>> from pier 3 in san francisco, welcome to the best of "bloomberg west," where we focus on innovation, technology and the future of business. i'm cory johnson. every weekend we bring you the "best of west," the top interviews with the power players in global technology and media companies that are reshaping our world. after months of speculation, nearly 4 million public comment f.c.c. chairman has finally outlined his net neutrality program. having an open internet and

regulating the internet as you till fifment he writes i'm submitting to my colleagues the strongest open internet protections ever proposed by the f.c.c. it will ban paid prioritizeation and it will bright line rules be ban paid prioritizeation of mobile broad band. >> not a lot of big surprising news, but i must say that i think it is a disappointing move. it is largely an overblown

response into a narrow question of what sort of legal authority that at the need to police the open internet. i am disappointed. >> you are disappointed because they are trying to change --what disappoints you about it? >> title two, there are all sorts of legal entities we crossed into. a big part of the open question is how the fcc will do the forbearance process? there are provisions of title two that just about everyone agrees are outdated and unnecessary. >> give me one example. they were written when people were using homing pid johns to communicate. -- pigeons to communicate. what is outdated about this? >> there are a number of things. the loop on bundling and those sorts of provisions that were put in place in the 96 telecom act for what were then regional monopoly telephone providers. just about everyone agrees those sorts of regulations are not appropriate in the broadband market today. how exactly the fcc goes about

forebearing is a big question, and there is tension in justifying the need or title two, apart from whether it is justified at all. there is tension between the forbearance findings and the change in classification to a telecommunications service. >> chris lewis, just about everyone agrees that it will not work. are you just about everyone? >> no, i definitely do not agree with that. what i think everyone can agree on is that neutrality protections are important. the question before the fcc is how you put those into action. we support chairman wheeler's decision to use title two, because in 2010, the fcc tried to enact net neutrality rules and have it struck down by the court. in that decision, the court basically said the rules were

too close to title two type or commentary rules. by chairman wheeler putting out a proposal that uses title two, and make them more likely they will pass court muster. we think it is a historic decision and are very supportive of him moving forward. >> i get the idea that the fcc needs title two. they can't just make laws. do you think that is the best way to make sure things that go across the cable modem are unhindered by the cable company itself? chris? >> yes, we think it is the strongest rules the fcc has at their disposal. congress could always update the telecommunications act. there is talk of doing that. that process takes time. consumers have been without net neutrality protections for over a year now.

we are very supportive of them moving forward now, and then if congress chooses to clarify things, we would hope they would do it in a way that would protect the net neutrality principles and empowers the fcc to do it job as a cop on the beat for internet service providers. >> it sounds like this is the best tool they have got. tell me one negative impact that could come in this room is what it sounds and is implemented. >> i think the biggest negative impact is it has a lot of litigation risk. it will likely the over on appeal. i do not think it is likely to pick. -- stick. it has always been fundamentally a fight over the jurisdiction the fcc has to police these networks. there is not a lot of strong disagreement over what net neutrality itself should look like, but the fcc jurisdiction. i think we should go to congress and get it clarified once and

get this fight settled once and for all. >> doug brake and chris lewis, what they are thinking in washington we now know, but what does silicon valley have to say about this? here is michael beckerman. what he is done here by reclassifying service providers as common carriers and title two regulations is the big >> change. no throttling of legal content. wireless networks would be covered. at the same time says it would be like touch regulation. they would not have tarri there wouldf still bes investment. >> what if this make up fantasy cable company aquires lyft and slows down all of the uber requests and the uber business

disappears and slivet the only thing left for your ride? >> under net neutrality that would be prevented and competition is what is allowed the internet to flourish. you have companies like lyft and uber. the isp should not decide who wins and who loses. >> netflix shares sold off with this news. i wonder if it is because people say these guys have open themselves up to more competition. why do the big companies support the open internet when they are the ones who have the advantage because they can build their own networks like google has or apple and they can do other things like pay for it as netflix has. >> all of our member companies have thrived and we look at what makes the internet great. it is the idea of free enterprise and let the users

