♪ cory: live from pier three in san francisco, welcome to "bloomberg west." every weekend, we will bring you the best of west top interviews. our top story, the fcc approving his store new roles to provide the -- preventing internet service providers from blocking or slowing down traffic.

it also subjects the internet to title ii regulation. the vote was 2-1 along party lines. harris tom wheeler. >> after a decade of debate and an open, robust, year-long process, we finally have legally sustainable rules to ensure that the internet stays fast fair, and open. >> the next 20 minutes we will have an in-depth discussion on net neutrality, and what it means for global business. we caught up with steve wozniak who attended the vote and had these comments. steve: the internet was so beautiful when it first came. it was such an open and free expression form, and over time decisions were being made by the isps, the gatekeepers, you might

call it. do we trust them to make decisions? no, we need some kind of supervision of their bad behavior. are they likely to make deals and accept bribes? >> you are confident that the rulemaking adapted today will in fact ensure an open and free internet? steve: i think it will be a positive step. i think the other side is also for open and free internet. title ii regulation means oversight of bad behavior, not meddling, not controlling things, that looking for bad behavior. or could be a lot of things that are illegal, unconstitutional behind the scene of the big isps. i do not think we can trust them that much. this is for the people, the consumers, the average joe against the suppliers, that have all the power and the wealth.

here 4 million of us signed petitions and it is an indication that the people from some time when. we have had a lot of defeats over the years, but sometimes we have a win. >> some say this will stifle investments. >> tom wheeler himself pointed out in an article in the wall street journal that said, we really do not think it will matter. no, i do not think this is running their business. this is just having oversight of bad behavior, when they do bad things for the people and customers. >> is this a solution to a problem that does not really exist? throttling and discrimination is happening now on the web? >> there are maybe things in the background we do not even know about that of been going on

inside those companies, because they have not had enough oversight. as far as net neutrality goes everyone agrees we need net neutrality should. the republicans say it is the right thing to do. >> let me just ask you, if you were trying to start a company today, will pick it -- will today's addiction -- position take a difference? >> i do not think it would. yesterday it would. in the earlier days, it would. after a while, it condenses down to a few take players, the big 800 pound gorillas who do everything to stifle and not let the little guys get in. i think it improves it but slightly and only in restrictive places. i am hoping that it gets into things like broadband, able to

be declared a necessity, brought to everyone. there is no big isp that will bring broadband to my house. i am in silicon valley and i do not have broadband because i have no choice. it is a monopoly. that pipe, that is what i grow up with knowing, these are the utilities. things that came into our house that we'd had no control over. >> steve wozniak with bloomberg's peter cook. it is a huge win for some internet activists, who launched a grassroots campaign. here's evan greer of fight for the future. evan: this is an unprecedented victory that everyone, a year ago, thought was impossible. they did not anticipate what happens when any institution of

power comes to take away people pass internet freedom. any time that happens, people rise up. we use the internet to defend the internet. we do not have millions of dollars or an army of lobbyists we can send to the fcc to get our voices heard. we built pools using cutting-edge technology that made it easier for the millions of people who care about this issue, to have their voices heard in washington, d c. >> it is really an amazing thing with our society that does not like to get involved. to see such an uprising of voices, regardless of what size you -- what side you are on. you did things like a countdown clock to the vote, which kind of kept the drumbeat going. talking about how that worked and health people were able to incorporate that. >> what we did is, we built a 12

that made it so that any website could put up that countdown timer ticking off the seconds literally until we get net neutrality. we got more than 20,000 websites to do that for the month leading up to the fcc vote which helped drive an enormous amount of phone calls and e-mails to members of congress to let them know that if they come and try to take away this victory from the internet, the internet will come for them and it will not go well. >> we will be right back talking with some opponents of the net neutrality vote, call it dangerous for american consumers. ♪

♪ >> i'm cory johnson, this is the

best of bloomberg west. republicans are criticizing the decision -- i spoke with kevin cramer just moments after the vote. >> i disagree with him fundamentally on the need for this type of a rule, that i do agree with him -- and i think the vast majority of republicans in congress agree at we ought to caught a fight in law some of these provisions. throttling, those things we agree on. the idea however, even the idea the fcc is overwhelming the title to authority i think is the wrong way to go. we talk about process and i appreciate what he had to say about the timelines and meetings and whatnot, but it did not seem like this role reflects -- this role refracts -- reflects the majority of congress.

