>> live from pier 3 in san francisco, welcome to "bloomberg west," where we focus on the future of business. i am cory johnson. here's a check of your bloomberg top headlines. house republicans considering a stopgap funding bill to avoid a partial shutdown of homeland security department tomorrow. this move comes as the senate moves forward with a bill that would finance the agency with language blocking president obama's immigration orders. >> we have seen what the senate can or cannot do, and then we will make decisions about how we are going to proceed. >> house and senate democrats have said they will not negotiate a funding bill that blocks the president's immigration policies.

israeli prime minister benjamin netanyahu will hold private meetings next week with senate gop leader mitch mcconnell and democratic leader harry reid. netanyahu rejected a meeting with the broader senate democratic caucus. the prime minister is scheduled to speak about iran next week at a joint session of congress. his appearance heightened tensions between the white house and israel. speaking of invitations, apple sent out invitations. netanyahu will not be involved in the march 9 event. apple will unveil details about the apple watch. it is expecting to ship in april. the invitation had the words spring forward written in it. march 9 is the day we must move our clocks ahead by an hour for daylight savings time. google is making the largest investment in renewable energy that it has made thus far. the company invested $300 million in the solarcity fund.

google also committed money to wind and solar farms on three continents. herbalife posted 11% drop in fourth-quarter revenues. profits also down a lot over the previous year. the nutrition company under ftc investigation and battling short-sellers such as billionaire bill ackman has changed some of its sales practices, and that is hurting growth apparently. herbalife was also hurt by currency headwinds. numbers are getting a boost. the stock kind of flat in after-hours trading. guidance was way down for the coming year. it is a historic day. the fcc approves new rules protecting the open internet. the rules require that all internet traffic be treated equally. it means internet service providers are subject to

regulation for the first time trade -- time. here is the fcc chairman, tom wheeler. >> after a decade of debate and an open and robust year-long process, we finally have legally sustainable rules to ensure that the internet stays fast, fair, and open. >> there will be a slew of legal challenges surely. verizon wasted no time poking fun at the rule, posting rebuttal in morse code. joining me is the chairman of mobile future. an expert in morse code. i made that last part up. the constitution was written in 1787. those are old rules too. talk to me about what you think the problem is with this ruling.

>> we have had two decades of regulatory piece regarding the growth and dies in -- dynamism of our internet. it has curated in armrests benefits for all of our economy. that piece was shattered today. we are transitioning into this brave new world of regulatory uncertainty. once we can crack the 300 pages of the rules as they are written and have access to them, companies both large and small are going to -- after we are done popping our champagne corks and high-fiving, we will have a very sober period of reflecting on what the rules really mean, and what impact they will have on the dynamism of her wonderful -- our wonderful internet system, and how they will impact innovation, an investment, as were thinking about the future of our internet and evolution to new generations of networks. >> what companies can't get started under these new rules? >> i don't think it's a question

of what companies can't get started. it's a question of how dynamic can companies expected to proceed in the future. we are entering a world where the broadband ecosystem is now going to be considered a regulated utility. as far as i know, the history of regulated utilities in our nation has not in one rich in innovation, in investment, and the kind of disruptive deployment of new products and services of the type we have seen in only the past two decades in this extraordinary internet environment, and particularly on the mobile and wireless aside. >> steve wozniak was at the fcc meeting today. peter cook caught up with him afterwards. he had interesting things to say. listen to what he had to say. in terms of title ii, he had this notion of -- listen to what he had to say. >> title ii regulation means

oversight of bad behavior. not meddling, not controlling things, but looking for bad behavior. >> that is an important point. woz is dead-on about that. do you think the reputation of companies like comcast, time warner cable, maybe verizon, at&t -- do you think that customer service reputation and distrust these companies have engendered hurt the chances in this ruling of anything but title ii from being enacted? >> unfortunately, i would think the bottom line here is if past is prologue, bad behavior really hasn't been the hallmark of the internet broadband ecosystem. one of the reasons we have seen so much investment, dynamism growth is because it hasn't been a history or tradition of bad behavior, but really effective customer service, really effective innovation, and really effective and dynamic

