Transcripts For BLOOMBERG Best Of Bloomberg Technology 20171124

And thessed her tenure tough job that awaits her replacement. The Trump Administration took a big step towards avoiding obama era Net Neutrality regulations. The current sec chairman announced tuesday he plans to hold a to cymer 14 vote on overturning the protections. The regulations are intended to prevent broadband providers from favoring their Business Partners offerings or their own video and other content. The fcc would require that all Internet Service providers be transparent about their Business Practices if they are blocking or throttling content. They have to disclose that, and we make clear that the federal trade commission would have authority to police broadband providers if they are behaving in an anticompetitive way. Through those rules, we would be able to protect consumers Going Forward and protect investment in networks that are necessary to promote digital opportunity. Caught up with a man who led the fcc during the Obama Administration when those , tomctions were instituted wheeler. Mr. Wheeler transparency is the solution, so all that is necessary to do something evil is to tell you that im about to do something evil. That does not make any sense. Then what do you do once you have that information . 2 3 of the households in america have no other choice as to where they are going to get their internet, so this is to go out and claim that somehow this consumerind of protection is a fraudulent representation. They say there proposal is more fair, more proconsumer. What makes you think it is the apposite opposite . Name ofler in the consumer protection, they are not going to protect consumers. Mcsweeney this afternoon tweeted that even if they turn it over to the ftc, they do not have any authority. They are just running away from their responsibilities. Emily the big concern is how this impacts the haves and havenots, the folks who could increase future innovation, be responsible for future innovation. How would this impact the haves of the moment, googles, facebooks, netflix . Mr. Wheeler i think the big thing is how it affects everybody and their ability to get on the internet and for consumers to reach providers and providers to reach consumers. What were seeing here is the ization of the internet. If you like your Cable Company in the way they choose which channels you can see and the way they continue to increase your prices, you will love what happens under this repeal because suddenly, the people making the rules are the networks, and the consumers cannot survive without the networks, and the Service Providers cannot survive without the networks. Isps how can we hold accountable . Mr. Wheeler that is what we did in our open internet rule. Noblocking, no throttling, paid prioritization. You have to provide information to the consumer, and we will put a referee on the field to look at what your continued actions are as Technology Evolves and throw the flag if necessary. What the trump fcc is doing is just turning its back and walking away and giving the Network Companies everything that they have asked for. This is unfolding against very interesting political backdrops. We mentioned earlier what is going on with at t costs proposed merger, with time warner, the doj now suing at t. How much of this is politically motivated . i cannot answer that question. I do find it shocking that the trump fcc from day one has gone right down the line for what the Big Companies want when they are supposed to be representing consumers, not the companies, continually turns their back on their congressional mandate to protect consumers. By all accounts, it appears this will happen in december. For you, what is it like to watch your work be undone . [chuckles]. Have had better thanksgivings no, i think the answer there is that this is a long process. Yes, it appears as though they have the votes to overturn it in december. Then it will be up to the court. The decision we made twice went through the court and was twice affirmed by the court, and i hope that the court will look at this and say, hey, wait a minute this has been in effect for two and a half years, and there have not been bad things that resulted. Why are they turning around and going the other direction . Emily that was the former fcc chairman, tom wheeler. Lets get the other side, the former republican fcc commissioner who served under both president s bush and obama who joined us right after wheeler in support of a rollback. We are going back to where things were in 2015 and what is isng put back into place clintongore administration policy. The internet ecosphere, i think we can all agree, was exploding beautifully before 2015, before thee old 1934 rules under 1934 Communications Act was put on Broadband Internet access. You the have section two of the clayton act, section seven of the clayton act, actually. You have a lot of protections. The terms of service, white each broadband Internet Service provider, which is a contract with consumers if they were to discriminate in a way that harms consumers, there would be lawsuits, forf instance. There are so many protections that were already in place in 2015 before the single title to was imposed into the internet ecosphere, so it is actually going to be just fine. The sky is not falling. There is not going to be some internet dystopia coming. Its going to be the same place better place, actually, as we look to invest 300 billion in new mobile technology that we will need over the next decade, to have america continue to lead the world in wireless and really wire up the internet of things. Its going to be a great decade coming up. Got a question from if you are who asks quite plainly how this actually helps consumers. 