Transcripts For BLOOMBERG Bloomberg West 20140804

Spotted child pornography images in a users gmail account. We will look at the privacy implications of the case. For the first time nfl coaches are allowed to use tablets to study plays during games. There was a problem with the service during the season opener. Our lead story of the day apple takes a major step towards controlling every single piece of the user experience, and is reportedly spending tens of millions of dollars to build its own network, its own internet backbone. A new report says a small portion of apples content Delivery Network has gone live in the u. S. And europe. Apple has struck deals with Big Internet Service Providers allowing apple to deliver content like ios updates directly to consumers. This means the content can be delivered at faster speeds and without relying on technology from third parties. Our editor at large cory johnson is with me in the studio and we to joined by an analyst who wrote this report. You pointed out a tray start showing that downloads are going directly from apple to the comcast network. First of all, describe why you believe this is happening. Apple, like a lot of large companies, think netflix, microsoft, google, decided to build their own simply because they need to take control of what they are distributing. For most content owners and distributors it doesnt make sense to get into the business of building a cdn because from an economic standpoint they are not large enough. But as we know, apple has a lot of devices in its market and a lot of Different Software downloads and streaming as well. Iosk of the radio, i was updates, and from itunes. Right now they are only doing a small portion of the delivery but over time they will do more. You also said that this content Delivery Network is huge or potentially huge. It is pretty big. If you talk to some of the isps ive spoken with, theyre talking about the type of capacity apple has put in place. What apple has done it is typical of a company that builds its own cdn it does not just put in the capacity in use today. It puts in the capacity it will need in the future. Some of that the traffic apple is passing over the number today is still pretty small, but they had in the capacity several times for the future. Apple is looking at the longterm play controlling the entire ecosystem. Reports about internet traffic shows that apple has about 4 of in a traffic iosept when they have an update, when it becomes netflix like with 40 of internet traffic. Exactly what does apple have to do to deploy this network . It is not that difficult. What theyre doing is deploying servers in different locations not too many because they are focusing on north america and europe, but they place servers thirdparty data centers and those servers inside the data Center Connect to other networks, and typically the way that is done is through a crossconnect. Sometimes you are buying transit. Sometimes you are doing a paid interconnect deal. Apple in this case is doing the same thing. They are not laying fiber but they are turning on dark fiber already there. Correct. They are not a backbone. Apple is buying from Companies Like level three wavelength, transit. They are buying Network Resources and putting it together to create there own network. They dont own the cable on the ground and are not laying in the cable in the ground. When you look at the potential for this, how big a deal is it . The update to yosemite, but what i where is it going to come into play on a broader scale . Is coming from money they are already spending now. They point out that while apple is a customer, no customer is more than 10 of revenue. But they are spending probably tens of millions of dollars to get their stuff out onto the web could but it is going to meet if they control this network they could presumably achieve cost efficiency. Number one, if it is cheaper, apples Gross Margins get better. Tober two, they may be able tailor it. If they are tailoring service to deliver the kind of content that apple creates, that will come across faster and cleaner, not just the stop we are getting from apple, like movies and music and software updates. Things they have struggled with, things like icloud, the future of computing and mobile, and apple has had issues an with it in the past. If apple is controlling so may parts of the user experience, is this something other companies could do as well . Most other companies have already done it. ,icrosoft, google, twitch yahoo , a lot of these companies started building cdns in 2006, 2007, but cory is absolutely right in that apple has a huge advantage in that their servers are purposephil, built just for delivering apple content. Something that is having performance issues and i know it is something that apple wants to correct. Going to become imperative to the quality of service they are going to provide customers across other services. What about apples television . It is something we have talked about for months, but good in Something Like this come into play in a big way if apple comes out with a Television Set or some kind of Television Service . Here is the thing once i wrote report a lot of people in the media speculated