interaction between consumers and companies. what is important to think about in terms of the future is whether or not these title ii rules will actually stanch bad behavior or be a disincentive for more investment in the kind of dynamic infrastructure that we need to maintain the needs of american consumers going forward. it is true that there is a whole swath of companies that have been participating in the broadband ecosystem in the united states. so far, particularly on the wireless side, even in the existing environment we live in, there hasn't been a single formal complaint about abuses of open internet standards. as one of the reasons we have seen tremendous growth and tremendous dynamism that has been sustained. bad behavior is not going to be addressed by title ii. what title ii will address is creating more questions, more uncertainty, and greater

challenges, both large and small, about what the future path will bring. >> you said a lot of interesting stuff in there. one was the notion that money won't be spent in innovation. chairman wheeler pointed out that the telecoms under title ii have spent over $800 million on building out their networks, vast fortunes. >> $800 billion. >> and trying to be on the cutting edge. what do you say in response to that? >> that's a false argument. the mobile ecosystem, broadband ecosystem has not been under title ii regulation. one of the 40 apps average american actually carries on his or her smart phone actually has a voice application, and it's only that application on our smart computers that we call smart phones that has been under that regulatory framework. mobile phones have not been under title ii. that is really the reason why we

have seen extraordinary and disruptive innovation that has propelled the u.s. internet ecosystem, particularly its mobile sector, to the forefront of innovation and leadership globally. title ii is going to put a cloud of uncertainty now, covering all of our broadband internet as it will do, and really raising questions as we move forward in the next phase of evolution of the internet ecosystem. as a progressive, a democrat someone who has actually worked in washington for the clinton administration, i think this is an unfortunate turn of events. >> we also talked to the internet association about what the companies out here -- to a lot of those innovators -- listen to what they had to say what the internet association had to say in terms of what companies want here in silicon valley. >> part of the reason why we

need net neutrality rules that are strong and enforceable and sustainable is to ensure that whatever the next generation is, they can come without having to ask permission or having a gatekeeper blocking users from picking the best sites they want to visit. >> what do you respond to that when the companies doing this innovation say they want these title ii rules? >> the rules are not get cleared to any of these companies. we still have not yet gotten the documents from the fcc explicating what is in this 300-page order. when we do understand the complexity of the thousands of very fine points of the title ii framework, we will understand that the implications of title ii will go far beyond applying to only large core broadband providers, but will impact any company, even startups early-stage companies, as long as they have a transmission components. voip companies, companies doing

innovative work in cloud computing, will potentially be subjected to a broad swath of new rules and regulations, which means that instead of what has been the case for minimally viable product companies wanting to hire a coder or product developer first, the first course of action will be to hire a regulatory attorney who is very good at telecommunications law to explain this complex and very intrusive framework. >> the lawyers will win? i can't believe that would happen in d.c. thank you very much for joining us. "bloomberg west" will be right back. ♪

>> here are some top headlines. san francisco-based gap posted a 3% gain in fourth-quarter revenue. sales old navy particularly strong. gap's focus is on on improving

its digital shopping experience. barnes & noble is separating the two publicly traded companies again. one will contain the retail chain, the other the nook e-reader. the barnes & noble's college bookstore business is not expected -- is now expected to be completed by the end of august. net neutrality not only a major decision at the fcc meeting, there was another one. commissioners voted to let chattanooga, tennessee and wilson, north carolina override a state law and expand their city-owned broadband services into new areas. the fcc ruling only applies to those two cities. president obama called the fcc pushback against any laws restricting local rock broadband -- local broadband. earlier today i caught up with one of the leading voices advocating these new rules.

