses and great deals for customers are the result.

Uber Eats lost more than $300 million in the September quarter, with losses up nearly 70% year over year. Grubhub shares plunged 43% in late October, when it offered profit guidance well below Wall Street expectations. Industry analysts widely believe that DoorDash and Postmates are losing money and will have difficulty going public, given recent trends.

DoorDash and Postmates didn’t respond to emailed requests for comment.

Chanos, whose firm is short shares of Grubhub, believes that the food-delivery companies are facing pressure from restaurants asking for lower commission rates. He also expects that consumers will see fewer coupons and promotions from the delivery firms, adding that higher prices would probably result in far lower delivery volume.

In a statement, Grubhub said that it “has proved itself as the only food-delivery business in the U.S. with a profitable, transparent, and sustainable business model.”

“Several of our peers have achieved national scale,” Grubhub said, “but we are the only one that has grown without unsustainable shortcuts like incurring massive operating losses, offering irrational diner pricing, and giving drivers substantial subsidies.”

Cibelli, whose firm owns Grubhub shares, predicts that all of the players will have to fix their businesses by cutting back on the discounts that attracted customers in the first place. “Uber Eats, Postmates, and DoorDash are all going to have to approach break-even and cease their cash burn,” he says. “The odds of consolidation are quite high. Likely, you will eventually have two dominant players.”

The hedge fund manager believes that with fewer players, aggregate industry profitability will improve as the overlap in operating expenses such as marketing and administrative spending gets eliminated. After the consolidation, he predicts, the remaining companies will be able to raise prices, benefiting Grubhub’s stock price.

Bulls and bears agree that the current competitive landscape isn’t sustainable. Cibelli says that the private companies that used their enormous fund raising to chase low-profit-margin sales will face the biggest obstacles.

“DoorDash, especially, has created transactions more aggressively than would have occurred naturally by offering too good of a deal for consumers, especially on the fast-food-chain side,” Cibelli says. “It’s nice to press a button to have
Wendy’s
delivered to you very cheaply, but these are inferior transactions.”

In November,
Morgan Stanley’s
consumer survey revealed that 58% of diners said promotions and deals played a role in their food-delivery decisions. Furthermore, only 36% of consumers said they were exclusive to one platform.

Fast-food orders are especially problematic in terms of profitability. Morgan Stanley estimates that two-thirds of fast-food orders were under $7. In a typical $10 fast-food order, the firm says that a food-delivery company would lose $3.80 because of a $5 cost per delivery, net of fees.

Consumers are unlikely to readily accept higher delivery prices, as they might be with higher ride-hailing costs.

“If there are less promotions like free delivery, I’m not going to order as much personal meals,” says Puangmalai, 37, who is also a freelance software developer. “My usage will go down on the lower-ticket stuff.”

Video Streaming

While the ride-hailing and food-delivery industries are due for a reckoning, online video streaming has a longer runway. The “free lunch” in video could last for a while, thanks to the deep pockets of big tech and media.

These companies have already told their investors to expect many years of continued losses, as they build their streaming libraries. AT&T, for example, expects its HBO Max to lose more than $4 billion before turning profitable in 2025.

The WeWork moment hasn’t hit the streaming business largely because video-streaming companies have other profitable businesses, like theme parks, movies, wireless services, and smartphones that can subsidize the streaming efforts at attractive price points.

In November,
Walt Disney
(DIS) launched its Disney+ streaming service at just $7 a month, about 45% lower than Netflix’s standard plan. In its first year, Disney plans to have a library of 7,500 TV episodes and 500 movies—including the company’s Pixar, Star Wars, and Marvel films. Disney has told investors that it won’t make money on Disney+ until 2024.

Disney isn’t alone in firing large shots in the streaming wars. In October, WarnerMedia unveiled details for its HBO Max streaming service, which will start in May. Warner says the service will have 10,000 hours of content from HBO, Warner Bros., DC Entertainment, CNN, TNT, Cartoon Network, Adult Swim, and other WarnerMedia properties. It will have 50 “Max Originals” by 2021. Despite having double the content, HBO Max will cost $14.99 a month, the same current cost as standard HBO.

