>> live from pier three in san francisco, welcome to "bloomberg west" where we cover innovation, technology, and the future of business. let's get a check of the bloomberg top headlines. health-care workers have been treating ebola in west africa were welcomed to the white house by president obama. >> because of the work being done by folks like this, in the three affected countries we are already seeing a difference. >> the president said the u.s.

much continue to send workers to west africa to defeat the disease at its source. the federal reserve is ending its landmark bond purchase row gram. they say the labor market is strong enough to withstand the end of the meal is. the u.s. equity markets responded by closing down slightly. and visa, the world's largest debit and credit card company, says sales rose in the fourth quarter. profits at visa fell 10% after an 11% increase last quarter. the company announced a new $5 billion share buyback. and executive changes at twitter. dick costolo has been remaking the executive team as they try to reverse slumping user growth. today, the little blue bird of twitter announced a partnership with big blue, ibm. >> to our lead -- how big a setback is the explosion of the

rocket to the private space race? this was the scene as the unmanned rocket blew up on launch yesterday. >> and we have liftoff. the third mission to the iss. main engines at 108%. >> the orbital sciences spacecraft was headed to the international space station on a resupply mission. nasa says the astronauts in space are in no danger of running out of supplies. in the meantime, an investigation is underway to see what caused the $200 million rocket and spacecraft to blow up. with me in the studio is cory

johnson, and on skype, former astronaut and iss commander and also, colonel chris hatfield and best-selling author of "you are here, around the world in 92 minutes." how big a setback is this for nasa and orbital sciences? how big a surprise is something like this happening? >> it is a setback. this is not something that will jeopardize the program. launching rockets even though we have been sending astronauts to space for 50 years, you've got very complex pieces of machinery and anytime you have to put that much energy into the vehicle, there will be risks and mishaps like you saw yesterday. they are going to do a full investigation and find the root cause and learn lessons and apply it and that will lead to more robust rockets in the future. but as you heard, there was no injury on the ground and they

have enough margin on the iss for food, water and oxygen and things like that. the biggest impact is orbital, this has impacted their company quite a bit. they have been doing this for several decades. not a total surprise because in this industry, it is not routine. >> both of you are astronauts and you know an investigation is underway and it is early hours at this point. chris, any early ideas about what may have happened? >> leroy and i have both written -- ridden a couple of different kinds of rockets, so it's nice to have a chance to talk about it. listening to frank culbertson, who was the person talking last night and watching the video, you could see the big first stage engines work, they've got

a lift-off and then a few seconds after it was off the launch pad, something significant failed. you could see the color coming out of the back changed, as if the mixture between oxygen and fuel suddenly changed. then there was an instantaneous loss of power. frank talked about this as well -- you look like something might have been coming up the side of the base of the rocket which might indicate the engine itself was coming apart. it's too soon to be conclusive, but as leroy stressed, the station is ok, the six people in orbit are ok, and no one was hurt. maybe it demonstrates the importance of the fact that it is an international space station. not counting on just one company. there was a russian launch this morning with resupply and an american launch in december with resupply, so it's good to have a partnership when you are doing something as complicated and dangerous as flying in space.

>> it's my understanding the engines used were literally made by russians in the 1960's. this is something elon musk pointed out -- it sounds like the punchline to a joke, he was saying, but these engines were literally made by the russians in the 1960's and mothballed for a while until orbital sciences found out about them. is this the wrong technology to be using and did we see the dramatic failure? >> you are correct. the original nk-33 engines were made by russians and ukrainians many years ago and were brought over and aerojet refurbished them and supplied them to orbital and other companies. i should mention other launch vehicles use russian kerosene engines because that was the deal made with congress way back when we started working with the russians in the mid-1990's and the united states was concerned

about russian engineers and scientists going to work for countries we did not want them to work for. we found ways to engage those engineers and one way was to buy kerosene engines from them because we were facing those out -- we were phasing those out of production and doing more advanced cryogenic engines. for a lot of technical engines, you want to use kerosene is a first stage because a generates a lot of thrust. you cannot single out orbital for using russian engines. pretty much the only modern built kerosene engine in the united states are being done by spacex now. is it right to do that? i think it makes sense. the russians have a lot of experience building kerosene engines. you could bring up the issue about the possible impact of the age of these engines used by other manufacturers.

