>> welcome to bloomberg west where we're covering the business of technology. every weekend we'll bring you the best top interviews of the week with the top players. our top story the f.c.c. approving new rules designed to protect the open internet. all internet traffic will be treated equally preventing providers from blocking or

slowing down traffic. subjects it to title 2 regulation. 3-2 along party lines. >> today, after a decade of debate in an open and robust year-long process, we finally have rules to ensure that the internet stays fast, fair, and open. >> over the next 20 minutes we will have an in-depth discussion on net rules to ensure neutrality and what it means for global business. peter cook caught up with steve wosniak who attended the vote and had these comments. >> i believe in the -- the internet was so beautiful when it first came, even when it was dial-up it was such an open and free expression forum. and over time it started getting closer and closer to

getting clamped down. decisions were made by the gate keepers. and do we trust them and we trust them to make decisions? no. we need some kind of supervision of their bad behavior. are they likely to make deals and take breebs? give somebody preference on their channel, that's a bribe. >> so you're confident that the rule today will ensure an open and free internet? >> well, i think there's going to be a big no. step, positive step. i think that the other side is also for open and free internet in terms of net neutrality. the decision today goes a lot further than net neutrality. title 2 regulation means oversight of bad bafere. not meddling, not controlling things. not making decisions. but looking for bad behavior. there could be a lot of things illegal, unconstitutional behind the scenes flt i don't think people trust them that much. to me more than anything else this is a victory for the people the consumers. the average jose against the suppliers who have all the player and the wealth and make the decisions for them and they

feel hopeless and helpless. here 4 million of us sign petitions. i see it -- and it's an indication that the people can sometimes win. we've had a lot of defeats over the years but once in a while we get a win. >> let me ask you about some of the criticism we heard about the. one is that this is going to stifle creativity. >> tom is also wheeler himself pointed out to an article i read which said we don't think it's going to make any change. i don't think this is running their business. i think all it is is basically having some oversight of bad behavior when they do bad things for the people and the customers. >> what about the notion that this is a solution to a problem that doesn't yet exist, that people can't really document the notion that throttling and discrimination is happening on the web? >> there's a fear that it could

exist and there are which it

>> this is the best of

bloomberg west. congressional republicans are roundly criticizing the f.c.c.'s decision to subject the internet to title 2 regulation. i talked to kevin cramer jist moments after the vote. >> 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 ought to codify in law some of these fundamental principles like prohibitions on blocking and other -- price discrimination, throttling. those things we agree on. the idea, however, of giving the f.c.c. this overwhelming title 2 authority is really the wrong way to go. and the other problem, he talked about process and i appreciate what he had to say about the timeline and the meetings and what not but it didn't seem to me like this rule reflects certainly the majority members of congress that he supposedly listens to because either we have a pretty good plan that we're working on

in a bipartisan fashion that i think provides more of a certainty and frankly more confidence both to the consumer as well as the investment public. so i think it's unfortunate that they trumpled congress today but i think this is only the beginning of the litigation process. >> well, that's -- no matter what they do, i suppose. but it's interesting to hear you take sort of a middle stance. there's the argument no regulation at all and we've heard that. there's the argument that says title 2 is the best way to go because these companies have a responsibility to consumers to provide this important access. i guess the argument you're making is that title 2 is the wrong way to do it. but chairman wheeler just said, look, under title 2, the telecom companies have spent hundreds of millions of dollars providing service. are you saying that's a bad thing that that kind of innovation won't happen? >> what i'm saying is that it's unnecessary and that when you give that type of leeway that

type of authority to a regulatory agency who passed this rule on a 3-2 vote, that it presents, it opens up the door to a regulatory agency who passed this rule on a 3-2 vote, that it presents, it opens up the door to lots of other things. while he has given assurances that these other things like price controls wouldn't be part of his leadership, there's nothing to prevent the next chairman or the next commission and why go that way? why always rely on forebearance to be the exception? why not codify these principles in the law and leave the internet as open as we can to let the consumer, let the innovator be the regulator as opposed to the government? because, quite frankly, whether it's the telecom companies have the f.c.c. or name your regulatory agency, overregulating which this could lead to -- i think tom wheeler is an honorable guy, but why open that door unnecessarily when you already have people working from both parties on a congressional solution that i think is more middle ground. >> you struck on an important word here, forebearance. which essentially -- i don't