2015, weell since have seen a stutter step in investment in broadband networks. A number of studies and market analyses suggest that capex has been curtailed in this space because as you had in a previous segment, the damocles of rate regulation was swinging over isp s, so title to was created for the mob bell title two was created for the ma bell faux monopoly. With this bottleneck all of a sudden for innovation and experimentation in the marketplace. Keep in mind, by the way, that over 90 of consumers have a choice of 4 mobile broadband providers. Speeds are much faster than dsl or cable modem speeds were, and they will be 100 times faster after we wirelessly connect with internet of things, so its going to be a wonderful time. sily how do we hold isp accountable when this is mostly onsystembased . Mr. Mcdowell there are many laws in effect here. What prevented them prior to 2015 from behaving in an anticompetitive way that harms consumers . The section five federal trade commission act, the clinton alsolayton act, but economic incentives. You have a competitive marketplace for broadband, and it is primarily mobile broadband. We see cord cutting and court shaving. Shaving. Have market pressure, and you had other laws already on the books prior to 2015 that protected consumers, protected entrepreneurs, protected investors, and it gave us this great ecosphere that we enjoy today, so it is a myth. We have also been talking about video j suing at t over the attempt to acquire time warner. With tom wheeler, we talked about how much of all of these issues are politically motivated. Im curious for your thoughts on that. Mr. Mcdowell i worked on a lot and we worked, closely with the department of justice and the federal trade commission on these deals. Are seeing is a reinvention of antitrust law or an attempt to do so with this. Omplaint there is a reason the government has not challenged a vertical deal where a distributor is buying a supplier in new a half a century. That is because they tend to fail or there is no competitive harm. Right now, the jurisprudence, the case law is really stacked against the government. The government has the burden of proof are, and we are going to see an interesting case. Get the popcorn out because there are two have companies in america that know the most about antitrust laws. Exxon, the old standard oil, and ma bell, at t. Go for awilling to horizontal merger where they were buying a competitor. They are more than willing to go to court and win. The government has a huge burden to overcome and would really be creating a new caroline and a new precedent as they try to argue in court the government has a huge burden to overcome and would really be creating a new paradigm. Emily that was former sec commissioner robert mcdowell. New ceoubers ubers finds himself an apology mode again. This is bloomberg. Emily this week, we learned massive hackup a attack affecting 57 million accounts. Hackers still the data of 50 million drivers. The company kept the breach concealed for a year. Oustedek, the company teen of executives for their roles in keeping the hack under wraps two executives for their roles in keeping the hack under wraps. Rather than report the breach, the company paid the hackers to delete the information. More than a year ago, uber heard from the attackers they found a way to get names, telephone numbers, that sort of information on 50 million riders and 7 million drivers. Most importantly, drivers license numbers for 600,000 numbers. That is information that uber was required to disclose and did not. More than a year later with a new ceo, the company is deciding to come forward and say that they should have disclosed this information, and here is what happened. Emily hes telling them out of this should have happened, he will not make excuses, and they are changing the way they do business. Has been negotiating with regulators. For a long time. What makes them think they could get away with Something Like this . While they were talking to the federal trade commission and just after negotiations with the new York Attorney general, they faced the question of what to do about this hacking. Its hard to imagine this engenders any sort of trust with regulators. You already saw in the instance with london where regulators revoked their license that part of the issue was a just did not trust them and that the company had not really represented very clearly what has gone on. This is another sign that uber is willing to go to great information that it believes it is required to report to regulators. That will give cities, states, and