age is not an issue, but i want to stress that these engines -- the investigation will tell if that was a factor. >> i want to talk about spacex and elon musk. chris, what does this mean for the private space community? people like richard branson and virgin galactic? >> the real question of whether something is just another commercial space flight or private is who is the customer? in this case, the u.s. government was the main customer, so it is commercial. they are paid for by the government. the only one on your list really

trying to do something different is richard branson. he's trying to change the customer from government to being an individual. he still has not flown one being passenger yet. whether he's got the right share of the market and a viable business model remains to be seen, but he's feeling one who's brave enough to truly bank his business on private spaceflight. elon musk is working, trying to use government contracts to fund the research to come up with technology that might someday lead to private spaceflight. it is a pretty interesting time in history to see how this is going and we will learn a lot from the accident that happened yesterday. >> we will follow the investigation as it plays out. chris hadfield and leroy, former iss commanders. thank you. washington, d.c., just passed a law that says uber could serve as a model for the rest of the country. we will speak to their policy chief coming up. ♪ >> i'm emily chang and this is

"bloomberg west." the washington, d.c., council just passed a bill that uber hopes will pave the way that will legalize and regulate ridesharing apps. it's called the vehicle for hire innovation act and has been heavily opposed by the taxi union to say it does not create a level playing field. for more, i'm joined by david plouffe, senior vice president of policy and strategy for uber. you've only been on the job for a couple of weeks. how's it going? >> it's very exciting. it's growing by leaps and bounds

and there's a great group of people who are trying to improve cities and make the company grow. >> a lot of regulatory challenges ahead of you which you are especially skilled at working out. tell me about what happened in d.c. and why this is such a watershed moment. >> i think it's the 13th municipality or state in the last month -- california, colorado, oklahoma city, nashville -- there is some momentum here. washington was a place where there's a lot of fights throughout all of this. we ended up partnering with people in the city council, a local councilwoman there in particular, to really create a standard. a lot of the debate is how do you fit uber and these other ridesharing companies into a framework that's 50 or 60 years old? they looked at it anew and

created a new standard. the million dollars of insurance, state background and federal background checks on the drivers, so this is a model where we will build the momentum we have seen. many states and cities around the world are looking for a pathway forward. hassle-free transportation, cutting down on dui and safety elements here. i think you will see washington be something a lot of cities are looking forward to. >> what about new york? it's a challenging market and it's not the only one. how are you marketing your strategies there and run the world? >> we work closely with the taxi and limousine commission to provide a pathway forward as one of our fastest growing cities. london is a great example. it's a taxicab city and we came in there and added to that.

what a lot of people have to realize in san francisco and london is that this is not an either/or. it grows the transportation pipeline and increases the pleasing rideshare services. it helps with underserved neighborhoods. in cities where there's a public transportation grid, like a metrorail system, a lot of businesses not on that system suffer. uber expands the ability for people to travel in different parts of the city. paris is one of our fastest growing cities. we just entered las vegas and there's a huge pent-up demand for people just pushing a button and getting a ride. we all live our lives in a way where we want information right away. we want to make a reservation for an airline right away. >> in the interest of transparency, i'm a huge uber

customer and i've talked to many drivers who are happy but we see some uber drivers protesting in many parts of the country. we had a producer in philadelphia who says they are not making much money, especially with the launch of uberx and free rides that have been offered in philadelphia. how do you keep drivers happy and how do you respond to people saying they are not making a living wage? >> you have to look at the vast majority of drivers. we are adding thousands of drivers every week, so i think you've got people who are driving full-time, who are making a good living and you have a lot of people driving 10 or 15 hours a week. they like complete flexibility whether you are full-time or part-time. you don't owe anybody money on the medallion, you just press a button, then drive. if you want drive four hours tomorrow, you do that.

flexibility is key, but what you are seeing is as more and more people use uber, the more trips our drivers can make per hour. many are sole providers, some of them have a fleet of cars. it is working well for the cities and for the drivers and i think it's something that is only going to grow as more people get exposed. even in washington and new york, there are still people learning about the business. >> who comes first at uber, customers or drivers? >> the drivers are our customers. it doesn't work without skilled drivers who are passionate about what they are doing. they are the bedrock of the company. one of the great things is the drivers and riders have relationships and talk all the times about their lives in the city.

