Iran’s record internet blackout is taking a heavy toll on private businesses, with owners and industry officials warning that it could lead to mass layoffs and closures.
The Islamic Republic imposed heavy restrictions on the internet after Israel and the US started their war on the country in late February, having earlier blocked online access during nationwide protests the previous month. That move helped obscure international visibility of a violent crackdown in which thousands of civilians were killed.
Now more than 70 days long, the ongoing outage represents “the longest recorded national internet shutdown in a connected society,” according to global internet monitor, Netblocks, which estimates that the restrictions have cost Iran’s economy more than $2.6 billion.
“The wave of job cuts, the economic shock and the recession that we’re now seeing is mainly because of the digital siege, not the bombs,” said Amir, the owner of a Tehran clothing business which employs between 50 to 60 people. He declined to give his full name, citing the sensitivity of the matter and concern that he may be targeted by authorities.
Iran’s leading financial newspaper, Donya-e Eqtesad, likened the damage to a “silent earthquake” that’s crippling the economy as much as the US and Israeli airstrikes. It put the cost to the Iranian economy at more then four quadrillion rials, equivalent to almost $2.5 billion according to open-market currency prices.
“There is a great impact, not just to Iran’s digital economy but also more widely, including irregular segments of the economy, independent trade and off-the-books business,” Alp Toker, the founder of Netblocks, said in an interview.
Iran has been gripped by successive economic crises since US President Donald Trump initiated a policy of severe sanctions during his first term, an attempt to force the Islamic Republic into concessions over its nuclear, foreign and domestic policies. A major collapse in the rial triggered the recent demonstrations and the subsequent near-total internet ban has played havoc with people’s lives, disrupting work and study and effectively isolating a population of 90 million people with a smartphone penetration rate of 134%.
Last week, Zahra Behrouz Azar, Iran’s vice president for women’s affairs, warned the blackout disproportionately impacts women, because they make up the majority of self-employed, small business owners who rely on ecommerce and social media platforms to sell goods and services.
A senior member of the Iranian Chamber of Commerce, Industries, Mines & Agriculture in Tehran said the ban is driving a “huge wave” of unemployment, without giving figures. Industry officials warned last month that the outage is costing Iranian businesses between $30 million to $40 million a day.
‘Severe Damage’
Amir, the clothing entrepreneur, relies on social-media platforms like Instagram for sales and marketing and he attributes the success of his brand to the platform and its huge popularity in Iran.
“The impact of the internet blackout has been very very high,” he said. “Almost 80-90% of our marketing channels have been closed. Traffic to our site has dropped significantly. Our Instagram account was our biggest marketing channel but it hasn’t been active since the January uprising.”
Sending promotional messages using the country’s cellular phone network is even proving difficult, he added, while his company’s website went down for several days after airstrikes damaged a data center housing its host server.
Iranian internet users have lived with online restrictions for years and virtual proxy networks, which are used to bypass the bans, are ubiquitous throughout the population, including among government officials. State institutions promote the use of so-called official VPNs in an effort to bypass those that are downloaded from servers outside the country.
Bans on popular social-media sites like Facebook, Twitter and YouTube have been in force since the 2009 re-election of hardline populist Mahmoud Ahmadinejad, which triggered widespread protests that were violently shut down by security forces. Restrictions on applications like WhatsApp, Instagram and Telegram have also been imposed, particularly when there’s unrest or during crises like the current war.
During the current shutdown, Iranians have only had access to a number of state websites and essential services as part of a domestic internet network known as the National Information Network, according to Filter Watch, an internet-rights research and analysis group that focuses on Iran.
Internet Pro
Last week, in response to concerns about the blackout’s impact on the economy, the government introduced Internet Pro, a state-managed scheme giving access to businesses, companies and tech professionals via so-called white sim cards and an ID verification process that critics have said undermines privacy and personal security.
Amin, who works in AI at a software company, says his work has slowed down dramatically and at times stopped altogether, with direct consequences for his personal circumstances and pay.
“This is both a financial loss for the company and ultimately affects the workforce; from salary reductions to layoffs and not being paid on time,” he said via a messaging app using a VPN. “This is not just a technical problem, it has directly turned into financial damage.”
Amin said job sectors that are eligible for Internet Pro are limited and require specific documents that mean he’s unlikely to qualify. The sim cards are also prohibitively expensive at as much as 150 million rials each, or about $100.
Iran’s restrictive internet policy has meant that people are increasingly turning to alternatives that are effectively owned by the state or licensed by the government. These include messaging apps like Bale, which provides banking services and was developed by Bank Melli — one of Iran’s largest state-run banks — and Soroush Plus, which is ultimately owned by Islamic Republic of Iran Broadcasting.
“The push toward national apps isn’t unique to Iran, but the way Iran is doing it by suppressing all alternatives, creates a space for vulnerabilities in terms of digital security,” Netblocks’ Toker said. “It creates a trust gap and has a chilling effect not just on speech but also business activity and people’s ability to thrive online.”
Iranian messaging apps do not have end-to-end encryption and operators and authorities can access user content including messages, location, location logs and history, potentially going back years, Toker said.
Earlier this week, the head of Soroush Plus, which acts as a dupe for Telegram and WhatsApp, said new users of the app surged by more 9 million in the two months to April 30, according to comments published by the semi-official Tasnim news agency.
“Many companies are moving to internal platforms like Bale because they have no choice,” Amin said. “This trend will hurt Iran’s digital economy in the long run, not help it.”
This report is auto generated from the Bloomberg news service. ThePrint holds no responsibility for its content.