about itv. This doesnt have anything to do with itv. I dont know if any additional plans or news apple has pertaining to itv. Placeis putting this in for Software Downloads and want to improve performance with icloud and i expect them to use it for itunes and radio content as well. It really doesnt have anything to do with itv right now. What does it have to do with a competitor, the dropbox that is a place that apple has looked to grow in the past. This could make it more feasible. Any Additional Services they want to roll out down the line, they could use their cds for. They are not going to deliver 100 of their content, from what we have seen, microsoft and netflix, who have done something similar, typically take about 24 months before they bring the vast majority of their content inhouse. I think apple will still rely on the cdns for a small portion of delivery but most inhouse overtime. Your report has a lot of people talking. Thanks so much for joining us today. Coming up, how technology is helping to stop the spread of the ebola virus in west africa. We speak to an Infectious Diseases expert next. Welcome back to bloomberg west. I am emily chang. More than 800 people have been killed in west africa in the ofoutbreak of people a ebola on record. What is the role of technology in helping to both track and treat this very deadly virus . Cory johnson is still with us, and joining us from pittsburgh, and Infectious Disease expert and a Public Health Committee Member of the Infectious Disease society of america. Thank you for being here. This is such an important story. One of the things you were pointing out is that it is the lack of technology in west africa that is leaning to the spread of the deadly virus. Can you explain that . Thanks for having me. It is not necessarily the lack of technology, it is that he with all the prior outbreaks going back to 1976 has had a lowtech, triedandtrue approach of case finding, finding patients, chasing their contacts, and a message about hygiene and protective equipment. That is what usually stops the outbreaks. What is happening with this upgrade is we are having a hard time getting that message across to the countries that have the most ebola cases, where people have a mistrust of western medicine, a mistrust of Governmental Health authorities, and that is what is driving best friend. Driving the spread. Isnt part of the problem getting the message out, the lack of the internet, the lack of phone . For malaria and hiv there has been a surgeon using these type of technologies to enhance Public Health messaging. We are not seeing that with ebola and it may be that this area has not had the penetration of Public Health infrastructure. But it is one of the most promising ways to stop Infectious Diseases. In the United States we look at who is treating what tweeting what, and as technology diffuses through africa, we will see these used much more frequently. Very beginning of epidemiology, the Technological Advancement of john snows tracking of cholera in the 19th century, taking them taking a nap out of london and seeing where the infections happen. With multiple diseases we have ways of the chronically monitoring them and using models that will determine how the disease is spreading, how many people are getting affected from each other individual person, using antidifferential equationtype models as well as random models that the computer different scenarios for that is how we use technology for example, with influenza. People are using this with the ebola outbreak. However, i dont want to rely too heavily on technological advances because there are simple measures that can stop ebola, have stopped at every other time prior to the outbreak. What are the measures . Is finding the cases, finding individuals sick with ebola and seeing who is in contact with those patients and following them for the incubation period of 21 days and telling people to wear proper protective equipment, and then also when dealing with peoples buddies who have died from ebola to use copper practices that dont expose them to body fluids. You can only get it by being exposed to blood and body fluids. There have been a lot of discussion about the 2 american citizens being brought back to the United States and one of them is already here with an infected with this virus. Can you talk about the technology that is keeping them in isolation with the transportation event, and once they get here, what kind of technology is being used to make sure this doesnt spread . The doctor came on a gulfstream jet that had the special isolation pod within it that kept him separate from the rest of the cabinets. Isever, like i said, ebola only spread through blood and bodily fluid and most people dont have a big risk when their writing on an airplane with unless they ebola are exposed to the bodily fluids. He was put in a facility at emory university, one of 4 unique places in the United States. The room is specially pressurize so it does not allow air to leak out of the room and there are facilities to deal with this blood and bodily fluids. There is no cross contamination. The individuals examining him would be wearing stateofthearttype respiratory protection to avoid exposure