it's a strong relationship and when we want to foster and help grow. >> thank you so much for joining us today. always great to hear from you guys. forget its $19 billion -- now $22 billion purchase of whatsapp. facebook is planning to spend more on the long term. what could be facebook's next target? ♪ >> welcome back to

"bloomberg west." facebook shares are tumbling today. they say spending will increase 50% to 60% next year and user growth is slowing. they reported that their user base grew to 1.35 billion, up year-over-year, but down over

the 3% growth it had in the prior quarter. cory johnson is with me now to discuss. facebook has always focused on user growth before it focused on monetization. you barely see any ads on instagram. >> they might focus on it, but they are not getting into it the way they used to. they are reaching the extent to the law of large numbers where there just are not that many users who are not of facebook except places where they can be like china or africa where there is a distribution issue. >> let's talk about whatsapp. i talked to sheryl sandberg and she emphasized this is how we do it -- we're not planning on monetizing that anytime soon and then you heard zuckerberg say we want to get to a billion users before we even try to touch it. >> you came by my desk when i was freaking out when the whatsapp financial filing came out.

facebook filed financial numbers for them and we can see how bad a business model it is all stop they have a lot of users and want to find a way to monetize it. this business was losing so much money. they lost $300 million in the first half of this year. it's not just expensive in terms of what it cost, whatsapp, it's expensive because of how much it lost and is presumably continuing to lose. >> what about oculus? what did mark zuckerberg say about oculus? he said don't expect anything anytime soon. >> he said just wait, you will see. the facebook business is so good they are able to run it with taking a lot of risk and spending money in projects that might not work out. that's the thing that has investors concerned. they see the r&d spending by

facebook, which is an amazing thing. it's one thing to buy oculus which is a small amount of money compared to whatsapp, which was a ridiculous amount of money, but the r&d spending less quarter was just huge. beyond r&d, it's the percentage of revenue. the r&d spending, the revenues were instantly devoted to r&d's spending and this is almost as big as it has ever been. they did it right before the ipo before they became a public company. >> cory johnson, our editor at large. we are seeing not just facebook but google and amazon making these big moonshot bets. it will be interesting to see how they lay out. germany's rocket internet is bringing one of its copycats to the united states. we will hear from one of the

companies startups launching in chicago today. ♪ >> time for on the markets. let's get you caught up on where stocks traded today. the federal reserve confirmed it would end quantitative easing and as a result, the markets extended those losses. you saw the dollar with fresh highs against the euro and the yen. ♪ >> this is "bloomberg west,"

where we focus on innovation, technology, and the future of business. rocket internet is bringing another tech copycat to the united states. space ways is launching in chicago today. the company allows users to order a storage box to their home, pack the box, and have it picked up and delivered to a storage facilities. it launched in london with the help of rocket internet this july, so why is the company turning its focus to the u.s. market? the managing director of space ways joins us now from chicago. explain what you do.

as i understand it it's like drop box for physical storage. >> indeed. people go online to our website, tell us how money items they want to store, how many boxes they need to store items like books, documents, and clothing, and then we deliver the boxes for free to their doorstep and they pack the boxes and we pick them up once again for free and people pay a monthly storage fee. when they want their items back, they get returned within 24 hours. >> what was the inspiration here? a lot of u.s. start-ups do similar things. i know all about this market now that i have done some research but there is some competition out there. >> there are plenty of companies around the world doing this not only in the u.s.

the reason we are pursuing the business model is we are well-equipped to do this. it seemed like a straightforward business model. you need a warehouse, need drivers to pick up items, boxes. but if you look at more closely, it's about having a really solid operations and never losing an item people store with you. with the backing of rocket internet, we felt like we had the capacity, systems, and processes in place to build a great company. that's why we decided to launch spaceways and expand to the u.s. because it is an amazing market in that regard. the u.s. market is $24 billion and hasn't changed much over the last couple of years. we just thought it was time to bring it to market. >> you spent some time at rocket before launching this and this

