Live Business News: Widespread Internet Outage and Colonial Pipeline’s Ransom
11 min readDaily Business Briefing
June 8, 2021, 8:56 a.m. ET
June 8, 2021, 8:56 a.m. ET
Several major websites, including those of the British government, The New York Times, CNN, The Financial Times and The Guardian, were briefly inaccessible for many users on Tuesday morning.
According to Downdetector.com, which tracks internet disruptions, sites including Etsy, Hulu, PayPal, Reddit, Twitch and Twitter also reported problems.
Many of the affected sites appeared to have been restored after a little less than an hour.
The outage was connected to Fastly, a provider of cloud computing services used by scores of companies to improve the speed and reliability of their websites. Fastly later said on its website that the issue had been identified and that a fix was being made.
Fastly works on technology known as a content delivery network, which is a highly distributed network of servers used to reduce the distance between a server and user, and increase the speed at which a website loads.
The technology is thought to improve reliability because it distributes the delivery of a website to many locations, rather than depending on a central data center. Fastly did not immediately respond to a request for comment on Tuesday.
Widespread internet outages are less common today than years ago, as Google and other major tech companies develop interconnected data centers that improve performance, but there have been a number of incidents over the last year.
In December, Google services including Gmail, Maps and YouTube crashed for about an hour. The company attributed the problem to an “authentication system outage.” And in January, Slack, the popular workplace messaging platform used by millions of people worldwide, experienced a major disruption in which users could not send messages, load channels, make calls or log in to the service.
Outages like the one on Tuesday, in which many of the affected sites belonged to news outlets, often hit businesses in the same sector because they rely on the same third-party services, said Marie Vasek, a lecturer in information security at University College London.
“One thing this outage shows, along with some of the bigger outages that we’ve seen, is that while the internet is something we’d like to think of as this very centralized thing, it really just isn’t,” Dr. Vasek said. “All of these websites really depended on this one third-party service, and the slight disruption in that caused this disproportionate effect.”
For a company pitching itself as helping improve the reliability and speed of websites, it is hard to imagine a worse turn of events than what Fastly experienced on Tuesday.
Fastly, a cloud-computing company used by businesses around the world to operate their websites, faced an outage that caused popular websites including Reddit, Twitch, Hulu and The New York Times to suddenly crash for about an hour on Tuesday. Websites in North and South America, Europe, Asia and Africa were affected, the company said.
Fastly, based in San Francisco, provides the kind of behind-the-scenes technology that most people do not know exists, but is crucial for making the internet work. The company had been enjoying some success. Its stock skyrocketed last year, benefiting from all the people who were online amid the pandemic, the same wave that helped other tech companies like Zoom before coming back down over the past several months.
Before the system crashed on Tuesday, the stock had more than doubled since the company went public in 2019. In premarket trading, its stock briefly tumbled more than 7 percent before settling at about 1.6 percent lower.
Fastly provides a technology known as a Content Delivery Network, or CDN, a highly distributed network used to reduce the distance between a server and a user, thus accelerating website loading speeds. Fastly says its network improves reliability because it distributes a website to many locations, rather than depending on a central data center.
Everything began going sideways for Fastly on Tuesday morning. At 5:58 a.m. Eastern time, the company posted on its website that it was investigating a problem with its services.
Customers that were experiencing outages included PayPal, The New York Times, The Financial Times and The Guardian. Even the British government’s main webpage was offline.
A representative for Fastly, whose own website was taken down, attributed the problem to a service configuration that set off disruptions to systems that send website content from a server to individual users.
Kentik, a network analytics company, said internet traffic volume coming from Fastly’s services fell by 75 percent.
The complexity of the internet means that short-lived outages will always exist, said Doug Madory, Kentik’s director of internet analysis. He noted that Google, Amazon and other large companies have also experienced problems that take services offline.
“There is no error-free internet, it doesn’t exist,” he said. “This is unavoidable because of the complexity.”
The Justice Department said on Monday that it had traced and seized much of the ransom that a major U.S. pipeline operator paid to a Russian hacking collective last month. The ransomware attack shut down the Colonial Pipeline for about a week, prompting fuel shortages and price spikes, until the company paid hackers more than $4 million worth of Bitcoin. But federal officials said that a new F.B.I. task force had recaptured most of the Bitcoins by, in essence, hacking the hackers.