i think provides more certainty and frankly more confidence both to the consumer and the investment public. it is unfortunate they trumped congress today, but this is the only the beginning of the litigation projects -- process. >> congressman, it is interesting to hear you say -- take a middle stance. there's an argument of no regulation at all. there's the argument that says title ii is the best way to go because these companies have a responsibility to consumers to provide them important access. i guess the argument that you are making is 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 is a bad thing? >> i am saying that it is unnecessary, and when you give

that type of leeway, that type of authority to a regulatory agency which pass this on a 3-2 vote, it opens the door to lots of other things. he has given assurances that other things like price control would not be part of his leadership, there is nothing to prevent the next chairman, next commission. why always rely on forbearance to be the exception? why don't we leave the internet is open as we can, and let the innovator to be the regulator as opposed to the government? the fcc, oh group -- over regulating, which could lead to why open that door when we already have people working from both parties on a congressional solution i think is more middle ground. >> you mentioned an interesting

word, forbearance. forbearance gives the fcc some leeway in terms of enforcing this role, yes? >> it does give them some leeway but it gives them discretion. if we will trust our discretion to forbear certain things, why would we not trust their discretion on other things like specialized services, as an example? if we are going to give discretion to the commission let's trust them a little more to do the right thing, as opposed to give them the authority and hope they do the right thing hereg. >> title ii gives them that yes? >> title ii gives them the legal basis if this can in fact be upheld, and i'm not sure it can be. it will be litigated, and litigation as we know is a long process, throws uncertainty into

the mix. once the litigation begins, and the chaos begins, that will bring more democrats who in recent months have drifted in defense of their president, in defense of mr. wheeler. hopefully it will bring them back to the negotiating table for a more common sense, moderate approach. >> that is congressman kevin cramer, republican in north dakota here it also speaking out former fcc commissioner, who says these rules are not good for consumers. >> here we have in the united states, for 20 years writing itself on not regulating the internet, and something has changed. this cannot be good for the american public. >> yet those who advocate title to say that something has changed the internet service providers have started to charge

fees to pick favorites, winners over losers on the content side. are you saying that title ii is the wrong way to do it, or any regulation on the internet is bad? >> i do not believe there is any need for regulation. all of these allegations about isps imposing charges on service -- on content companies this is all hypothetical. they cannot point to actual examples. this is all regulation in the name of what might possibly happen in the future. it is not addressing actual problems that we have today. it is not addressing actual complaints that are before the fcc. >> let me respectfully disagree. netflix has been compelled to pay to get ahead of the line. let me read a statement from reed hastings the ceo of netflix.

"they must provide significant access to their network without charge." he goes on to say "allowing fast lanes gives isps the perverse ability to congest, and the power to pick winners and losers on the internet." this is a company that has been compelled to pay this to comcast, to verizon, to get ahead of the line. >> i respectfully disagree. what we have seen here is just 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 everyone else. that is what title ii is going to require. it will quite frankly prohibit

the type of contract netflix entered into. >> what they say is that it let the isps can just their networks or make their networks look congested so they could charge that fee and there was sort of the perverse problem. what do do for that problem creating an incentive to create that congestion for the benefit of more income? >> i do not agree that there is a problem. i believe a lot of this is a manufactured problem. 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 do not think so. i think this is the wrong

solution for a wrong problem and a problem that likely does not exist. >> hypothetically, but not hypothetically, twitter has not had to pay this type of fees but has come out strongly against it. twitter telling us "we strongly support and shoring that such net neutrality rules include prohibition against blocking or throttling of sites and services, as well as paid prioritization of some traffic over others." i feel like the companies in silicon valley maybe most of them see real problems and this for the development of the services they have already created and the development of the services going forward. >> again, twitter does not point to an example of a single website that is being blocked by isps. in the last 20 years, the fcc has had complaints about one site in blocked, and it took

decisive action to unblock that . >> that was former fcc commissioner harold brock. ♪

♪

>> this is the best of bloomberg west. i am cory johnson. it was a blockbuster trial that had a major influence on silicon valley culture. she is suing her former employer . in her lawsuit, she says she was pressured to have sex with a coworker, and spent five years retaliating against her after she broke off the affair. they say she never complained about the affair until later. what does this say about the place of women in seleka and valley? -- in silicon valley?