The low cost of streaming is all the more striking given the costs being spent on content to power the services. Cowen estimates that Netflix and Amazon will spend $15 billion and $8 billion, respectively, for content in 2019. The firm thinks that
Apple
(AAPL), which just introduced its Apple TV+ service at $4.99 a month, will spend $6 billion annually within two years.

“The pricing environment will definitely be more muted than in the past five years due to the increased competition,” says Cowen analyst John Blackledge.

Indeed, Netflix may be looking to cut the entry price in certain markets. It is already trying lower-priced mobile-only plans in India, suggesting that cheap plans may be the key to its international expansion.

The problem for Netflix is that running a streaming service continues to get more expensive. On its last earnings call, Netflix’s management acknowledged that the content cost for the hottest TV shows with multiple bidders had risen 30% over the past year. The bull case for Netflix stock has always been its potential to raise subscription prices over time. But new streaming options are sure to limit Netflix’s pricing power.

Over the past year, it was quite the roller-coaster ride for the streaming giant’s investors. Netflix’s stock price started 2019 strong, with a 40% rally through July, but it then lost all those gains in just two months after the company posted a disappointing second quarter. Netflix shares did rebound into year-end, closing up 21% for 2019, though materially lagging the major indexes. Shareholders should expect more volatility and lackluster relative returns for the next few years.

The uncertainty for the longtime market darling speaks to a new dynamic on Wall Street. Delighted consumers are no longer aligned with happy investors. As the unicorns grow up, they’ll look more like cable companies and less like nonprofits.

“If something is too good to be true, it probably is,” Moffett says.

Josh Nathan-Kazis contributed to this article.

Write to Tae Kim at tae.kim@barrons.com

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#nationalcybersecuritymonth | U.S. and China Strike Phase One Trade Agreement; Washington Steps up Efforts to Block Chinese Tech Amidst Mounting Opposition

Source: National Cyber Security – Produced By Gregory Evans

U.S. and China Announce Agreement on Phase One Trade Deal

On Dec. 13, President Trump announced that the U.S. and China had agreed to a “Phase One” trade deal. Under the agreement, the U.S. will roll back tariffs on Chinese goods in exchange for more U.S. goods purchases and structural reforms from the Chinese side. According to Trump, he will sign the deal on Jan. 15 with Chinese representatives at the White House. If the signing goes as planned, it will represent the U.S. and China’s first agreement to reduce import duties since the two countries began implementing bilateral tariffs in July 2018.

So far, most details of the agreement have not been made public. But as for U.S. commitments, Trump on Dec. 13 already canceled new 15 percent duties scheduled to hit $160 billion of Chinese exports on Dec. 15. Additionally, the Office of the U.S. Trade Representative (USTR) has confirmed that the U.S. will reduce tariffs on $120 billion of China’s exports from 15 percent to 7.5 percent. According to Chinese Vice Commerce Minister Wang Shouwen, the Trump administration will make these cuts in phases, though neither side has specified a timeline. Tariffs of 25 percent will remain, meanwhile, on $250 billion of Chinese goods.

As for China’s commitments, China has already cut tariffs on a slew of agricultural products and commodities. The USTR also reports that China will raise its imports of U.S. goods to $200 billion above 2017 levels—though China has yet to commit to import quantities for specific goods, like agricultural products. China has further pledged to heighten intellectual-property protections, end forced technology transfers and liberalize its financial services; however, the deal does not touch Chinese government subsidies to domestic firms. The deal also includes a process by which the U.S. may impose punitive tariffs if China does not adhere to its promises.