decide, and frankly, our companies are much closer than any other company or industry you are looking at. they care about their users and let them decide who will win and who will lose in their happy to have that fight. >> is it a cost concern as well? netflix has spent tens of millions to pay to get their content faster to customers, faster than their competitors. >> i don't think so. i think it is just an issue of fairness, and you do not want to have a chokepoint anywhere in the network. when you have your customers you want to reach your customers and have them reach you and not have an isp or some other middlemen in the middle taking a toll or blocking or degrading content >> michael beckerman, the c.e.o. to have tech lobbying group, the internet association. thet work uses loopholes to pay less than the billions it did on some valuable air ways. that debate is next.

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>> this is best of "bloomberg west." i'm cory johnson. well the largest spectrum auction in u.s. history $45 billion in bids. one big winner dish network trailing only at&t this the auction. here is the controversy. this is a big business with $14 billion in an yule sales but in this auction it used loop holes to get a small business price break in the auction. they claimed $3 billion in discounts. a commissioner is livid and a program director for the commeedia group common cause

also joins us for this discussion. >> the results of the auction were amazing. they showed once again that consumers want and need better wireless connectivity. it's too early to say exactly what to make of the winning bidder. what matters is whether and how they put to use the spectrum licenses they have won. >> it should be noted that dish has a lot of spectrum they have won before and not put to use. when you look at their use of this loophole to qualify as a small business partnering with entities but owning 85% of these companies, could you see this coming? >> i certainly did not see it coming to this extent. i don't think anybody else did either. i think that is part of what is generating such outrage. it is in front of the fcc's integrity. dish claiming $3 billion worth of discounts makes a mockery of the entire program.

>> yeah, what was the purpose of that sp -- that program? what was it intended to do? >> originally congress directed the fcc to set up a program to help small entrepreneurs get a foothold in the wireless industry, and engage in what is called facilities-based competition, using spectrum that they get at auction, building a network, and providing end user service. but what has happened now is the fcc has loosened the rules over the years so much that we get a situation in which the big, sophisticated corporate interest can gain the system and use these shell corporations in order to get multibillion-dollar discounts. i think that is wrong, as a commissioner and taxpayer. >> the notion was to help small businesses to help competition to help women and minorities. dish is none of that. >> our policy should be facilitating market entry, and we are always glad to see new small business, new, diverse

female owned firms entering the market. i'm glad to hear more about facilities-based competition. there are all sorts of steps the fcc can be taking to improve that, including by relaxing or preempting bad legislation in the states, preempts communities' ability to create networks. they could put a stop to the comcast-time warner merger. there's lots on the menu for the commission to do to really ensure that we have marketplace full of options with lots of entrepreneurship. >> that -- those issues, todd what is common cause's take on dish using a small business loophole to win the auction? >> to be clear, we support using designated entities to enter the marketplace and receive bidding dicounts. what matters is from our perspective, on the back end what is a clear timeline for them using these licenses and entering the market? >> i want to read from the

letter he wrote to the rest of the fcc. i think it is really powerful. you wrote, quote, we must change course, and soon, by closing loopholes that allow big business is to rip off the american people to the tune of billions of dollars. the american people should be outraged about this. i certainly am. what can you do about this now that the horse is already out the barn door? >> it is incumbent on a fcc to do a full and thorough investigation into these particular applications. the integrity of the designated entity program is at stake. if it turns out that the scandal is what is legal under our rules, it is incumbent upon the agency to reform the rules to close these loopholes. i would note that i dissented last year from a number of proposals to loosen the rules even further. i predicted almost exactly this result, corporate interests would find ways to arbitrage the system and game it at the

expense of the american taxpayer. i turned out to be right. >> why do you think the other fcc commissioners went for this? they support some of the same goals. is this about maximizing revenue and letting the biggest bidders win in the interests of competitive entrants women and minorities be damned? >> you would need to speak to them. we seem to share the same goals of having a small business program that works. the question is, are you willing to take on the efforts to reform the program to ensure that small businesses benefit? that is where we have seen division. i hope this current episode will inspire the fcc to take action to ensure that those who claim the bidding credits are the women and minorities who historically have not had a chance to break into this marketplace. those are the people we should be looking out for. not the fortune 500 corporations that can go to wall street to raise capital for these auction