know how to make it sound simple. forebearance sort of gives the f.c.c. some leeway in terms of enforcing this rule. yes? >> it does give them some leeway but it also gives them the discretion. if you're going to trust there's discretion to forebear certain things, why wouldn't we trust there's discretion on the other side for like specialized services as an example? so if we're going to give discretion to the commission then let's trust them a little more to do the right thing as opposed to fwive them all the authority and hope that they do the right thing? >> in defense of the commission, they tried that before. the court threw it out and said you need to have a stronger legal basis. title 2 gives them that. yes? >> yes. title 2 gives them the legal basis if in fact this can even be upheld. and i'm not sure it can be. the thing i am sure is it will be litigated. and litigation as we know is a long process. throws uncertainty into the mix.

it's my hope that once litigation begins and the chaos begins quite frankly that that will bring even more democrats who have in recent months have sort of drifted to the left in defense of their president and in defense of mr. wheeler. hopefully it will bring them back to the negotiating table for a more common-sense moderate approach as being proposed in the energy and commerce committee and house of representatives. >> congressman kevin cramer republican from north dakota. also speaking out former f.c.c. commissioner. who says these rules are just not good for consumers. >> here we have for the first time the united states after the past 20 years priding itself on not regulating the internet suddenly something has changed and the american government has decided to regulate the internet. this cannot be good for the mubble. -- american public. >> those who advocate says something has changed and the providers have started to charge fees to pick favorites,

pick winners over louisers on the content side. are you saying that title 2 is the wrong way or that any regulation is bad? >> i would actually don't believe there's any need for regulation and all of these allegations about isp's imposing charges on service -- on content companies is really p -- this is all hypothetical. it's not -- they can't point to actual examples. this is all regulation in the name of what might possibly happen in the future. it's not addressing actual problems that we have today. it's not addressing actual complaints that are before the f.c.c. >> well, let me respectfully disagree. netflix is a company that has been compelled to pay to get ahead of the line. and there's a company that opposes having to make those kind of payments. let me read a statement from the ceo of netflix and what he had to say. strong net neutrality prevents

charging a toll to services like netflix. they must provide significant access without charge. allowing fast lanes gives isp the per verse incentive to boost revenues. the power to pick winners and losers. so what do you say? this is a company that has been compelled to pay this to comcast, to verizon to get ahead of the line. >> i respectfully disagree. i'm afraid that what we're seeing here is just spin from netflix. netflix entered into agreements for contracts with verizon and comcast to effectively put themselves at the head of the line. in front of millions of other content providers and users on the internet. before netflix entered into that agreement it was treated the same as everybody else. well, that's exactly what title 2 is going to require. it quite likely will prohibit

the type of contract that netflix entered into. >> that's their argument. further more what they say is that it lets the isp's congest their networks or make their networks look congested so they could charge that fee. what do you do about that problem creating an incentive for the last mile deliverers of content to create that congestion for the benefit of more income? >> first of all, i deliverers of content to create that congestion for the benefit of more income? >> first of all, i don't agree that there is a problem. i think a lot of this is really a manufactured problem. will prohibit the type of contract that but i think more to the point. let's hypothetically say there is a problem. is the solution to impose telephone regulation on every broadband provider in america is that really the path we want to go down? is the solution to congestion problems to make every isp in america look exactly like the telephone company? i don't think so. i think this is the wrong solution for a wrong problem and a problem that likely

doesn't exist yet. it's all hypothetical. >> hype thetically but not. twitter who hasn't had to pay the kind of fees but has come up strongly against it. i want to read a statement and get your reaction. >> i feel like the companies in silicon valley -- not all but many of them maybe arguably most of them, see real problems in this for the development of the services they've already created in the future, services they may develop going forward. >> first of all again, twitter doesn't point to an example of a single website that is being blocked by isp's. in the past 0 years, the f.c.c. has had complaints about one site being blocked. and the f.c.c. took decisive

action to unblock that. it didn't require new title 2 regulations in order to do that. >> former f.c.c. commissioner. we'll be right back.