to any aerosols that might be generated. However, like i said, ebola is only spread in a very limited fashion so a lot of this is relevant for other diseases like sars and mers, which is what these were designed for good however, he would be getting all that stuff just by being there. The other issues he has received an experimental drug, and that is a Promising Technology and that involves rationally designing molecules that are specifically targeted to parts of the evil of virus so that it parts of the ebola virus and it is a very elegant solution to treating Infectious Diseases. That is one of the Great Success stories that this drug is being used for the first time in humans and has not shown on could untoward effects i think that is going to come out of more of the clinical case history published and discussed. If you had to pick one lesson from aids that is being applied to ebola, what is that . What we had was an outbreak that went undetected probably since the beginning of the 1900s, and then he came to light in the 1970s. What i think is the biggest lesson of hiv is a negative lesson we didnt act early enough with hiv. If we wouldve caught hiv in the states he was dumping from animals to humans before it had the ability to spread to humans, we could have changed the face of the epidemic. ,hat is important about ebola controlling the source before it gains mutations and can do much more damage the way hiv. The wayway hiv di hiv did. Tracking these outbreaks when they first spill from human to humans from animals and not allowing them to get a foothold in the human population. Stuff,right, fascinating and good to hear you are out there doing this kind of work. Infectious disease expert, thank you so much for joining us. We will be back with more of bloomberg west after this break. Microsoft is teaming up with the nfl to offer tablets on the sideline of games. It is a 4 million deal, use samedayem to action. They will only connect to a private instadium wireless network. Is ame now to discuss Bloomberg News reporter and gadget editorinchief. Apparently it didnt work out so well yesterday. I dont think anyone has said what happened. It just didnt work for the first half. That is a long time. Es out problem. V i was spending some time with the developers of this service, behindthescenes thing, and i ran into the guy working this program and he explained that getting this technology in the hands of coaches according to the sky, according to this guy, wasnt as hard as they expected. They had a guy with a blackandwhite camera and would run down copies or print them on the sidelines and look at where the defense was paired pretty old school. A lot of this is a Marketing Partnership with the nfl, looking for different ways in which they can integrate technology and also marketing deals. Coaches wearing the headphones on the sidelines. Part of this is getting new technology. If the team decided they wanted to use apple or why isnt apple jumping on this . There are teams in various sports that use ipads. You read about when a new player comes onto a team they give them the ipad with the playbook and things like that. There are ways in which apple is in there but they are not the preferred provider. This is highly regulated by the Different League and college. The camera was going by the background of the or gone Coaching Staff in the booth oregon Coaching Staff in the booth and the cal team looked up and said that these guys are using laptops they are not allowed to use. One interesting thing about the new surface is that they have this system that is not far to even the most dumbest football coach in the world. Allowing themlly to tell a straight in real time in real time. Te when you see Peyton Manning during games hes usually flipping through polaroids. The coach can point out where the defender is going to move instead of flipping through time lapsed photos. They can draw plays and how the defense is moving on there. How helpful is it . How helpful is the new technology . Assuming it works. Yeah, assuming it works. It really speeds things up. Instead of having to flip through photos, you can watch short clips of the video, instead of just still images. I think that is where you get the technology providing a little bit more advancement. Im looking forward to the first loss being a committed as well to those services. As well totributed those surfaces. The champion of the Seattle Seahawks as much as it pains 49ers fans to say that out loud that coach in particular got it instantly. Thank you so much. We will be watching those tablets on the sidelines. Coming up, more of bloomberg west you are watching bloomberg west, where we focus on technology and the future of business. An upstart chinese phone maker was number one in china for the second quarter. According to analysts, it had a 14 share of the chinese Smartphone Market last order last quarter, knocking off samsung for the top spot. Aomi shipped 15 million smart phones in the quarter. There are Big Questions about what a deal would mean for the media business. We will be following time warner earnings this week. Jon erlichman is joined by longtermerim ceo and Media Executive ross levinsohn. If anyone is qualified to