on their own. >> todd, if there's one rule change that has to be made before the next auction, what do you think that should be? todd? >> the best steps they fcc could take for the next auction are ensuring set aside reserve spectrum for the smaller competitors to ensure we don't have yet another situation where all of the scarce public resource end it is up concentrated in the hands of the big two, verizon and at&t. let's make sure they're going to smaller players, entrance and upstarts. >> from self-driving cars to the rise of ride-sharing companies, technology is transforming transportation. what will transtransportation look like in years? i'm going to talk to anthony fox.

>> i'm cory johnson. this is the best of westmoreland. here are some stories that made annoyance technology over the past week. facing life behind bars. he was convicted on all seven charges. prosecutors said he ran a $1.2 billion online empire selling illicit good. microsoft co-founder bill donated stock that went to an unknown entity. he has cut it to 3%. it will fight is on between google and ube even. uber has partnered with carnegie mellon to work with self-driving

cars. persons familiar with the model said google is working on its ride sharing service. speaking of google, i went to their headquarters in mountain view california, to check out the latest self-driving car prototype and talk about the potential of the twoling anthony foxx. they talked about the future of transportation in america what happened the next 2030 years might look like. take a listen. >> the problem we're having with transportation is we're looking at what is in front of us rather than what is way in front of us, because what is way in front of us will be more impactful in terms of defining our future if we are not careful, so we would like to be in the position of defining our future rather than letting it defined by things that will make it worse for us. >> so what is the biggest, sort of most difficult trend you feel like the current planning is

not addressing? >> i would say there are two things. one is that their funding approach is not budgeting towards outcomes. if we want to have travel times reduced over the next 30 years, it is going to mean investing at a much higher level than we are doing today. across the board, not just the federal government, but state and local governments. secondly, on policy, it is not just a question of having more money. it is also how that money is being spent, so looking at the mix of transportation needs that we have as a country, between highways and transit and rail, both passenger and freight, we have got some significant challenges at levels about what will optimize us in the next 30 years read we will have to break down some silos to do it. >> fundamental changes. you have got millennials not consuming or owning as many cars, doing things like uber using public transit, moving to urban areas, and then the growth

in urban areas and the urbanizeation in america at a level we have not seen in 150 years. >> trs really interesting to see the growth of metro areas. these are areas that you know, usually there is a city in the core and a suburban ring around the core, and there is a ring around that, and that is what we are referring to. >> people might be thinking of preindustrial areas like new york city, boston, but you are talking about places like charlotte and albuquerque. >> yes, a wider swath, and it is moving west into the areas like you are talking about, so it is not just the big cities. it is also the medium-sized cities across the country. >> so are self driving cars a -- an answer to this or are they just another problem dealing with the issues that are already out there?

>> there are a lot of pros with the self driving cars, on the safety side with accidents and for consumers, and the challenge we're going to have is developing regulatory systems and processes and policies that are more adaptive and flexible that can actually take a brand-new technology and be able to assess it correctly and help the manufacturing get into the marketplace. >> we interview the coast of uber and lyft on our show quite a bit, and they talk about winning to approach the regulatory hurdles in their businesses at the local level. they can overcome the local level, but they cannot do it at the federal level. what are the biggest federal issues that companies like uber and left have to conquer? >> they are in a different category, because many of the regulatory systems that basically govern taxi companies where there are most of the

conflicts are at the state and local level. there is very little that the federal government has there. but i do think the federal government has an interest in, for example ensuring that the service that is being done by, for example, somebody who is driving a uber car, we do have an interest in making sure that that person has been background checked and things like that so that folks can be assured that they are going to get where they are going. >> so are you thinking that if the local authorities do not take care of this, the federal government might have to? >> i'm saying that we have -- i believe we have a role to play in urging states towards that. i'm not necessarily suggesting that we should pass laws that do that at the federal level, but i do think that is an area that state and local areas are going to have to address. >> while you were talking about uber and lyft, bloomberg was breaking a story that google is