National Governments all over the world serious pause. How can we be sure this information did not get into anyone elses hands and that the hackers did delete this information . Eric right. Is they did pay the 100,000. They had evidence that the files were actually deleted. We do not know who these hackers were, but they refer to them as individuals. Right now, there is a belief that that information is not out there in the public, and uber is offering Data Protection for the drivers affected by the most serious information breach. The former ceo know and when did he know it . Error always a good question. A lot of this false to their chief Security Officer eric always good question. A lot of this falls to their chief Security Officer. He was ousted. He knew the company had been negotiating with the Attorney Generals Office in new york and the ftc. There are questions about how much he knew, the legal reasoning and legal obligations behind the decision, but he certainly knew about the hack uberhe scrutiny over faced. Emily what kind of penalty ofld they face some sort consequences from regulators, could they be hit with a lawsuit in fact . Eric anything is possible. As we reported before, uber faces ongoing criminal probes that have touched at least five different areas. This is a company that over time regulators and Law Enforcement officials are looking at, and there are dozens of lawsuits against them, so it would not be surprising that Something Like that could happen, but i think we have to wait and see what the actual consequence is, but you have to imagine a some sort of monitor or attempt to make sure that uber is doing what it says is doing is something regulators or Law Enforcement will be thinking about after these revelations. Emily i know it may be hard to keep track of all the open investigations, but what do we know about the status of those and if we are likely to see any kind of penalty . Eric we have not heard a lot since my big story last month saying that there were these five investigations. One interesting fact is that joe sullivan, who has been ousted as att of this incident, was this center, or at least his organization was at the center of some of those things. You hear about gravol, the software meant to help in some cases drivers evade Law Enforcement. That was something sullivans team was responsible for an something investigators have looked at and may still be looking at. There are so many questions until the ceo has to keep playing cleanup, and he knew that was what he was coming into. Maybe he did not know quite the extent of it. This one, the data breach, is a total surprise. Emily tesla is spending an average of 8,000 per minute as it rants of production on its all model 3 sedan, which would put the company on track to exhaust its current cash pile by a early august, so the pace is not expected to continue. Tesla has said it has ample money to meet its target of producing 5000 model 3s by the end of march. Is hittingthe doj at t hard. Details on the losses that could block at ts 85 billion takeover. Lawsuit that the could block at ts 85 billion takeover. Emily big news for tencent, which has become the First Chinese government to revalue net more than 500 billion dollars. This just three months after it top 400 billion for the first time ever. It joins apple, apple that, amazon, microsoft, and facebook is the only companies valued at ithan 500 billion joins apple, alphabet, amazon, microsoft, and facebook. We got exclusive access to its workshop and drum testing grounds. Tom mackenzie reports. Testing grounds. Tom cole and the drudgery of could be nearmute drone if these taxi makers get their way tom the drudgery of your daily commute could be near an end. We have the permits and our taxi drones will be seen flying in dubai and other places public we. Tom where do you see the iggest opportunities publicly . Definitely commercial use rather than human carrying drones. Were only at the beginning stages of largescale usage of drones. The passenger drones had just come to the attention of the public and our company has just shifted our attention from technology to the commercial side as we see huge opportunities in the global market. Tom is the biggest challenge the regulatory market . Is that still the number one obstacle you have to get over . The Civil Aviation authority and uae in china have given us the green light for testing. In china, the u. S. , and many other places, policy makers have put us in the center, working closely with us every day on regulation. This is already very unusual. Your prime focus or are you looking overseas as sales . The overseas market is indeed bigger than the Chinese Market in terms of purchasing ability. However, we are making our way in china. For example, we signed deals with tina local governments and health them build control centers like this one for them to use our drones extensively in areas such as urban control and Environmental Monitoring we signed deals with two local governments. I expect passenger drones to bring us much more income next year. Secured a 1dy million order from an American Company and formed a strategic partnership. The passenger drone