>> block buster trial that could have major implications on silicon valley culture. suing her former employer. in her lawsuit she says she was pressured to have sex with a coworkerer and then spent five years retaliating against her after she broke off the affair. he says the affair was consensual and never complained. but what does this say about the culture of silicon valley and the place of women in that culture? >> in some ways this is quite different from what we've been

hearing about in silicon valley. on the one hand i just completed a survey of women in sfem, 550 and one third reported sexual harassment. but most of what we've heard of with women in silicon valley is much more subtle stuff than what went on here. women being called aggressive as opposed to assertive. women having to prove themselves over and over again. here we have situations where as alleged in the complaint and we'll see in trial what comes out, but that there were literally quite different business rules applied to men and to women. so that business rules that were directly relevant to comp for example, women not invited to important male-only business dinners. this is very, very different from what's come out before. and really is the kind of thing that was going on, for example, in law and medicine 20, 30 years ago. >> bill fromkin, is this case something that really is an

outliar of what we know as more sort of subtle and pervasive things that are affecting women in silicon valley and technology? >> not necessarily in my view. the bottom line here is that the courts look at each situation case by case. so it's hard to really look at trends as would a law professor. but when you're in the trenches you're really looking at exactly what happened here. she has direct evidence that statements were made to her that she was denied compensation that she was sent to siberia in terms of where her office was that men were promoted over her. this is somewhat typical of most sexual harassment cases and particularly silicon valley or no silicon valley women face this all the time and it's going to be a situation of what the jury feels is really occurred and how they want to dole out the damages if they think there was a problem. >> i certainly -- the last

thing i want to do is take the devil's argument here. but i wonder if the days proves -- they allege she certainly -- the last thing i want to do is take the devil's argument here. but i wonder if the days proves -- they allege she wasn't sexually discriminated against. if the case does prove that is it still useful to look at these issues through the lens of this case? or is it damaging to do so? >> i think it is important to look at it through the lens of this case for a number of reasons. keep in mind that she didn't even allege sexual harassment of one of her claims. what she alleged is retaliation. once she brought this to people's attention. the firm disagrees. but what tells that is that once she brought this to many people's attention, the coo, the head of hr, and they weren't -- they basically were not responsive or they were inappropriate for example, she alleges that one partner suggested a one-on-one lunch with the man who pao alleged

harassed alleged harassed her. not a professional way to handle that kind of complaint. so really important messages for employers are that if you have an employee who is alleging eeser sexual harassment or gender discrimination of any kind, very important to take it seriously, to get on it immediately, to conduct a really thorough and responsible investigation and act on it. >> i would say duh, except that they apparently didn't get this if what she is allegeling is true. is it damaging to the reputation of kliner perkins? is it even not helpful to have this discussion if indeed this is the case of someone who was a crony investor as opposed to someone who was sexually discriminating? >> basically every one of these cases you have the same situation. you have the employee saying that they've been retaliated against. bad things have happened and the employer saying that there was the case of someone a legitimate business reason. so that's a given. all the investigations, what is really striking to me is the fact that the case is actually going to trial because there's going to be a lot of inquiry

into the way the company does business. no one likes to look at the way you make slamie. on the other hand, with respect to ms. pao a lot of personal issues are going to come out about her life, about her relationship with her husband, her motivations. so it's really nobody wins. i think this case is less about money and more about vindication and position in the industry and trying to not sort of accept each other's positions. but most of the time these cases do not make it this far. so there's definitely some bad blood going on here. >> the fact that tom perkins one of the initial principals of the company stated very early on the company needs to return to its sort of highest ethical standards, does that matter a lot here? it's curious that was one of the first things that came out of the trial. >> it's going to hurt the company just being in the trial. when you're brought to task in a national spotlight on you and now you're having to explain

yourself, regardless of the outcome, the company i think is going to take a hit. and talking ethics is probably a good spin at this point. >> bill frumkin and joan williams. best of bloomberg west. we'll be right back.