about to get into the business of competing with uber. do you start to realize or do you think about the department of transportation having to think about things like privacy when it cosms to these -- comes to these things whether it is drone or cars or whatever. >> it is a huge issue, particularly with vehicles with connective technology both enhances the experience but also chris vulnerabilities that we didn't have with the conventional automobile. we're going to have to address that one the industry. a lot of these whether it is air, rail automobile, we're finding that the industry will voluntarily sit across the table with each other and us to help figure out how the deal with some of these privacy concerns and security concerns. >> that was u.s. transportation secretary anthony foxx. maybe the biggest hack ever at a health care company.

what should companies be doing to protect themselves if even anthem can't be safe? we're going to talk about that next. ♪

>> you're watching the best of "bloomberg west" where we focus on ino vision and technology. anthem, the second largest health ininsurer in the u.s. said it was hacked and information on ten s of millions of commerce, employee, were taken. how big a deal is this breach in the wake of big attacks? i spoke with cybersecurity reporter jordan robinson and michael kaiser.

>> i think this continues to happen for several reasons. as we have seen like this breach and some of the retail breaches these people are sitting on huge amounts of data. millions and millions of people. >> if you can't -- look, complexity is going to be there. things not going to get less complex as the data that governed us all. what do you do? do you have to not worry about the hack but worry about what they do with the information? >> credit cards this is what people have become used to having stolen.

that impact on consumers have been very little. here we see a rich data set about individuals that can be used by criminals to create false identities to, conduct identity theft and do other kind of things. in the cybercrime realm, they can sell these records on the black market and people will try to monetize them in different kinds of ways of course. that is how it will be distributed. it will be sold in bulk. >> when north korea attacked sony pictures, they wanted to stop the release of a movie. they failed at that. or perhaps they got what they wanted. what did these hackers want? >> one thing is clear, we know they wanted a lot of information. we do not know exactly what they wanted to do with it. but we do know they wanted a lot

of it and they wanted to keep their options open. this is pretty standard for hacking attacks. if you have access to a company that is not segmented, we were a group of individuals or small group of individuals has access to 80 million social security numbers, you will take all of it and sort it out later. some of the tools indicate that these were possibly state-sponsored attackers, you know, sophisticated attackers. but we don't know what they wanted to do with the data. we just know they wanted a lot of it. >> the line between state-sponsored and criminal is hard to distinguish. right? >> yeah, and there is a very interesting dynamic at play where we have seen cases where nationstate attackers, espionage attackers, will be inside a system and see a bunch of data that they can sell on the criminal underground and they will just takes it.

is that a nationstate attack? these were individuals that tried to take a little off the top? it's hard to tell without intercept and nsa intelligence whatever, what's the motivation of these attackers will ultimately be. >> jordan robertson and michael kaiser. i also spoke a connecticut attorney general who sent an angry letter to anthem demanding answers about that hack. take a listen. >> spsit seems that hackers are always one step ahead. i think whole industries, for example, the credit card industry needs to have some kind of shakeout where we shift from magnetic bands to embedded chips, like they do in europe. i think we have reached tipping point on these dats breaches. >> they are looking into the number of breaches that have happened from target to home depot and beyond.

up next, 3-d printers can make houses these days. are they until the future? we have the numbers behind this industry next. ♪

>> i'm cory johnson. this is the best of "bloomberg west." 3-d printers, the next big thing? they are going to write down $100 of their recently acquired business. they paid $300 million for it just two years ago. now they are growing at 7% or that's what stratasys says about the business at least. so what happened to the future of a 3-d printed world?