will become a star in 2018. Tom you received 52 million in funding. Are you still looking for investment . Regarding 300 million u. S. Dollars as we start mass production of our passenger drones at the beginning of next year. We also plan to install fully Automated Production lines to enlarge production capacity. Furthermore, we will sign deals in saudi arabia, singapore, and several european sites where we will need funding to support drone tests. Tom they are also putting their three of delivery drones through their paces. If regulators give the start of , it will sendt take off. Still ahead, the Justice Department has filed suit to stop at ts takeover of time warner, and President Trump had this to say about the deal him not going to get involved in litigation, but personally, i always felt that was a deal not good for the company. I think your pricing is going to go up. I think its not good for the country, but i will not get involved in litigation. Emily more on that story ahead. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Back to the best of Bloomberg Technology. I am emily chang. At t is telling the Trump Administration we will see you in court. It is suing to block at ts takeover of time warner. Randall stephenson says it stretches the idea of antitrust beyond the breaking point and is vowing not to sell cnn. The deals a major blow to bid to create a media and telecommunications empire. We listened in on the doj call and we were joined after. Is it is ationale but they areer, saying this concentrates too much power in the hands of one company and gives at t too much to prioritize its own stuff through time warner, so it is really interesting and unheard of case for the doj to come out against what doesnt at least on paper look like a pure vertical merger. Leading uphe weeks to taking over the position that doj, it look look like everything was moving forward. Is this politically motivated . Cory there has been some reporting saying this did come from the staff and not the politically appointed people. The suggestion was this was about market concentration. The lawsuit will try to bring into what ever it can come at what the president has said on twitter and in private to look out it may have influenced the deal to throw some mud at this thing, but this is a pretty tough suit. It is interesting to see from from this current fcc. If this is considered a consolidation of power, had we think about google, facebook . There is more power and influence in those companies. If i am them, i am nervous because the legal environments adjust they could be going after Large Companies of influence. Could do you think this have a broader Ripple Effect or is specific to this deal . It will absolutely have a broader Ripple Effect. There is no way this doesnt have a Chilling Effect on m a. Wes is a case about what constitute power to be. You had the traditional idea that power concentrates markets. This is the idea of absolute power. If the doj goes through and you will see people who would have done mergers thinking twice. You will see people pullback from some of the bigger, potentially more contentious the idea ofhen trump and whether there was political influence, we dont know yet, but trump has been vocal he does not like this deal and does not like cnn. Stephenson said spinning off cn and is not an that they want cnn come up there is an opportunity to negotiate. Could that be part of a negotiation . Cory it looks like the negotiations ended a few days ago and the suggestion that cnn might be spun off, that might have worked, but they are going to court. Is important to understand how cnn works within the cable empire at time warner. If the cable carrier somewhere wants to carry cnn, they will be told you can have cnn if you take tnt, cbs, all our other offerings, so time warner is able to sell many crown networks by having the crown jewel in cnn. Thats why you have cbs and tnt on all these other carriages, a great source of revenue for time warner, and time warner recognizes they need to keep it heart of their business. Emily we are getting headlines out of the doj, saying the lawsuit has nothing to do with President Trump or influenced by President Trump or anyone else in the white house. Cory it does not mean it wont, in the trial. Of course they will say that. They have to say that. Emily party line. It is absolutely party line. Cory an oldie but a goodie. About how to think people consume media and content these days. All that is changing, therefore the rules are changing. Thats what we have to think about, the potential implications. At ttime warner merger would propose a level of competitive harm not seen in decades, ok. This is why a doj official is saying, what is next . How does this process play out . Think they will obviously go to court on this one. It seems unlikely they will find resolution before hand. At t believes they have a winnable case. They believe there has been some level of political interference. They said on Must Immediately when the doj came out this put out anat t aggressive statement saying the lawsuit is a radical and inexplicable departure. They feel this is the doj overreaching and they will go