talk about this foxtime warner deal it is ross levinsohn. He has worked both forward for monarch and the boss a time warner both for Rupert Murdoch and the boss at time warner. We have spent the last couple of weeks getting everyones reaction to foxs interest in time warner. What did you think . I am not surprised. Obviously, mr. Murdoch and news corp. Are credibly aggressive. The thing that jumped out of me jumped out at me most of this word to go through and the thing that resonated most with me is the powerful just incredibly powerful executive team that would be part of this combined company. I would almost say it is akin to the murderess row on the 1927 yankees. Think about the team in place between the news corp. Side with mr. Murdoch and chase carey and James Murdoch and dinner rice peter rice and the executives on the the divisions and time warner side, i dont know if jeff would stay but he is an incredible executive. The folks at cnn, jeff zucker, if you were to stay, at turner, hbo, just unparalleled talent in that combined company. Always of the question whether anybody stays. Since we dont know how this is going to end yet, and you have worked for both Rupert Murdoch and jeff bucher is, how do you think this wind . This will end . Getsrupert debt is his sights set on something he does everything he can to get it. I dont think in this case news corp. Is looking for a certain price and time warner is looking for a certain price. I think there is incredible synergy and the company is. I think you can run multiple studios and multiple Cable Networks and use the leverage of the combined company to take some back Office Expense out. I think it news corp. Will work very are to get this deal done, and i think it will have to be the right price for time warner. I am stating the obvious but this deal will have to work for both sides and it is incredibly powerful if that happens. If not, disney is looking out there thinking about it, and maybe one or two others. That is a good point. As somebody who has spent time in Silicon Valley, do you think it is possible in this time of convergence that you would see a big player in tech acted the way thank you time warner act as the white knight to time warner . I dont. Owning content is a little outside the comfort zone for Silicon Valley. Netflix and apple have figured out how to bridge the 344ish miles between Silicon Valley and los angeles and they do it through licensing the content that is produced mostly down here and building the platforms that are produced mostly up there. I think there is general unease about owning content in Silicon Valley. There is acceptance, and embrace of sorts to licensing it and working with the partners, owning it. Platforms tend to have much bigger margins in Silicon Valley that actually building content area i think there is a comfortable marriage right now but i honestly dont believe we will see one of the big giants in Silicon Valley right off a 100 per share or more check for time warner. Business models sometimes have overlap because everybodys going after advertising dollars. The company, yahoo , where you used to work, people asked if it is a Media Company or Technology Company. How do you think the business of yahoo is performing right now . I dont want to sit here and monday morning quarterback the work that Mercer Marissa has done. I think she has made it part of the conversation in a very positive way again. Thingsretty simple about. I looked at it as a Media Company, a Media Company with powerful technology. That technology can help can helpze content, it target advertising, and it also helps people discover and communicate. I dont want to really speak to be a critic or supporter in any respect. It is horrible when i was sitting in a chair even running the americas, it is hard to listen there are a lot of critics and experts out there. I can only tell you that from my perspective it is a Great Company and there are great people that great people there. It is finding its way. She was right when she came in and said that it is going to be a couple years. But you have got to lock into a strategy and for me that was a Media Company with powerful technology. The advertising is there, the people are there. It is doing more than 4 billion of revenue. It is doing hundreds of millions in profit. You have got to lock down and plan for the future. The next year or so is going to be important for that company postalibaba. The company has said that the money that comes back from the alibaba ipo, a good chunk of it, at least half, will go directly to shareholders. If you are calling the shots on how that cash from ali baba were spent, how would you spend the money . Oh, god, hypotheticals. My strategy was clear when i was there. I would have invested more in premium content, more in ways to monetize that content. I also think, honestly, there was no way around rationalizing thesize of the company and focus. 