senator al franken, democrat from minnesota am a we talked about why than 4 million people are having their voices heard about this fcc and this obscure rule. >> it tells you that especially younger americans, but a lot of other people really knew what the subject was about, is it as arcane or technical as people think it is, and instead of fast lanes that very deep-pocketed corporations can buy to get their content to you faster, and a slow lane for everybody else this is going to maintain net neutrality, which has been a architecture, and why we've had all this innovation in the internet ecosystem. >> it seems that the critics of this -- there are three camps here. the view that government can do no good and should have no

regulation, and i believe that where it is. it seems like it does not apply -- there are two other camps that said, we believe in net neutrality. title ii is the wrong way to do it. the fcc decided title ii is the right way to do it. why do you think that title ii is the right way to make sure the internet remains free and clear of prioritization? >> when the d c circuit court has ruled on this, they more or less pointed to title ii as a way to do this. either because he did not understand this or for some other reason, ted cruz did this video that got a lot of play where he did an old rotary phone and a smart phone and said, this

was under -- this was under title ii when the fcc regulated phones, and this smart phone is now free of that. that's not true. the voice on that smart phone is under title ii. we have had all that innovation -- you are probably not old enough. i can't see you to remember when montville was mobbed l -- mob bell. -- when ma bell was ma bell. and you paid so much for long distance. under title ii, we have gotten to here. i have not read the rules that have come out of this, but the way the chairman wheeler outlined them a couple weeks ago, they're not going to be setting rates. they are going to use forbearance. this is meant to preserve net neutrality. this is what the circuit court basically said that was the legal basis in which theyfcc could maintain net neutrality.

>> i am old enough. the service of people get from the telecommunications carriers is not what they want. they don't like what they get from comcast and time warner. the telecommunications companies themselves are not the leading innovators in the world of technology. >> sometimes they try to fight it as much as they can. this is an issue on municipal broadband, which some of these isp's have been fighting on a state level. they should not be doing that. this regulation isn't going to stop innovation at all. this is how we have innovation on the internet. everything we have done thus far on the internet has been while we have had net neutrality. >> senator al franken speaking with me earlier today. ♪

>> this is "bloomberg west." the fcc's historic vote was watched closely today. earlier i spoke with kevin cramer of north dakota to get his reaction to the vote. take a listen. >> the chairman knows his subject matter and he was well-prepared to say what he had. this debate has been around for a decade. previous attempts to do what they did today have been turned back by courts. they're always trying to find another way to do it. i disagree with him fundamentally on the need for this type of a rule, but i do agree with him and i think the

vast majority of republicans in congress agree that we have to codify in law some of these fundamental principles. those things we agree on. the idea of giving the fcc this overwhelming title ii authority is the wrong way to go. it talked about process, and i appreciate what he had to say about the timeline in meetings and whatnot. it did not seem to me like this rule reflects the majority members of congress that he supposedly listened to. we have a pretty good plan that we are working on in a bipartisan fashion that i think provides more certainty and frankly more confidence, both to the consumer as well as the investment public. it's unfortunate that they trumped congress today, but this is only the beginning of the litigation process. >> it is interesting to hear you take a middle stance there.

there is the argument, no regulation at all. there is the argument that says, title ii is the best way to go because these companies have a responsibility to consumers to provide this important access. i guess the argument you are making is that title ii is the wrong way to do it. chairman wheeler just said under title ii, the telecom companies have spent hundreds of millions of dollars providing service. are you saying that's a bad thing? >> what i'm saying is that it is unnecessary, and when you give that type of leeway, that type of authority to a regulatory agency who pass the rule on a 3-2 vote, it opens up the door to lots of other things. he has given assurances that these other things, like price controls, would not be part of his leadership. there's nothing to prevent the next chairman of the next

commission, and why go that way? why always rely on for parents to be the exception -- forbearance to be the exception? let the innovator be the regulator as opposed to the government. whether the fcc or name your regulatory agency, over regulating, which this could lead to -- tom wheeler is an honorable guy, but why open that door unnecessarily when you already have people working for both parties on a congressional solution? >> you struck on an important word, forbearance. i don't know how to make it sound simple. forbearance sort of gives the fcc leeway in terms of enforcing this rule, yes? >> it does give them some leeway. it also gives them the discretion. if you're going to trust there is discretion to forbear certain things, why wouldn't we trust their discretion on the other