>> this is quite different from what we have been hearing about. on one hand, i just completed a survey and one third reported sexual harassment. most of what we have heard of of women in silicon valley is much more subtle stuff, women being called aggressive as opposed to a assertive. women having to prove themselves over and over again. as alleged in the complaint and we will see in trial what comes out, but there were literally quite business -- quite different business roles applied to women and men. women not invited to important mail only business dinners. this is very, very different from what has come out before and really is the kind of thing that was going on, for example in law and medicine 20 or 30 years ago. >> is this an outlier for

something that is more subtle and pervasive things that are affecting women in silicon valley and technology? >> not necessarily in my view here it the courts look at each situation case-by-case. when you are in the trenches you are looking at exactly what happened here. she has direct evidence that statements were made to her, she was denied compensation, she was sent to siberia, men were promoted over her. this is typical of her most sexual harassment cases, and women face this all the time. it will be a decision of what the jury feels occurred and how they want to pull out the damages if they think there was a problem. >> the last thing i want to do is take the devil's argument here, but i wonder if the case proves -- indeed, that she was

such a crummy employee. 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? >> i think it is important to look at it through the lens of this case for many of reasons. she does not allege sexual harassment, she alleges retaliation. once she brought this to the attention of people in the firm the coo, the head of hr, and they basically were not responsive or they were inappropriate. for example, she alleges that one partner suggested a one-on-one lunch with some man who had in fact harassed her.

not a professional way to handle that kind of complaint. if you have an employee who is alleging either sexual harassment or gender discrimination of any kind, very important to take it seriously, to get on it immediately conduct a thorough and responsible investigation, and act on it. >> i would say, duh, but they obviously did not get it. is it even not helpful to have this discussion if it was a crummy investor as opposed to someone who is sexually discriminated? >> basically, in every one of these cases you have the same situation. you have the employee saying they'd have been retaliated against, that things have happened here it and you can employer saying there is a legitimate is this reason. what is striking to me cory, is

the case is actually going to trial because there will be a lot of inquiry into the way the company does business. no one wants to know about the way you makes a law may, and that will be revealed here. with respect to mr. howe, a lot will come out about her life her relationship with her husband, her motivation here it nobody wins. it is more about vindication and position in the industry and trying to not accept each other's position. most of the time these cases do not make it this far, so there is definitely some bad blood. >> the fact that tom perkins stated the company had returned to its highest ethical standard, is that matter a lot? that was one of the first things that came out of the trial. >> it will hurt the company just being in the trial. when you are brought to task

with the national spotlight on you and you have to explain yourself, regardless of the outcome, i think the company will take a hit here it. >> we will be right back.

♪ >> you are watching the best of bloomberg last. >> massive charges, layoffs, falling sales, currency head winds everything is happening at hewlett-packard. except for sales success. the 76-year-old tech pioneer in a critical phase as it prepares to split into two. they say the cost of that split 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 -- that the turnaround is on 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 to separate 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. free cash is 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 current fees -- currencies 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. some of that is lower headcount. >> but the free cash flow at hewlett-packard for the last year or two or 18 months has had the benefit of factoring, which is barely mentioned in the quarterly reports in the circular reference. 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 step back here, this most recent quarter. >> so if you look at that the way they boosted that free cash flow by selling receiveables make. maybe 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 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 is really were hp 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. >> that was jason nolen. we will be right back.

♪

>> i am cory johnson. this is the best of bloomberg west. google buying technology and patents from soft card, a service backed by three of the biggest wireless providers. att, verizon, and t-mobile. worked with google to preinstall its app. but is this going to help google take on apple pay? i talked with the ceo of the pay plan called zip mark. >> 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. they have some support from mastercard, etc.. google wallet is the early entrant 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 -- the pioneer 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 very new 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 apple. we'll see that start to even out as more standards emerge. >> you tell me, the

requirements of merchants 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 ecosystem 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 to see if google does what apple did with the banks and line them up. at zip mark, we are a payment processor, 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 ecosystem in line with their new standard. and that will determine how much of the market they can control. >> is the fingerprint 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 convenience for users. >> just when you thought you had seen the most of what ed snowden could release this incredible revelation that the nsa 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. listen to what he had to say. >> encryption is after all all about the keys and in this case very complex algorithms 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 back doors 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 in somalia and said, we do not need to use these. we gave them to the nsa and they were appreciative. but the notion that they would go after 300,000 phones that they had no reason to want suggests that this is a vacuum cleaner of access, not a target of terrorists. >> this is the entire program with collection as it exists right now. intelligence agencies have to look at, do i approach this from a vacuum cleaner perspective or do i go ahead and have targeted collection? the targeted collection piece,

going after specific people, entities, phone numbers is a much better way to do it, much more efficient. the problem that you have is if you do not understand the general landscape of this signals environment that you are operating under, you will not have a way of actually finding that proverbial needle in a haystack. the target you are looking for will not become evident until you understand the background of that target. that is the difficulty intelligence agencies have and that is why the vacuum approach is still being used. >> i want to give them their chance to respond, they said -- the intercept indicates the target was not to molto per se but to cast the widest net possible to reach as many mobile phones as possible. essentially they are saying, that is what was going on, there

was this approach to try to get everything without letting anyone know. certainly in holland they are ticked off about this because the u.s. is supposed to be a cooperative partner -- partner with holland. is this a change that is happened in prior decades? >> what you did in prior decades was cooperate. so when you are dealing with a partner like holland or other western european partners, it was decades ago to tell them what you were interested in and they would assist from their local law enforcement agencies or their intelligence them self. there are a lot of things that are difficult -- different about this. the business relationships that global companies like gemalto have is because it is not just a dutch company, it is a global player and they are the largest

producer of sim cards in the world. they have a vested interest in maintaining security rate the nsa and counterparts in other nations have a vested interest in finding out how to go after certain signals and encryption algorithms so they can then track people they are interested in. >> that was cedric leighton from washington dc. we will be right back. ♪