The Phase One deal has handed outsize benefits to U.S. and Chinese tech companies. Technology products (along with other consumer-retail goods) were disproportionately represented among the imports originally scheduled for new tariffs on Dec. 15. U.S. tech companies like Apple that produce in China will no longer see foreign-manufactured goods like phones and computers slapped with tariffs. And as analysts at Morgan Stanley have noted, following the deal, technology companies in China will likely experience the largest valuation increases among Chinese firms. Foreign financial firms may also be winners from the deal. Both sides have represented that, as part of the trade agreement, China will for the first time allow foreign companies to enter its financial sector without a joint venture. (China had already announced in July 2019 that it planned to abolish this joint-venture requirement.) This forthcoming change may also expand financing opportunities for firms raising funds in China.

Business groups in the U.S. have widely praised the deal as a positive step, and U.S. stocks rallied on news of the deal. Some commentators have argued that the Phase One agreement—which had remained in doubt for months—signifies a thaw in U.S.-China tensions and sanguine prospects for future agreements. Chinese negotiators are, reportedly, already attempting to work with the Trump administration in hammering out the next phase of the deal.

Still, reactions in the U.S. to the substance of Trump’s deal have been mixed. Although U.S. officials have touted the deal’s impact on the American economy, commentators have criticized it for resulting in few tangible concessions—particularly on structural reforms—that China had not previously been willing to make. And many remain skeptical that, even with this deal, the two sides will reach further trade agreements before November’s presidential election. Reports also suggest that Chinese leaders consider the deal a huge victory—and one that justifies a hardline approach to future U.S. trade talks.

State Department Steps up Efforts to Block Chinese Tech Imports, But Faces Mounting Opposition

Reporting broke in December that the State Department has, in recent months, attempted to stop American companies from purchasing Chinese technology components. The State Department’s Under Secretary for Economic Growth, Energy, and the Environment Keith Krach has led the initiative, which asks firms to sign a set of principles titled the Global Digital Trust Standard (GDTS). The GDTS would, in effect, commit firms not to buy products from Huawei and possibly other Chinese companies. Krach has reportedly approached thirteen business entities—including telecom carriers AT&T and Verizon, as well as chip manufacturers—about signing the GDTS. None appear to have signed.

The GDTS—by covering U.S. purchases, not sales—represents a more expansive attempt to influence U.S. supply chains than many past government actions against Huawei. But it also builds on recent steps in this direction by the Trump administration. On Nov. 26, the Commerce Department proposed a process for reviewing, and possibly prohibiting, information-technology acquisitions from “foreign adversar[ies].” These measures are widely considered to target Chinese companies like Huawei (although they have yet to take effect). Last month, the Federal Communications Commission (FCC) also labeled Huawei and ZTE national-security threats. This categorization bars purchases of their products through an FCC fund subsidizing rural telecom services.

The State Department’s requests, however, have met significant resistance from U.S. companies. Corporate leaders worry that signing the GDTS will commit them to anticompetitive behavior, exposing them to antitrust lawsuits. Concerned about higher costs and supply-chain disruption, businesses are also increasingly rebuffing Washington’s broader efforts to regulate tech imports, with many pushing back against the Commerce Department’s Nov. 26 purchase-review proposal. Unease about that rule change—and the review process’s complexity—led many trade associations on Dec. 6 to request a two-month extension to the rule’s comment period.

Chinese opposition to U.S. restrictions on Huawei has likewise grown more forceful, which may portend rising tensions on tech issues between the two countries. On Dec. 18, the Chinese state-owned paper China Daily published an editorial condemning U.S. efforts “to put Huawei out of business” as “dangerous” and “nothing but protectionism.” Huawei, meanwhile, has lately tried to market itself to American allies as more faithful than the U.S. to shared western values. And Huawei announced plans in December to sue the FCC for deeming it a national-security threat without due process. This legal challenge may compound U.S. firms’ fears about antitrust lawsuits should they cease importing Huawei goods.

It is not yet clear how the pushback will affect the Trump administration’s import-regulation efforts. Trump has continually ramped up restrictions against Huawei since May 2019, when he placed Huawei on a blacklist—still just partially implemented—that precludes it from purchasing U.S. components. However, there are some signs that regulators are open to tweaking such policies in response to feedback. Throughout November and December, the Commerce Department has issued export licenses to certain companies applying for exceptions from the ban against selling to Huawei.