>> massive charges, lawoffs, falling sales, currency head winds everything is happening at hewlett-packard. the 76-year-old tech pioneer in a critical phase as it prepares to split into two. they say it will now hit $2 billion over several years and it doesn't include the cost of layoffs. and yes there will be more layoffs. job cuts will hit 55,000 by the end of the fiscal year. but cfo is hinting about even more cuts during that spinoff process.

meanwhile, meg wittman insists that the turn around track even though sales fell for the 13th of 14 quarters. i spoke with jason nolen. >> the biggest surprise to me was the free cash flow. $3 billion. and some of that was currency translation some was foreign tax. but a big component was the cost of separation. legal fees, consulting fees there's a lot of work that has to be done that separates these two companies. i think it's the right move long term but that was a big surprise to me. i didn't expect a billion-3. >> let's talk about this. it's very different than earnings. it's the money that the company collects. there's a lot of sort of back and forth stuff that goes on on the balance stuff that leads to that but it sounds like that didn't include the cost of layoffs. that could be more than that. >> that's right. so the earnings took a hit on

translation. they priced in local curnsies in foreign markets. that is that's a function of math. when you lay people off you pay them severance. it saves the company money over the long term. we've argued they need to become a smaller and more focused company. >> but the free cash flow at hewlett-packard for the last year or two or 18 months has had the ben fut of fact rg, which is barely mentioned in the quarterly reports. the word factoring shows up twice in these reports. but they've been selling their receiveables from their customers. these aren't -- these are their customers. good debt. they've been selling that. boosting free cash flow but are they kind of running out of those kind of tricks to boost free cash flow? >> they've extended payment terms, too, to these customers. so it used to be fast pay makes

fast friends. now it's more of a working capital. but they can only take that so far to your point and that 10-12 day range that they give is about as far as they can take it. but we've seen very good cash management over the last couple of years and that's certainly, there's been a little bit of a stepback here. >> so if you look at that the way they boosted that free cash flow by selling receiveables make i'm a conspiracy theorist but i look that a quarter of the pay or bonus pay is based on cash flow earnings improving and they're selling receiveables. am i crazy to look at the profit motive? >> not at all. but you can only do that for a certain amount of time. the company was obviously overly enthusiastic when they gave that $6 billion knowing they had to separate the two companies. they should have been more forth right with investors but a lot of people were caught off guard.

>> finally we talk about this forever but we can't. enterprise services, the business of -- which i think of as armies of consultants marching in and helping with the technology solution. that should be a great strong business for them. that was horrible of course e down over 10%. >> that's another one where it's getting smaller, profitability starting to come back. they inked a big deal with a large investment bank. and that's where they can come in, sell services, software, infrastructure, and be better at selling the breadth that they have. they have more breadth than any other company. they need to do a better job of stitching that together.

>> google buying technology and patents from soft card a service backed by three of the biggest wireless providers. worked with google to preinstall its app. but is this going to help google take on apple pay? >> apple pay now has the first real competitor. i think if you look at the way that apple pay had been approaching the market they approached it in a sort of holistic kind of way. they lined up the bank they lined up the hardware obviously because that's what they do. and the consumer experience. and then they launched. and they're continuously adding issuers. google wallet is the early eent trant didn't approach the market quite that way and i think what you're seeing now with this deal with soft card

is the capitulation of the model that the mobile carriers are going to run with it. so now you're seeing that model being exited and really having a full staff competitor with google at the helm to compete with apple pay. >> google may have been the pine nr but you can judge by the arrows in their back. tim cook last week said that two thirds of all contactless payments were going through apple pay in the fourth quarter. suddenly they're the one to beat and they're knew to the market. >> i think that's more of a statement on how poor the adoption has been for the other two players in the market. not to take anything away from app. we'll see more as more standards emerge. >> you tell me, the requirements of marchents to accept liability after october