♪ >> this is the best of bloomberg west. i'm cory johnson. smartphones and tablets have transformed the way television has watched and the way it is made. modern family was filmed entirely on apple devices. shelby holiday spoke with the producer of the show. >> the bigger story to me was the fact that the entire episode takes place on claire's computer screen.

i find that to be the most interesting part of this. we just wanted to do it 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 really simple now. i have a feeling that producing this episode and directing it they not have been so simple. what challenges did you run into? >> there was a lot that when into this. the hardest part was coming up with the storyline in which we could feature all of 11 or 12 of our actors, and still stay on one person's computer screen. we had the original idea for the story, and things fell into place quickly. it was not so much how are we going to feature everyone, but how will we fit all this into one episode? originally we would have the -- we were going to have the actors

should themselves, holding up a phone, but there were other considerations about framing things properly and not shooting offset great we devised a method where the cameramen, our camera people were used to shoot them with the phones, so it did not look like the phones were floating out in space. the actors were instructed to always keep their hand on the cameramen's hand. it was a very romantic day here . >> was there any product placement? >> other than providing the products that we use for the episode, no. this was purely a creative decision on our part, just like the ipad episode was. i happen to be very tech-y and i like this stuff. the last episode, we needed a

reason for phil to be waiting in line and it happened to line up for when the ipad came out. this just came from my life. i was faced timing with my daughter from college and looking at my screen, and there was some e-mails and a script i was working on. i could see her and myself and my wife standing behind me, and some webpages opened. and i thought, this paints an amazing picture of my life. you can tell a lot about me from this one screen. that is where the idea started. >> this is not the first time you have featured apple devices in your show. we do not think about the collaboration between the technology company and the television studio. how important is that relationship? >> listen, it is a fine line is we are not here to sell apple products. that is not our goal in terms of

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

for amateur filmmakers and budding filmmakers, people who are just beginning because you do not need the initial huge investment. you can make a compelling movie on your phone and your computer. and all you really need is a great story and some great characters, and off you go. >> that was modern family's steve levitan. bloomberg west will be right back. ♪

♪ >> i'm cory johnson. this is the best of bloomberg west. what does snoop dogg and mark zuckerberg have in common? they enjoy phil's coffee. silicon valley veterans like ron

johnson, and maynard webb. he joined me with the ceo jacob jaber for a discussion of her and coffee and technology. >> we have most of our stores in the bay area, so there is a lot of technology folks who come in and drink a lot of coffee, especially the engineers. that is a big part of it. >> do you invest in technology companies? >> this is my first venture outside of technology, and i will tell you my story. i love coffee. i am one of those tech guys that have that love -- that love coffee. i cannot drink caffeine, so i drink decaf. nobody has a lot of choices, and my son told me about fills, and said dad, there is this great place you have to try here it he brought me a cup and i said, you

put cream in this? he said, i did not. i said that is pretty good. >> there is more about the technology of -- >> what is disruptive? >> i think we possess a lot of similar values that technology companies do so the best coffee in the world is the one that comes to your taste. comes to each person, individual's taste. we had to platform for customization and personalization. we do not even do express out of stores because we believe that sometimes it is about what you'd do not do. every cup is handcrafted, and we convert latte drinkers and espresso drinkers into phil's triggers every month. >> i am always running from

place to place, and i go in there and have to wait. >> caffeinated people can be in a hurry. >> it does not take that long it could take 3, 4, 5 minutes per cup. it may take a little longer than that, but there are up 13 it's 4 -- opportunities for efficiencies, but we opt for quality. we have an app rican order head pre-order and prepay when you are getting up from your bed choose the blend you want and when you want to pick it up. it is already filled when you walk in. you walk in and you walk out, it is a two second visit. >> now all i need is a runner . >> that doesn't it for this weekend's addition of bloomberg west.

we will see you later. ♪

♪ >> i am here in the heart of london for a leaders lunch like no other. some of europe's top powerbrokers join me for the -- to set the table for the year ahead. it pays to know where the opportunities lurk. this is a career banker. deemed one of the strongest lenders in the euro zone.