In Other News

Reports emerged on Dec. 15 that the U.S. expelled two Chinese diplomats last September for suspected espionage after the two officials drove onto a military base in Virginia. At least one of the diplomats, U.S. officials suspect, was an undercover Chinese intelligence officer. The decision represents the first espionage-related expulsion of Chinese diplomats in over thirty years. After reports of the event broke, China denied that the embassy officials engaged in any wrongdoing and urged the U.S. “to correct its mistake.” The expulsions come amidst growing concerns among intelligence agencies worldwide that China is conducting espionage on a “mass scale.” Shortly after reports of the expulsions emerged, separate reporting indicated that a Chinese student had stolen research materials from a lab in Boston as an act of suspected biotechnology espionage.

Beijing last month reprimanded tech giants Tencent and Xiaomi for violating users’ data privacy with certain applications—including Tencent’s instant-messaging app QQ. Specifically, the government alleged that these apps violated national laws against collecting and selling personal data, such as through the use of designs that make it hard for users to delete accounts. In response to the transgressions, China’s Ministry of Industry and Information Technology (MIIT) on Dec. 19 published the names of dozens of problematic apps; it also threatened “punishment” if their problems were not addressed by end-2019. The crackdown gives force to an MIIT campaign announced last November to rein in mobile-app privacy violations, particularly among apps with high user volumes. Still, this campaign contrasts with Beijing’s recent efforts to scale up the government’s own data collection, which includes a Dec. 2 law requiring anyone registering a mobile number to undergo facial-recognition scans. Following the government’s announcement, Tencent issued a public pledge to amend its privacy statements.

On Dec. 8, the Financial Times obtained information that the Chinese government has ordered that all foreign-made hardware and software be removed from state institutions within three years. The substitutions will occur steadily through 2022—30 percent in 2020, 50 percent the next year and 20 percent the final year—and they complement similar moves by the U.S. to restrict Chinese tech imports. Analysts suspect executing the replacement will be difficult, because Chinese substitutes for some foreign products fall well below those foreign products’ levels of sophistication and developer support. China has wanted to remove foreign tech from key government operations since at least 2014, and doing so fits in with its objective of technological self-reliance under its “Made in China 2025” program. Still, the announced three-year timeframe is faster than expected, and the shift may harm some U.S. tech companies, which generate an estimated $150 billion in annual revenue from total sales to China. Some analysts expect, however, that major tech firms have anticipated and prepared for a move such as this.

Commentary

Paul Krugman argues in the New York Times that the “Phase One” trade deal achieves few of Trump’s objectives, while Max Boot contends in the Washington Post the benefits it will bring the U.S. are speculative. Writing for Foreign Policy, Peter E. Harrell predicts that the next phase of U.S.-China trade disputes will center on export and investment controls rather than tariffs. Michael Ivanovitch argues in CNBC that a Phase One deal will do little to end the U.S.-China trade deficit and forestall future trade spats.

Henry Paulson writes in the Washington Post that the U.S. needs to catch up with China on developing 5G technologies. For Project Syndicate, Ngaire Woods questions whether Huawei really poses a greater security threat to the U.S. than companies like Facebook. Yukon Huang and Jeremy Smith discuss for the Carnegie Endowment for International Peace why the U.S. and China should resolve their technology disputes in multilateral forums.

For the New York Times, Ian Johnson examines how the Chinese Communist Party is incorporating traditional Chinese values into its governing strategy, and Roger Cohen explores the origins of political unrest in Hong Kong. In the Diplomat, Remco Zwetsloot and Dahlia Peterson argue that China’s immigration practices hold it back from competing with the U.S. in tech.

For Lawfare, Christopher C. Krebs discusses how the Cybersecurity and Infrastructure Security Agency can tackle U.S. cybersecurity vulnerabilities. Richard Altieri and Benjamin Della Rocca explore potential U.S. executive and legislative responses to Xinjiang internment camps. Tom Wheeler explains how Trump administration policies have set the U.S. back in its competition with China on 5G technologies.