side, specialized services as an example? >> congressman kevin cramer. ♪

♪ ♪ >> i'm cory johnson. this is "bloomberg west." the fcc's big vote was met from opposing groups who want to fight for the future. they rallied millions of people online for the battle for the network. the founder of a battle for the net.com, talked about the tools that they used to save the internet. >> this is an unprecedented victory that a year ago people thought was impossible.

they did not anticipate what happens when any institution of power comes to take away people 's internet freedom. and they should have. it will rise up. what we did is we used the internet to defend the internet. we do not have millions of dollars or in army of lobbyists to send to congress to try and get voices heard. we built tools using cutting edge technology that made it easier for millions of people to care about this issue and have their voices heard and washington dc. >> it is an amazing thing, and our society that does not like to vote in the presidential election and doesn't like to get involved, to see such an uprising of boys is regardless of what side you are on specifically, and i love that you did things like a countdown clock for the vote, which kept the drum beat going.

talk to me about how that works and how people were able to incorporate that, not just on your site. >> what we did, we built the toll -- full-- so that any website couldn't use of that countdown timer. we got millions of websites to do that leading up to the vote. that helped as drive and a norma's amount of phone calls and e-mails to members of congress and essentially let them know that if they come and try to take away the victory from the internet, the internet will come for them. and it will not go well. >> it is interesting that as this develops. -- tom wheeler was the one who was most up in the air. there was a moment -- a piece about how much money comcast is given to people, how tom wheeler used to work for comcast as well. >> yes.

>> it was interesting that he changed his mind. i feel like the tipping point was john oliver and his hbo show. he did this wonderful long segment on this issue. >> absolutely. it was hilarious. it is important to note that net neutrality was blowing up before he came along. and i think there is a tendency here for the media to want to say that john oliver made a video and the president made an endorsement and then there was not neutrality. that could not be further from the truth. people camped outside for 10 days of back in may. we drove 55,000 phone calls circumventing the switchboard directly to the desks of fcc employees who are making decisions about the future of the internet. we decided on the white house. -- we descended on the white house. this was a one with old-school methods of people's struggle

with new technology that gives more people a voice and never before. >> there wasn't a lot of discussion in the debate about the potential political impact of these rules. the isp's have kept a certain political voices from having access to the home as fast as other political voices. but the threat was there. it is interesting to me that you use the internet in this process, and maybe that wouldn't have been possible if these rules were not passed. >> that's absolutely true. the internet has completely changed the rules from what is and isn't possible in washington, d.c. what that means is that there is a new potential for democracy. this isn't just true for net neutrality. this is true for everyone that wants to change the world. that is why this was such a critical fight that got so many people engaged. it is because this isn't about how fast our cat videos load it's about the future of our democracy and the future of freedom of speech. >> i don't know what you've got against cat videos, but fine. >> i love the cat videos.

>> i can't stand them. quickly, i wonder also, you gathered together this unusual group of people who become activists and care deeply about this political issue. what does that group do next, or is this a one-off? >> it's not a one-off. the internet is becoming a critical part of our lives. no matter what, governments and other powerful institutions will be looking for ways to limit and control what we can see and do on the internet. it's critical that everyone gets involved, recognizes when their freedom is threatened, and stands up to defend it. that's what we at fight for the future intent to do for as long -- intend to do for as long as we can. >> thank you very much. we appreciate it. "bloomberg west" will be right back. ♪