Bitcoin transactions are anonymous but not untraceable. The hackers moved the ransom through dozens of accounts, which can be tracked on the blockchain, the public ledger of all Bitcoin transactions. Eventually, the funds landed in an account that a federal judge allowed the F.B.I. to break into. According to court documents, o
fficials got the account’s “private key,” a crucial password that gives the owner complete control over the funds inside.
Tom Robinson of the blockchain analytics company Elliptic, who has been tracking the ransom payments, wrote in a blog post that the account compromised by the authorities appeared to hold the 85 percent share of the ransom that went to the client of DarkSide, the Russian “ransomware as a service” hacking group whose software was behind the attack. The remaining 15 percent was funneled through accounts presumably controlled by DarkSide developers.
In a way, this could be good for cryptocurrency, the DealBook newsletter reports. A major criticism of crypto is that its anonymity and ease of use make it suitable for crime, like the ransomware attacks that, by some measures, strike every eight minutes. The Justice Department didn’t divulge how it had seized the bulk of the Colonial ransom, but its success shows that it can comb the blockchain and crack into at least some accounts. That’s good for the traceability of cryptocurrency used for crime — but also goes against the decentralized, privacy-focused, anti-establishment benefits that some see as crypto’s greatest assets. (There are other cryptocurrencies with features that make them harder to trace than Bitcoin.)
Federal officials encouraged companies to work with the F.B.I. when attacked, as Colonial did, to help recoup ransom payments, which are thought to run into the billions of dollars (and are legal and even tax-deductible).
U.S. stocks were expected to rise when trading begins on Tuesday, with options on the Nasdaq climbing 0.5 percent. The S&P 500 looked set to open 0.2 percent higher, and is already near a record high.
Most European stock indexes rose. The Stoxx Europe 600 climbed 0.3 percent as gains in technology and health care companies outweighed drops in the shares of energy companies.
Economic data
The eurozone economy didn’t fare as badly as initially projected at the start of this year, according to a revision of first quarter gross domestic product by the European statistics agency. The region’s economy fell 0.3 percent in the first three months of the year, compared with a previous estimate of a 0.6 percent decline, data published on Tuesday showed.
“While the euro area experienced a technical recession around the start of 2021, this upside surprise” to the first quarter economic data “is another positive development,” analysts at Barclays wrote in a note. The improvement suggests “that the euro area could be experiencing a little less scarring than we thought originally.”
Japan, too, reported an improved figure for first-quarter growth. Its economy shrank at an annual rate of 1 percent from January through March from the previous quarter, the government said Tuesday, an improvement from the initial estimate of a 1.3 contraction.
Stocks
Shares in Fastly, a San Francisco-based cloud computing company, were 1.6 percent lower in premarket trading after a performance issue made lots of major websites briefly unavailable on Tuesday morning, including The New York Times and the British government’s website.
Tesla’s sales of cars made in China jumped 29 percent in May from the month before, and now represent a third of its total sales, Reuters reported. But Tesla’s Model 3
, previously the best-selling electric vehicle in the country, have been overtaken by a cheaper electric car made by the joint venture between General Motors and SAIC Motor. Tesla’s shares rose 3 percent in premarket trading.
A new Alzheimer’s medication is likely to further inflate high U.S. health care costs even as it is poised to be a blockbuster for Biogen, its manufacturer.
The drug is expected to become one of the best-selling pharmaceutical products in the world within a few years. Billions of dollars in anticipated costs are likely to be shouldered largely by Medicare, Rebecca Robbins and Pam Belluck report for The New York Times.
The drug’s approval could drive up insurance premiums, according to health care policy experts. And it could add new out-of-pocket costs for some families that are already facing years of staggering costs for caring for loved ones with Alzheimer’s.
“This is really what keeps me up at night: A therapy of this cost is going to have enormous implications for everyone,” said Dr. Joseph Ross, a pharmaceutical policy expert at Yale who sits on a committee that advises Medicare on some coverage decisions. “And by everyone, I literally mean you, too. There’s going to be some 60- and 70-year-olds on your plan. If they start getting this treatment, you will see your premiums will go up.”