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#nationalcybersecuritymonth | Tech 2019: Our biggest technology stories

Source: National Cyber Security – Produced By Gregory Evans As 2019 splutters to a close, it’s time for our annual lookback at our most-read tech stories, and to ask: “What happened next?”. Facebook and its family of apps dominates this year’s list with four entries – it probably won’t be a surprise that none of […] View full post on AmIHackerProof.com

#deepweb | Jeff Bezos’ big tech bets, Technology News, ETtech

Source: National Cyber Security – Produced By Gregory Evans

Amazon Inc, the world’s largest online retailer, is being known these days as more of a technology company, and rightly so.

Technology is at the core of whatever Amazon does — from algorithms that forecast demand and place orders from brands, and robots that sort and pack items in warehouses to drones that will soon drop packages off at homes.

At its new Go Stores, for instance, advances in computer vision have made it possible to identify the people walking in and what products they pick up, helping add them to their online shopping carts.

Jeff Bezos, the founder of Amazon and the world’s richest man, is always pulling new rabbits out of his hat, like next-day or same-day shipping and cashier-less stores. Besides, there is Blue Origin, the aerospace company privately owned by Bezos, which is on a mission to make spaceflight possible for everyone.

Be that as it may, a lot more disruption aimed at reaching the common man is on the anvil.

The most far-reaching and impactful technologies being developed today are for Amazon’s own use, but some others have the potential to disrupt every sector.

The technology marvels that Amazon Web Services — the largest profit driving unit in Bezos’ stable — is working on could jolt several industries, including in India, in the same way that Amazon once disrupted retail.

“In retail, while things like the size of the catalogue, advertising and other stuff might play a role in success, at Amazon, I think success is largely technology driven,” said Chief Technology Officer Werner Vogels.

The ecommerce giant is using advances in technology to disrupt several sectors outside of retail though — medicine, banking, logistics, robotics, agriculture and much more. Interestingly, some of that work is happening in India.

Initially, the thinking was around allowing enterprises in these sectors to grow by using its cloud storage and computing capabilities.

Now, Amazon’s reach has become more nuanced and it has moved up the value chain.

For example, no longer is Amazon offering banks a place to securely store information, it is going beyond by offering tools to detect fraud, making it unnecessary for the lenders to build expensive data science teams in-house.

It is a similar story in other industries, made possible due to the massive amounts of data that Amazon collects and processes.

“We give people the software capability, so they no longer need to worry about that side of things. Most of our services are machine learning under the covers (and) that’s possible mostly because there’s so much data available for us to do that,” Vogels said.

Jeff Bezos' big tech bets
Medicine

Hospitals in the United States have to save imaging reports for years. Earlier these were stored on tapes, since doing so digitally cost millions of dollars.

The advent of cheaper cloud storage meant new scans could be saved digitally, making them accessible to doctors on demand.

Now, doctors could refer to a patient’s earlier CT scan and compare that with the new one to diagnose an ailment, said Shez Partovi, worldwide lead for healthcare, life sciences, genomics, medical devices and agri-tech at Amazon.

The power of cloud and AWS’ own capabilities in medical technology have only expanded since.

Healthcare and life sciences form rapidly scaling units of AWS, which is building a suite of tools that allow breakthroughs in medicine — from hospitals using the tools to do process modelling or operational forecasting, refining the selection of candidate drugs for trial or delivering diagnoses through computer imaging.

Developed markets will be the first to adopt such technologies, but AWS is seeing demand surge from the developing world, including India.

“Not everyone is within a mile of a radiologist or physician, so diagnostics through AI could solve for that. Further, there’s a lack of highly trained people, but when all you have to do is take an image, it requires a lot less training,” said Partovi.

Space

Jeff Bezos' big tech bets
Bezos, in his private capacity, is now looking to connect remote regions with high-speed broadband. He is building a network of over 3,000 satellites through “Project Kuiper”, which will compete with Elon Musk’s SpaceX and Airbus-backed OneWeb.