company has had remarkable success around the world but has been criticized for simply copying other people's ideas, copying companies in the united states. how do you respond to that? >> i can speak for spaceways. the model is not new. the first company we saw doing something like that was started five years ago. they launched in chicago and now there are a bunch of other companies doing the same thing. we felt the time was right to pursue this model. the first thing, the first step of building a great company is having this idea. and as i said, a bunch of companies are pursuing this around the world. it was more like movement and we felt well-equipped to have a really strong company that could do extremely well globally. >> there are a couple of other

rocket startups that have launched in the united states. are we going to see more coming? >> i'm really focused on spaceways right now so i cannot tell you about other companies and their expansion plans. you start the company and then you think about where this makes the most sense. there is increasing demand for storage space, then we went to paris because we saw the same thing. chicago because consumers were looking for this kind of business model. >> what makes you think you can do it better than the competition that is out there? >> i think it is about

operations. it's not really straightforward. you have to do extremely well on the operations. we can't lose your boxes. if a pair of shoes gets lost along the way, you just have to get another pair of shoes. but if one of our boxes get lost, we can't let that happen. it could be a photo album and you have to be extremely strong setting up proper operations and knowing what you are doing. with rocket's experience in warehousing and transportation, we were well-equipped to make this model happen and provide higher service levels than other players out there. >> the managing director of spaceways. we will keep an eye on you guys. from startups to ipo's, twitter and box are just two companies to take advantage of the jobs

act. it has been more than a year since the law which gives startups more time to comply with government regulations went into effect. has it increased the number of companies in the ipo pipeline? >> quarterback gave a report to congress that was instrumental in passing the jobs act. what has the effect been? it has been out there for more than a year. >> as measured by the number of ipos that have come out since the jobs act and the smaller deals, which is what we were trying to get done, to access the ipo market. i think the length of the ipo being open on a number of different metrics has been an unqualified success.

>> to the last one first. the length of the ipo window. the market has been straight up and to the right for the last five years or so. >> we've seen the ipo window close during more robust markets. the volatility index has been extremely low up until a month ago. it spiked above 20 for the first time. we've seen better pricing dynamics and that's helped by confidential filings which were part of the jobs act and test the waters marketing which allowed companies to talk to investors before they go out on their formal roadshow and get a sense of what their value is. we don't see as many deals withdrawn and we see better pricing dynamics.

if you look at jobs act ipos, 67% of those price within or above the range since the jobs act as opposed to 58%. >> is it any better of the companies are going public? >> the companies are pretty good. we have not seen a rush to the market as a substandard company. you see generally really good performance. 2013 was great. >> particularly among the smaller companies. i pulled out some bloomberg numbers and they show the trend that the smaller companies getting funding, the companies raising between $100 million and $500 million are not seeing an increase in deals. >> i looked at those numbers before i came in and over the last year, we did year to date 130 ipos in the u.s. market, $100 million and below.

in 2012, when the jobs that past, we did 61 ipos in that size category. >> the thing that concerns me is the shorter time for investors to look at a deal before they go out could lead to companies who are not doing. a company called vauxhall jet raise money to build a factory in detroit. they said the factory was up and running in september and i went to detroit, walked in the factory, and it was totally empty. there was nothing going on there. i was worried there would be a lot of companies like this. have we seen that? >> i don't think we have seen that. that's borne out in the performance overall of ipos. you will always have a couple deals that don't do well or have issues, but overall, performance has been good and you have to publicly file three weeks before you start your roadshow.

then you've got five weeks of your information being out there and being scrutinized. i don't think that is a disadvantage to investors. >> thank you very much. >> the federal trade commission has accused at&t of deceiving millions of smartphone phone customers. we will tell you why and what it means for wireless carriers when "bloomberg west" returns. ♪ >> welcome back.

at&t has been sued by the federal trade commission over allegations of data throttling

which started in 2011. the ftc says at&t deceived at least 3.5 million smartphone customers who had unlimited data plans by drastically reducing their transmission speeds and then failing to notify them about going over their data limits. how big a problem is this for at&t and is this a common practice in the wireless business? joining me is cory johnson and the vice president of public knowledge, think tank for emerging technology issues. what is data throttling? what are they accusing at&t of doing? >> data throttling is when a wireless carrier or any broadband carrier decides to slow down the transmission of the internet to its consumers. what we are concerned about is the transparency of those practices.