♪ >> the fcc is voting to approve new internet rules, title ii would subject the internet to new regulation. what do tech giants say about it? here is michael becker. a lobbying group pushed really hard for those silicon valley companies because they really

believe in those rules. >> it is about user choice and ensuring that motivation continues. we have seen incredible innovation of internet companies, and users are able to access whatever website they want without a gatekeeper in the middle, discriminating or blocking content. that needs to continue for the future of our economy. >> name one service that those big internet companies have created that would not have been possible if we were allowed to let the isps choose who gets there first. >> you could probably point to any of them. the content inside on video, you have these great services like amazon prime with amazon video offering and netflix and others that provide great value to users and to people who love watching shows and movies, but anything else -- if you look at air b&b and uber and lyft and all the great new companies, who knows what the future holds, and you don't want and isp being

able to decide what companies will make it and what services are offered. >> is there a sense that this opens up the door for new competition? netflix is a leading provider of video online for feature films and so on. why do they want to allow competitors into their space? is this about saving money for them? >> no, competition is great. listen, if netflix has more competition, they have to work harder and users will benefit from that. there is great competition on the internet company side. there is almost no competition on the internet service provider broadband side. the fcc put out a report that 75% of american households have no choice in broadband provider. meaning they have one or zero choices for regular high-speed broadband, and that has to change and that's a problem. >> it is interesting also because there are competing services. we haven't seen this, where the isp's are providing a lot of content that is directly competitive. do you think we will see more of that?

>> possibly. that is one of the great things about the internet, it's hard to predict what the next big thing will be. part of the reason why we need net neutrality rules that are strong and enforceable and sustainable is to ensure that whatever the next generation is, they can come without having to ask permission and without having a gatekeeper blocking users from picking the best sites they want to visit. >> google in particular among your clients is in an interesting position. there also and isp and a handful -- they are also an isp and a handful of communities with many more to come. what is their position and how does it differ from some of the other companies you represent? >> google has been building high-speed fiber in a number of different cities. that is terrific for those communities where they are serving. it does bring competition and a better offering. what google fiber has said from the beginning is they will comply with net neutrality regardless of what the fcc does. it's part of their ideology and what they think is best for their users. they are going to compete head to head with isp's there and be pro-net neutrality there.

>> it's interesting that all these companies have gotten together around the idea of title ii. silicon valley is so famously libertarianism and not wanting to have strong government controls over anything. title ii is a stringent set of rules. and those will be applied to the isp's. >> the version of title ii of the fcc is voting on today is a light touch version. it would forbear upon most of the title ii regulations to ensure the protections are in effect. for us, we have been focusing on the end result. >> internet association ceo michael beckerman. let's bring you up to speed with some of the top headlines on bloomberg right now. united airlines warning pilots about safety after some near misses. in a strong worded memo last

month, a brief description of four incidents, in which a plane had to perform an emergency maneuver because it was too low to the ground being one of them. ibm ceo says she wants to spend $4 billion over the next four years to boost sales for new businesses. that $4 billion should lead to $40 billion in revenues. the ceo is under fire to turn around ibm. ibm suffered 11 straight quarters of sales declined, as the world shifts to cloud computing and mobile and away from ibm. former white house press secretary jay carney has a new job landing at amazon as senior vice president for worldwide corporate affairs. politico reports carney will split his time between there and washington, d.c. he joins another former obama aide in the tech world. we will be right back. ♪

♪ >> this is bloomberg west. we are talking about the fcc and the importance of the federal government in the internet, but what about small governments? accela provides software to more than 1000 public officials. the company raised $144 million to fund the business. the ceo joins me now. we talk about the fcc, providing internet all over the place at equal speeds to everyone. that is important in business, but important in government too. you guys are at the front lines with what governments are trying to do at the local level.