The bigger bet is in outer space though. His rocket company Blue Origin has already done commercial payloads on New Shepard, the reusable rocket that competes with SpaceX’s Falcon 9. The capsule atop the New Shepard can carry six passengers, which Bezos looks to capitalise on for space tourism, a commercial opportunity most private space agencies are looking at.

It is also building a reusable rocket – Glenn, named after John Glenn, the first American to orbit the earth — which can carry payloads of as much as 45 tonnes in low earth orbit.

Bezos’ aim, however, is to land on the Moon. His Blue Moon lander can deliver large infrastructure payloads with high accuracy to pre-position systems for future missions. The larger variant of Blue Moon has been designed to land a vehicle that will allow the United States to return to the Moon by 2024.

Robotics

Image Source: Jeff Bezos/Twitter
Image Source: Jeff Bezos/Twitter

Amazon’s take on robotics is grounds-up.

The company has been part of an open-source network that is developing ROS 2 or Robot Operating System 2, which will be commercial-grade, secure, hardened and peer-reviewed in order to make it easier for developers to build robots.

“There is an incredible amount of promise and potential in robotics, but if you look at what a robot developer has to do to get things up and running, it’s an incredible amount of work,” said Roger Barga, general manager, AWS Robotics and Autonomous Services, at Amazon Web Services.

Apart from building the software that robots will run on, AWS is also making tools that will help developers simulate robots virtually before deploying them on the ground, gather data to run analytics on the cloud and even manage a fleet of robots.

While AWS will largely build tools for developers, as capabilities such as autonomous navigation become commonplace, the company could look to build them in-house and offer them as a service to robot developers, Barga said.

With the advent of 5G technology, more of the processing capabilities of robots will be offloaded to the cloud, making them smarter and giving them real-time analytics capabilities to do a better job. For India, robot builders will be able to get into the business far more easily, having all the tools on access, overcoming the barrier of a lack of fundamental research in robotics.

Enterprise Technology

Jeff Bezos' big tech bets
AWS might be a behemoth in the cloud computing space, but cloud still makes up just 3% of all IT in the world. The rest remains on-premise. While a lot will migrate to the cloud, some will not. In order to get into the action in the on-premise market, Amazon has innovated on services that run on a customer’s data centre, offering capabilities as if the data is stored on the cloud.

With Outposts, which was announced last month, AWS infrastructure, AWS services, APIs, and tools will be able to run on a customer’s data centre.

Essentially, this will allow enterprises to run services on data housed within their own data centres, just like how they would if it had been stored on AWS.

The other big problem that AWS is looking to solve is not having its own data centres close enough to customers who require extremely low-latency computing. For this, the company has introduced a new service called Local Zones, where it deploys own hardware closer to a large population, industry, and IT centre where no AWS Region exists today.

Both these new services from AWS could be valuable in India given the lower reach of cloud computing among enterprises as well as stricter data localisation requirements.

Artificial Intelligence/Machine learning

Jeff Bezos' big tech bets
Amazon is moving up the value chain in offering services backed by artificial intelligence and machine learning to automate repetitive tasks done by human beings.

Enterprise customers will simply be able to buy into these services with minimal customisation and without a large data science and artificial intelligence team.

In December, AWS launched its Fraud Detector service that makes it easy to identify potentially fraudulent activity online, such as payment fraud and creation of fake accounts. Even large banks in India have struggled to put together teams to build machine learning models for fraud detection, but with such a service they can train their systems easily.

Code Guru is another service that uses machine learning to do code reviews and spit out application performance recommendations, giving specific recommendations to fix code. Today, this is largely done manually, with several non-technology companies struggling to build great software for themselves due to bad code.

Transcribe Medical is a service that uses Amazon’s voice technology to create accurate transcriptions from medical consultations between patients and physicians. Medical transcription as a service is a big industry in India, and India’s IT service giants hire thousands to review code. These services are expected to replace mundane manual tasks, freeing up resources for sophisticated tasks, and could lead to disruption.

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