2 years in, you really have to be focused on what that company is, how it is set up for the future, and the money look, no secret, i was aggressive looking at hulu, both at yahoo and postyahoo video is part and parcel of the future and in that respect, premium video. I was pretty clear and on record on where i was to move that company. Marissa comes from a very different background than me and she is an incredibly talented product person and visionary. Wherever she ends up taking it longerterm, the markets will judge it and the entire industry will judge it. Only about 10 seconds left. In terms of what you are up to now, you are with Companies Like stout. Is there a common theme here . I would say i am in and around premium content and video. I believe in the future. I am working with upstart companies. Unwearable Technology Company a wearable Technology Company. To provide secondary opportunities, providing liquidity for these very, very Rich Companies out there. I think there is a big market for that before they go public. The common theme is creating great products, and in my case, mostly technology and content. It is an incredibly vibrant time right now. No doubt. It is indeed. Thanks as always for your time. Yahoo interim ceo of joining us from los angeles. A google tip leads to the arrest of a man on child born charges. Police in houston arrested a man after google sent a tip into the National Center for missing and exploiting children saying that the man had explicit images of a child and his email. Authorities used that to histion to get access files. In april, google updated its terms of service to warn people that it was automatically and statedmails publicly since 2006 that it is working to fight online child sexual abuse. Joining us is executive director of the online trust alliance. As far as you know, how far did aogle go, how active was google in tracking down these images and leading Law Enforcement to this person back . Good morning, and thank you for giving me a chance to discuss this key issue. Google is not alone. Many technology leaders, including microsoft and others, thatcreated Key Technology provides this scanning of images. In many ways it is a very good thing. It is protecting users and in this case it is helping to comply with law and the requirements of detecting child pornography. Sayhen how active would you all of these companies are in actually tracking it down . Reporting it is one thing that going through emails is another thing. It is hard to argue that identifying child pornography is a bad thing. I think users have a question of how far these Tech Companies are looking into my email. For my past experience at microsoft, being involved with similar technologies, it is not like someone is sitting and looking for those images. There are algorithms that are very sophisticated that have this ability to identify images such as this. And then theres a process where, again, it gets escalated internally for verification. I think the bigger issue is that consumers need to understand what the terms of use are using these technologies, and at the same time balancing that out of what the legal requirements also the requirements of Service Providers today. I guess the question is where do you draw the line. If child porn or looking for these kinds of images is allowed, what is the next frontier . This is a key issue. I have been involved in official recognition workshops with the department of commerce and there is this balance of Data Collection and data mining and for what purposes. Fraud detection, security purposes, surveillance purposes, major issues that are going way beyond email. It is more and more devices with image capabilities, image capture capabilities. Gotten a lotse has of attention. I wonder, how often is this happening . You would think that everyone out there is using these services. Does this happen more often than we know . It is hard to say. There is also a risk of false positives. Lets say there is a scenario that a newborn child and a father is holding up a photograph of the infant baby that is the child monogamy. Child pornography . Nobody would think that. We have to make sure that innocent images are not perceived as such and the falsepositives and the impact that can happen from that. Again, as i understand it, this technology is by multiple Service Providers, as i mentioned. Microsoft has other technologies that they have discussed openly to help protect this capability. Detect this capability could i would suggest it is an ongoing basis, not just a random evaluation. The images that are being loaded are being analyzed and in a case where they are suspect of being an exception basis, evaluated further. I understand you did work at microsoft a long time so you would and should know. Thanks so much for joining us on such an important story today. Coming up, we will have more of bloomberg west after this quick break. I am emily chang and this is bloomberg west. Cyber security is playing a bigger global role in many occasions the department of Homeland Security is teaming up with the National Association of Corporate Directors to provide executives with a free digital sample security handbook that helps to understand Cyber Threats and assessing security vulnerabilities and teach employees about hackers. Someone who has worked for the department of Homeland Security and helps see streetlevel executives design of Cyber Security strategies. Tell me about this handbook. Handbook it is a good for the National Association