>> peoples experience with government is oftentimes dictated by the speed at which they're able to interact with them. the fcc ruling is relevant. what we try to do is connect people to government services and give them the experience -- it is almost like shopping on amazon or hailing a cab via uber. you want to be engaged with those processes. that is really what this funding is all about. >> you guys have raised a bunch of money in the last year or two. >> absolutely. in the past 15 months we raised $200 million. >> talk to me about what the opportunity looks like. is it going into the city of los angeles, the state of florida and selling those big deals? or is it thousands of small local governments that are much more plentiful? >> it's both. when you think about what the cloud brings to government, it levels the playing field. so the big cities and counties it's easy for them to fund these types of projects where they

were traditionally very expensive. what the cloud does, it levels the playing field and makes it so that the small cities and counties here in the bay area and around the u.s. can use the same products in san francisco los angeles and new york and what washington, d.c. uses. >> it's always a painful process and slow. what are the areas where customers first say the government says, that will help me fix this problem and deliver the service better? >> if you talk to contractors and other building professionals, one of their biggest challenges is being able to align their workflow processes with the government workflow processes. they try to finish their work and schedule inspections quickly. what we're are doing is trying to make that so they can do it with mobile devices their -- they are holding in the field. building permits, being able to set up a new business. if you talk to people who want

to open up a restaurant, a lot of times there will be a lot of paperwork and they send it to someone in government and it just kind of disappears. so being able to provide more transparency. when i buy a package on amazon i can see it from the minute i buy it to the minute it shows up on my doorstep. that is the same type of thing that businesses are expecting from the government. >> i would imagine the ability to sell the model is very attractive to governments , because they don't have to commit to a ten-year or four-year rollout of sales force automation or some database system with armies of consultants. >> absolutely. probably 12 to 24 months ago there was a memo written where somebody made the claim, we should really be paying attention to what the private sector has already figured out and the public sector should start going cloud. governments never like to be first, but now there is significant momentum in those areas.

and everybody is looking at it. at accela we have been doing this for many years. what we see is that procurement processes are starting to dictate cloud technology, not just making it -- >> so they get it? >> absolutely. >> i think of governments as being so backwards in the way they administer services, as opposed to thinking about the ways they can change. >> it's interesting what happened in 2008 and 2009. when we were in the recession governments really had to rethink the way they did business. now as we are moving into normalized periods where the economy is picking up, the service levels that governments must adopt are changing dramatically. so what they're doing is turning to technology and doing it in more cost effective ways. >> their budgets got slashed so much because tax owners were down in 2008, 2009. they had to figure out someway to deliver the service because they could not pull it off anymore. >> that's right. and on the demographics side, we see that citizens don't want to

stand in line, they want to go online. they want to do that in a way that mimics these experiences they get from the great consumer brands that are serving the internet today. >> to whom do you sell? are there cio's at every level of government? or do you do things at a macro level or state level. >> there are different tiers of governments we sell to. there are different strategies selling strategies for each market. ultimately who we are selling to is a government bureaucrat who wants to engage with citizens. one thing we know at accela is that these people who work behind the desk in government are very proud of their communities and they love them. we want to help them use technology to engage with citizens and make them heroes. >> howdy convince communities and they love them. someone -- how do you convince them because every day on bloomberg west seems like a new story. how do you ensure that security at accela is good enough? >> one of the things that

rational governments see is that a lot of times, the private companies who have made significant investments -- with this round of financing, but were able to do is beef up our infrastructure and able to show them we are in a better position to protect their data than they might be. >> it is interesting. i talked to salesforce last week. they have something called connected cities. what is it about your industry specific approach that might give them an advantage over big software companies? >> the vertical software companies, they provide very horizontal services by salesforce and workday. we really focus on our vertical, and really dominate that space. in our market, the permitting unlicensed part of government is a $10 billion market on its own. >> that is all. >> absolutely. >> do you find there's a different generation of purchasers who grew up with the internet, they know how it works and the guys they are replacing,

they are willing to spend money? >> the baby boomers, as they retire or a being replaced by a new thinking government worker who has always been connected to the government -- internet, and the cio's have brought a new level of thinking as well -- we are seeing change in approach to technology and delivering services. it's refreshing. >> thank you very much. that's it for "bloomberg west." get the latest headlines all the time on your phone, tablet bloomberg.com, and bloomberg radio. we will see you tomorrow. ♪

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