i talked with cathie wood. >> makerbot was more about a segmentation strategy focusing on the consumer end. but that's not the main story. makerbol will probably be less than 10% of the revenues. the real story here is industrial. as these stocks have been going down for the past year, but we have witnesses analysts and researchers have been raising their estimates of industrial 3-d printing for the next three, to five, to 10 years. they have gone from $8 billion to $10 billion. we have mckenzie out there who thinks in 10 years to 20 years this will be a $180 billion to $500 billion industry. stratasys is the leader in this space, we think it's a visionary, and we think it has a long way to go. >> so you have some predictions

that things are going to be great some day in the future and you have results that say it's not now. i wonder with so much innovation from somebody startup companies -- make about was not a stratasys company. why wouldn't that happened at some other company other than stratasys? what makes it think it's going to be the company leading that business, a falling business right now? >> i would like to emphasize -- it is in the fourth quarter, if you take out makerbot, the service bureaus, their revenue growth was 29%. that is organic revenue growth. that's a pretty good growth rate for the part of the business we think really matters going forward. i think they are already innovating, and one of the reasons the stock is down is because they are investing against a bigger opportunity than they had expected was going to happen. we are happy they are doing that.

most other analysts are not happy they are doing that. we invested in most companies where they have chosen not to invest and we have done it to some success. >> when i look at these businesses, i want to look at them for technological aspects. i look at 3-d systems acquiring the service bureaus to who they sell products. i wonder if the companies didn't add it to the hype around 3-d printing through legal, but accounting decisions that made the businesses look like they were growing faster than they actually are. >> i think in the case of 3-d systems, in this last quarter, people were worried about inventory issues, which smack of

something you mentioned. in fact, the inventory at makerbot fell because of some manufacturing issues. i have watched these management teams come together, and i think they have a conservative management team, as a matter of fact, certainly relative to anything else in the industry. especially 3-d systems, which i agree, growth by acquisition in that case i'm a little suspicious of. it's like putting a bunch of operating systems together. >> cathie wood. portfolio manager. i went to a factory just outside of detroit. i want to show you what i found. fully functional cars.

the holy grail of 3-the printers are at opposite end s of the spectrum. a german company is going after that giant 3-d printer and they are focused on selling to the auto company. they helped launch a wildly successful i.p.o. a year ago but in the first quarter, as a public company, it sold just three prints, two were sold after they loaned money to the buyers. but now they are promising a new leg of growth with a second factory opening up in michigan near the motown automakers. wheer is what the c.e.o. told investors on a conference call. they will initially support four large format printers by the end of this cal der year. we expect to be using on demand

parts by the end of september or early october. we'll start to see revenue contribution in the fourth quarter. i headed to detroit those facility. >> so here i am. michigan, middle of october. this is jet factory. you can see there is not much going on here. let's check it out. inside, a big, big basically empty room. there are no parts being distributed. no printers being manufactured. just a few workers doing some rudimentary framing work. one literally sleeping on the jop. this is the right address. 41430 hag erty circle. this facility clearly wasn't shipping on-demand parts by september or october. it doesn't look like they will be making large format 3-d

printers by the end of the year. perhaps all of the company also live up to the hype. but for now, 3-d printing is hard and it is hard to build a factory, even in detroit. >> so that was my look at their 3-d printing business such as it is. up next, the return of podcast. audio programs are making a comeback. we'll talk with a radio program entrepreneur. ♪

>> this is best of "bloomberg west." i'm cory johnson. podcasts are they again? thanks to the smash success of "serial" more people are binge

listening to podcasts. there is an 18-% surge in listening. he did that but now he is doing this, founding his own podcast production company called gimlet media. i talked to him about why they are cool. >> i think it has driven a lot of increase that we have seen. >> they thought podcasts, man. that is going to be it. are there execution lessons that you will learn? >> the reason i did this is i saw an opportunity. i saw an opportunity when i was working at planet money. our audience was growing. it seemed like there was a

demand for this kind of programming. to me, it was like -- it wasn't that much thinking. if you listen to the podcast you know i wasn't thinking that deeply about it when i started, bit just seemed like something that needed to be done so i went out and did. >> i love you're thinking both on a programming level, creating content and a platform as well. let's listen. you have been chronicling the launch -- how else, with a podcast? let's take a listen to a little byte from that. >> go ahead. >> if i were calling uber, and it said it was going to be here in two minutes, and it was all the time you had, what are you doing? >> i'm making a network of digitalpodcasts that will -- that are going to meet. i'm sorry. >> what will it take to do it? >> it will take $1.5 million. i think.