of Corporate Directors and it properly puts risk and this issued at their table. Corporate directors needed to realize this is an internal an extra role risk to their organizations. It is internal because they needed protect intellectual property, and extra will do to their perspective on the brand that in addition, what people are not rising is all sorts of risks when you think of mna and potential transactions. Anything connecting into your network is a potential risk to your organization. I want to go through your list of tips for the csuite when it comes to Cyber Security. Number one, improve information sharing. What do you mean by that, particularly at a level where does everybody at all the information . You have to be able to talk about this across the organization. This is to approve cyber hygiene. People need to understand basic passwords and how to protect themselves. Basically, be smart with their assets. 2, work with others in the industry and share affirmation on threats and vulnerabilities and issues you can solve as an organization. 3, the responsibility is up at the board level. Downs to be communicated from the executives themselves about the policies and procedures they want in place. Assess vulnerabilities and understand critical access. We were speaking about marissa whor, the ceo of yahoo , said that she does not use a passcode on her phone. If i dont have a passcode on my phone. Oh, yeah . Look, i just cant do the passcode saying 15 times a day. She is busy, she has a lot of stuff on her plate. But is that a big nono . It is. That basically adds another layer of security, and it is one step that makes it that much harder for somebody to gain access to the device. Number three, prepare and practice and Incident Response plan. It is plan plan plan. It is critically important, where if there is an event what do you do . How do you make sure the event doesnt get worse . Some people shut down portions of the network until they have time to go in there and do the full Incident Response and understand what happens. Second, you need to determine if you have to provide disclosure to your shareholders and to the public. Number three, you have to run while you are doing this investigation so you are able to continue to operate and not make this the whole issue. Any examples where the incident plan was acted on poorly or well . Im not sure if there has been enough to date. If you look at the heartland payment systems, if you look at target on the some of the major reaches over the past few years, all those companies wish they spent more time planning for what they would do now than they did before. That is a lesson for everybody. Cyber risk is just like any other risk. Four, trade in place, number five, leverage public and private partnerships. People need to be cognizant of where they login. Dont use public networks, use passwords, take your appropriate training courses about not to click on suspicious links. You have to be sure that you are doing your best to secure your enterprise. Fifth, i think you need to take it vantage of these resources. Educated andoyees speak to the government, dr. Experts to understand exactly what is talk to experts to understand exactly what is happening. If you were to give the general csuite are great for how well theyre are doing on this, what would it be . Airw it would probably be c but it is remarkably improving. There has been broader education about Cyber Security and people realizing that ignorance is not an answer and they need to be educated so they can ask smart questions. I did not like getting cs so i hope they are getti working on that great. Thanks so much. St bite, for the b. We where we focus on one number that tells a whole lot. Cory has the bite for us. How about 124 million u. S. Dollars . With apple launching its own content Delivery Network, apple is in a much better position to launch a competitive runner to competitive product you box. There is an opportunity for new competition that category. I guess i wonder, everybody is worried about google killing dropbox, and that didnt happen. Are the concerns about that overblown . There is a lot of competitors out there. Out there with a product that carter thought was the best. Lots of competitors. It is a hot arena and looks like the future of computing to be out there in the cloud, providing file updates everywhere. Got your money on anyone . You have seen the ceo of box, spent a lot of time in hollywood, in turn interned in hollywood, trying to cultivate those relationships. Ok, thanks so much, and thank you all for watching this edition of bloomberg west. All the headlines all the time on your phone, tablet, and bloomberg. Com. From bloomberg World Headquarters in new york, i am mark crumpton. This is bottom line, the intersection of business and economics with a mainstream perspective. Today, we will look at u. S. Economics investments in africa. Then our series powerbrokers look at conservative fundraising groups. And, why the latest report showed diversity is lagging in Silicon Valley. To our viewers here in the United States and those of you joining us around the world, welcome. We have full coverage of the stocks and stories making headlines today