1 if they don't have new cash registers is that going to drive a big upgrade cycle towards contactless payment as well? >> i think that it will. because in order to incentivize these kinds of changes merchants really need to have a business driver in order to retrain their staff, change all their hardware, all this infrastructure that they have. and a lot of these merchants have lots of locations to do this in. when you put something in place that has a real functional money value to it, that decision can be made. and the other players in the system benefit as well. >> is this a marketplace kind of business where really it's going to be one company that ends up dominating or will there be a couple or even dozens of payment platforms? >> i think that there's certainly room for a couple of winners. i think with this move and google lining up with mobile carriers and being able to

distribute their application by default on all the phones, it will also bring a space where more innovators can enter more easily. and it will be interesting there's certainly room for a couple of to see if google does what apple did with the banks and line them up. we know how important it is to have good relationships with banks. so i think it will be interesting to see how they bring the eco system in line with their new standard. and that will determine how much of the market they can control. >> is the fingerprint only option on -- only as an option on the i phone or for the 5 and 6 plus is that a significant differentiator here? or do you think customers are going to continue to engage in sort of unsafe activity with their payment systems and phones? >> i think that biometric identification will ultimately become something of the standard as it becomes cheaper and cheaper. whether it will standardize on a fingerprint or eye scan or voiceprint all of those can become a dominant standard. i think right now it is a

differentiator for apple in terms of convenes for users. >> just when you thought you had seen the most of what ed snowden could release this incredible revelation that nsu partnered with the u.k. spies were spying on google facebook, wireless carriers so they can get the secret codes to sim cards made by a company. i talked to a former nsa employee about those very charges. look what he had to say. >> encryption is after all all about the keys and in this case very complex algo rhythms denote the case very complex algo rhythms denote the most modern encryption systems. and it's very hard by themselves for agencies like the nsa to go in and break the more modern encryption systems. that's why they're constantly looking for things like backdoors for other ways to get in there while so that they can read traffic when they need to. and the whole idea is to get after a target when it's

necessary to get after that target. but the basic elements of course pertain to everybody that uses sim cards and that's basically the entire population that uses the cell phone. >> there's a mention one of the documents indicates that the brits got access to 300,000 cell phones or mobile phones

the problem that you have is that if you don't understand the general landscape of the signals environment that you're operating under, you will not have a way of actually finding that proverbial needle in a hey stak so the target of interest you're looking for won't become evident until you understand the background behind that target. and that's the difficulty that intelligence agencies have. and that's why the approach is still being used. >> now they responded to the article in the intercept saying the publicication -- the intercept, indicates it was not the company per se but an attempt to cast the widest net possible.

certainly in holland they're ticked off about this because the u.s. is supposed to be a cooperative partner with holland. is this the kind of thing that goes on all the time or is this a change of what's happened in prior decades? >> what you would normally did is cooperated with all the different intelligence agencies. so when you're dealing with a partner like holland or any of the other western european partners, it was normal decades ago to actually tell them what you were interested in and then they would assist from their local law enforcement agencies or the intelligence agency themselves depending on the country. so there are a lot of things that are different about this in many ways the relationships the business relationships that global companies like this company had complicate this because it's not just a dutch company. it is in essence a global

player. and as you pointed out they're the largest producer of sim cards in the world. so they have a vested interest in maintaining security. nsa and its counterparts and other nations have a vested interest in trying to find out how they can go after certain signals and certain encryption algorithms so that they can then track people they're interested in. we'll be right back.

>> smart phones and tab let's have transformed the way television is watched. now they're changing the way television is made. this week's episode of the popular abc show modern family was filmed entirely on apple devices. >> the bigger story to me is the fact that the entire episode takes place on clare's computer screen. i find that to be the most

interesting part of this. but we wanted to do this in a way that seemed as real as possible. so we just used the devices that one would use in real life. >> picking up a device is really easy to do and connecting with someone across the country is extremely simple now with all the technology we have. i have a feeling that producing this episode and directing it may not have been so simple. what sort of challenges did you run into? >> there was a lot that went into this. first of all, the hardest part was coming up with a story line in which we could feature all 11 or 12 of our actors and still stay on one person's computer screen. once we had the original idea for the story, things really fell into place quickly. and the problem wasn't so much of how are we going to fit -- feature everybody but how are we going to fit all this into one episode. originally we were going to have the actors shoot themselves by holding up the camera like one would do the