i'm looking for $1.5 million to $2.5 million. >> you're looking for a very specific amount of money. >> after an hour, i look over and chris holds up his hands. >> and his hands said what? >> he gave my pitch back to me. >> stop, and the name of god stop. >> please stop what you're doing right now. it was a very humbling experience. going out to try and raise money. i fancy myself a storyteller. when he raise money, you are telling a story of how your company is going to work. why it is going to be successful. i just went out there and i fell on my face. i was just awful at it. it took a while to get my bearings and figure it out. that was me pitching chris. >> i see charles to hague is an investor? >> yes, he is.

>> journalists, when they tell stories, they go in it with questions. i can hear your voice saying i don't know, which is the last thing anyone wants to hear when they are asking for money. you actually don't know what's going to happen in the future. >> right. but i mean you know, it was funny because like i went out and tried to raise money and i didn't do very well in the beginning. at the same time, simultaneously trying to raise the money, i launched the startup podcast. i launched the startup podcast, and the startup podcast chronicled my misadventures trying to raise money. i was horrible, i was failing to sell to people. but something about hearing me do that on a podcast all of a sudden -- investment came in once they heard the podcast. there's something about hearing me tell a good story about how he didn't want what i was doing that made people believe that i could pull off what i was doing. i don't know what's going on there, but --

>> i have the horse way behind the cart here. tell me briefly how the business is going to make money. >> we're looking at ad revenue and then listener. i come from public radio. where there was and is a thriving listener supported revenue model. in public radio, you guilt people and giving you money. i think there's a way we can make it a little more fun, and do a freemium model. that feels exciting and gives people value. there are founder of gimlet media. do you recognize these means? -- memes? we're going to speak to the imager, director of products about their interesting business. that's next. ♪

>> welcome book to the best of "bloomberg west." i'm cory johnson. image sharing site imager has just released the latest gif to the internet. they are for ways to capitalize on their content. you can pull almost any clip off online video and make it into a high quality online file including this disgusting gip. >> it is the internet's story platform. millionors people come every day to tell their stories through images. the stories might be funny, sad or inspiring. they are stories created by real people. 160 billion images are looked at

each month. 150 million people visit the site every month. what are they doing on the site? >> submitting their own images. stories from their daily life. talking to other people about these images and connecting to each other. >> how do you guys get paid? >> we have small display ads. >> the display ad business has not been a great one to support websites. getting better or worse? >> it is against us but this business is boot strapped. for five years we didn't raise a dollar of outside capital. >> so the success over the gif, can we talk about this? it is a fairly amazing thing. they have been around really before the internet. in the 1980's. i keep pointing to my hand because i found out how the copy

and paste them on my iphone. they are hilarious to send as a text message i believe. what is it about the gif? >> there is something about the gif. for us it is short and looping and doesn't have sound. you don't have to watch the full three minute s of a video. just the best five seconds. it is people sharing these short clips that can be viewed anywhere without putting your headphones in. >> to what degree is tumblr's growth? is that driven by people looking at gifs? >> they are popular on tumblr and other formats. >> is your plan to be like a tumblr-like service? >> we're given that tumblr where you follow people.

imager you don't follow anyone. as a result there are no celebrities. you can post comments tomorrow and you'll have just as good a chance of getting the homepage as i do. >> me getting undressed. >> you can make anything a gif. >> i do have shame. i wonder if you have a sense of what works. what works with a gif? what cap turs painl views? >> the beautiful thing about imager is it is a platform. people create their own gifs. what works? what is funny? what draws the most images? >> our job is to create the best tools for people who can't to create them. we don't spend that much time thinking about what is popular. we just figure out how to make those tools that allow people to tell their own stories. >> that was the imager director of products.

that does it for this edition of "bloomberg west." we will see you on monday. ♪

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