Biogen’s $56,000 price tag is higher than many Wall Street analysts had expected. The company’s shares soared 38 percent on Monday.
Even if only a small fraction of people with Alzheimer’s begin taking the drug, it will be enormously lucrative. Analysts at Cowen said on Monday that they expected the drug to reach 8 percent of Americans with mild Alzheimer’s by 2025, yielding $7 billion in revenue.
Parent PLUS loans are underwritten by the federal government and have become popular with parents who want to borrow to help pay for their children’s education. Many parents have turned to such loans as college costs have rocketed past wage growth, researchers say.
The loans account for nearly a quarter of new federal borrowing for undergraduates. They are still just 6 percent of the $1.57 trillion in current federal student debt, but they can be problematic because they allow families to borrow without regard to their ability to repay, Tara Seigel Bernard reports for The New York Times.
It’s also easier to accumulate heavier debts, because the only cap on parent PLUS loans is the total cost of attendance, minus any other aid provided. They generally carry higher interest rates than students’ loans, and come with fewer safeguards should a family’s financial situation take a turn for the worse. Only a basic credit check — looking for “adverse” events — is required to get one.
“The parent PLUS loan does not come with an attempt to understand the parents’ ability to repay,” said Rachel Fishman, deputy director of research for the higher education program at New America, a nonprofit research and policy group. “When the federal government is saying you can borrow this loan, and an institution is saying you can borrow this loan, that leads someone to believe that the federal government has done their due diligence. They have not.”
Kate Schweizer and her husband took out parent PLUS loans each academic year for their two daughters, eventually accumulating about $220,000 in debt. Today, they owe half a million dollars.
“Even though the cost of tuition seemed insane, I convinced myself that it would all make sense and pay off in the end,” Ms. Schweizer, 65, said. “I had hoped that since my husband had a solid union job, we would — we should — be able to afford this.”
The “scolds” who say they borrowed too much are right, Ms. Schweizer said. “But now what do I do?”
After Black Lives Matter protests last year and an economic crisis that disproportionately sidelined women, corporate America vowed to be more inclusive. It threw its weight behind policies like child care that would foster an equitable recovery from the pandemic, promises that seemed to represent a sea change in what until recently had been an apolitical corporate landscape.
But in corporate boardrooms, little has changed. Boards have been, and continue to be, predominantly male and white, according to a new study that will be released on Tuesday.
The study, by the Alliance for Board Diversity and the consulting firm Deloitte, found that white women gained the most number of seats, increasing their presence at Fortune 100 companies by 15 percent and at Fortune 500 companies by 21 percent. But, in total, they still represent just about a fifth of all board seats. And minority women — which includes Black, Hispanic and Asian women — represent the smallest slice of boardrooms at both Fortune 100 (around 7 percent) and Fortune 500 (around 6 percent) companies. More than half of directors newly appointed to board seats last year were white men.
The report, however, analyzed data only through last June. More recent data from the research firm Institutional Shareholder Services found that since last July, the number of Black directors on boards of S&P 500 companies surged by nearly 200 percent, representing 32 percent of all newly appointed directors, up from 11 percent in 2019. Almost half of them were new to publicly traded company board services.
That report, which didn’t break down the data by gender, attributed the shift to “the widespread racial justice protests last summer.”
Even before the protests, there was growing pressure for boardroom diversity from institutions like Goldman Sachs, BlackRock and Nasdaq, driven in large part by a growing body of evidence showing that diverse leadership correlates with better business performance. And as a result of 2018 legislation in California, almost all of the more than 600 public companies based there now have at least one female board member, according to researchers at Clemson University and the University of Arizona.
Substantial change, though, will still take time, experts said. A typical tenure of a board director is eight years, and adding more seats can be costly, with director pay often reaching hundreds of thousands of dollars.
The report from the Alliance for Board Diversity and Deloitte noted that, at the current rate of change, it would take decades for boardrooms to reach representation proportional to the demographics of the American population. Women of color, for example, make up 20 percent of the U.S. population, but it would take until 2046 for them to make up 20 percent of Fortune 100 board seats.
“The fact remains,” the authors of the report write, “progress has been painfully slow.”