phone in real life but then there were other conversations about framing things properly and not shooting off the set. so we quickly devised the method where the cameraman -- we used the camera people to shoot them with the phones and then so it department look like the phones were floating out in space the actors were instructed to always keep their hands on the camera man's hand. and that's how we did it. it was a very, very ro mannedic day. >> were there any products instructed to placement involved? >> no. they've been providing -- other than providing the products that we used for the episode. no. this was done -- this is purely a creative decision on our part. just like the ipad episode was. i happen to be very techy. and i like this stuff. so in the last episode we just needed a reason for phil to be waiting in line and it just so

happened to line up wit purely ah when the ipad was coming out. so it was a natural fit. here, once again this just came from my life. i was face timing with my daughter at college and i was looking at my screen and there was some e-mails and a script i was working on and i could see her and i could also see myself and my wife standing behind me. and some web pages open. and i thought, wow, this really paints an amazing picture of my life. you can tell a lot about me from this one screep. that's where the idea started. >> so this is not the first time you've featured apple devices in your show. we see devices on television all the time but we don't necessarily think about the collaboration between the technology company and the television studio. how important rnt is that relationship? well listen. you want to -- it's a fine line because we're not here to sell apple products. and i mean, that's not our goal in terms of this episode.

they may advertise with us. and that's wonderful. and i know steve jobs was a big modern family fan and that was very meaningful to me. and i know that many of the people at apple are fans of the show. and we're very big fans of their products. so really this is much more of a personal interaction than it is a business relationship. >> how impressive are these cameras that can capture an entire episodes on television now? >> i think the smart phones today, not just apple's but other companies' cameras on their phones are amazing. and most viewers would be hard pressed to tell a difference. we've actually snuck in some footage from i phones in the past in our episodes just because we needed a quick shot and it's pretty hard to tell the difference. so it's amazing. it opens up a whole new world

for amateur film makers and budding film makers. people who are just beginning. because you don't need that initial huge investment any more. you can make a compelling movie on your phone and your computer . you know, and all you really need is a great story and some great characters and off you go. >> we'll be right back.

>> what do snoop dog and mark zuckerberg have in common? phil's coffee. web joined me with the phil's

coffee ceo for discussion about the connection between brewing coffee and technology. >> we have most of our stores in the bay area. so there's a lot of technology folks who come in and drink a lot of coffee especially the engineers, to kind of keep on going. so that's a big part of it. >> why are you -- you invest in technology companies? >> this is my first venture outside of technology. and i will tell you my story. i love coffee. i'm one of those tech guys that loves coffee. i have a problem though. i can't drink anything caffeinated any more. so i have decaf. and that's like really being a loser because you go into stores and nobody has a lot of choices. and my son told me about flills and he said there's this great place you've got to try. so he brought me a cup from fill's into one of our meetings. i took a sip and i said you put

cream in this. i did not. wow, that's pretty good. >> so it's the quality of the product. there's more to it. between the connection of technology. >> it's also disruptive. >> let's talk what's disruptive? >> i think that we possess a lot of the similar values that some technology companies do. so our philosophy is that the best coffee in the world is the coffee that comes to your taste. and our concept is one of the best -- >> what? >> that comes to each person's individual's taste. everybody is different. so we have the platform for customization and personalization. we don't even do epresso out of stores because it's not about what you do it's about what you don't do. so we want to focus on doing a few things really well. and every cup is hand crafted and we convert thousands of drinkers into fills dring every few months. >> one problem i have is it takes too long for me. i'm always running from place to place. and i go in there and i have to wait.

>> and decaf nated peoplele can be in a hurry. >> so i think that our -- it doesn't take that long. it can take three to four five minutes for a cup. if there's a long line which there usually is it may take a little longer than that. there's opportunities for efficiency but we optimize for quality not efficiency. however, we recognize that some folks don't have time. so what we have is an app where you can order ahead. where you can preorder and prepay while you're just getting up from your bed choose the blend you want, choose when you want to pick it up and it's fully paid for and you walk into the order ahead counter. and more of our stores are having that option. so you walk in and walk out. >> that's awesome. now all i need is a runner. >> chairman may nard web and jason. that does it for this weekend's edition. catch our regular show

weekdays. we'll see you later.