>> it's an upsetting thing that these people would be paying for a service from at&t, one of the biggest companies in the world, offering this service, and then not giving it to them and not telling them they were getting ripped off. >> the key part of the suit is at&t and other carriers offer "unlimited data plans." the reason the ftc is suing is because they say at&t has not lived up to its billing that this is a truly unlimited plan. there have been complaints from consumers that at&t has throttled or slowed down its data service by as much as 90% when they have to deal with congestion. so when a company makes the promise that something is unlimited, the ftc will hold them to that promise.

>> it's like going to a buffet and all they offer is salt. why are they doing this? >> they will talk about the importance of needing to manage the network. there are peak times when networks may get congested. the way in which companies choose to manage the network is communicated to consumers. there's actually a transparency rule that is still in place. my organization has complained in august about at&t and other carriers about whether they are being transparent about their unlimited data plan. this is not the only case and it is important that federal regulators continue to keep a close watch over these companies and whether they are truly providing what they offer.

>> i would be infuriated. >> are you an at&t user? >> no. >> i am. >> we will be back with more in just a moment. you can watch us streaming on your phone, your tablet, bloomberg, and amazon fire tv. ♪ >> i'm emily chang and this is

"bloomberg west." ebay and hp had decided to stay with their companies in two. what flexibility comes from taking a company off wall street? cory, why do it? >> for a lot of companies, the changes they have to make in the public markets are not available to them. they disappoint shareholders and the stock plummets. i sat down to see what's going on, and started by asking how the business is different than what we saw last time it was

public. >> look at your show. every day you are talking about the new digital economy and the unbelievable changes happening at the edge with apple pay and these new exciting technologies. on the back end, you've got a 10 x increase in scale. that's making the i.t. department in every industry reinvent itself in a fast rate and that's what we are focused on. >> we are seeing ibm, hewlett-packard and oracle in there. in spite of spending billions and acquisitions, they see falling or flat sales across those companies. >> the cloud is hurting these big ironmakers and software is redefining how we do our jobs and making them more efficient. if you can find the seam where you can help people come out

faster, you can wait it out. the companies with big iron dependencies are suffering. >> from a financial perspective, we see so much concern for companies about when and how they are going to go public, you guys have been through an interesting road to be private at the time there's this fantastic transition. i wonder if you have been able to make different types of choices? >> it's difficult for me to imagine how we could have migrated the last year as a public company because the 90-day cycle would not work. our industry is going through a revolution with the digital innovation we are talking about and that forces you to invest aggressively. our new owners not only agreed with that but they let us spend 120 million dollars more than we

did last year on research and development. >> if i looked at the income statement, they would say the same thing. oracle is a classic example. they are going to see the shift in the near-term. give me an example of the decision you can make. >> they can make the decisions but the consequences are different. if you are in a corporation, you're talking with employees and telling them to remain calm. it's more difficult to hire people, but in our case it's the exact opposite. we can hire people from salesforce and great companies because we tell them we are going to invest right now and not worried about a 90-day cycle. you are able to hire people and make investments and shift big dollar amounts. we just moved a large amount of money.

that kind of thing has consequences in public. >> you guys have a chief customer officer, this notion of creating something whether they know if they need it or not. >> all of this innovation happening around social and mobile is about thinking how the customers going to use your products. we need somebody who all day long all they think about is how are the customers going to use the technology? how do they want it implemented and service? anytime we find something that is out of sync with the way customers want to operate, his job is to put it on the hit list that we go after it aggressively. >> the ceos of the two people he doesn't listen to is the customers and the salespeople because their notion of what is possible is incremental.

it sounds like you take that approach, where you are trying to create this thing they don't know they want. >> it is the henry ford quote -- if i was listening to my customers, i would have made a faster horse. you have to look past the near-term. you have people who look at what they need in the next version but you have to look two or three versions out and look two years out and think about how is somebody going to use this technology differently? we are the largest helpdesk company in the world, yet we just came out with technology that will make the need for opening trouble tickets go away entirely. people don't want to use that. we are enabling that and that is something customers would not necessarily ask for but you know the market is going to demand we move toward that. >> all i can say is go giants. that's it for this edition of "bloomberg west." we will see you later.

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