to court and hope to win this case. What do expect the consequences to be if this deal does not go through . I like the point, blame the bankers. It is always a good start. If it doesnt go through, look at fox. You have a number of companies trying to buy assets from fox. There is still a lot of potential acquirers. They have until april until someone can come in and pick this up, but you could see other suitors try to buy all or part of time warner. If they go to court and this thing gets blocked, it does not bode well for people attending these big, contentious mergers. Odonnell, was bob ed hammond, and cory johnson. Coming up, a major executive leadership departure, the next ceo as meg whitman wraps up almost seven years at the helm. This is bloomberg. Earnings front, salesforce reported a quarterly profit thanks to an expanded lineup of cloudbased programs. Revenue rose 25 in the fiscal third quarter, but forecasts for Fourth Quarter missed estimates. Marc benioff has been looking to new products, marketing and Ecommerce Services and adding Machine Learning capabilities to attract clients amid heightened competition. Major leadership changes at Hewlett Packard enterprise. Meg whitman will step down from her role february the, but will remain on the board. News of the executive reshuffle was announced in the Fourth Quarter report. The Company Reported 7. 5 billion in net revenue, missing estimates. We caught up with cory johnson and executive Vice President of Research Products for ibc. Apparently and impossible job, to write Hewlett Packard into a bigger and Better Business and restored to the full glory as the leader in silicon valley. We saw a lot of changes at the company, most notably the split , the highgrowth and low growth business, to spin it out the other side. Highent in as ceo to the growing business, but that business continued to shrink and spend billions of dollars on acquisitions, and yet they are still taking writedowns. They spent 10 million a week in restructuring charges this quarter alone. The onetime restructuring charges go back to 2001. That was not all her fault, but she could not find the direction to resume growth. The numbers they put out show some growth on an adjusted basis, but you see the most important divisions were not that they relied on a lot of leasing. They could not get the right product mix. Emily the president will be taking over for her. We spoke to him on a while back. About being successor to meg whitman. I have been in the company for 22 years. Always in many different areas of the business. I am very excited about the future of this company. Crawford is now with us. He will be succeeding meg whitman there. With meg whitman herself. What did she have to say . We talked about the quarter and her legacy. What she feels is that hewlettpackard is innovating in a way that were not when she arrived. If you look at the situation this company was in when she arrived, they were in a real haphazard situation with the exit of the head architect. The playbook they are running now is a playbook where they can and do innovate. The problem is they still participate in a lot of relatively low market segments. I have to tell you, this company was irrelevant, heading towards irrelevance, 34 years ago. The playbook of value added areas of the infrastructure that they can add to their portfolio and sell through their channel is showing Revenue Growth. That Revenue Growth is something we have not seen for a number of quarters. Now we see the second sequential quarter, so relatively we talked about it. The business is performing has in recent it history. Separate from that, you have to look at how is the job done. That is the. Open question. Kind of leadership is he expected to bring to the company . I have known him over 10 years. Precompaq merger. I met him within the personal systems group. In thehe every hper sense that he knows everyone and has climbed the corporate ladder and is well regarded in the company. Make made a comment when i spoke to her, when she joined, 60 of top managers were not from hewlettpackard. Completelymber is reversed and we have the ceo who climb the corporate ladder, so he is well regarded within hewlettpackard and a back to the roots of climb the corporate ladder and taking his bombs internally and knows the organization in a unique way. Coming up, consolidation in the chip industry continues. Arvel rallies off its plan all the details are next. Siri. Between alexa and the animal home pot is supposed to compete with echo, but is it too little too late . This is bloomberg. In the battle of the voice activated as systems, apple may be losing out to amazon in more ways than one. The homepod is set to debut next year, three years after the echo, and it is not just about timing. Home pot lacks many of the comes out with something that leapfrogs competition, a breakthrough. We saw this with the ipad come iphone, and i watch. Comingseeing a product three years after amazon, but misses the point in terms of what amazon is hitting at. They are going after a category that people arent asking for. Devicewant a cloudbased like the echo they can do everything from ordering groceries, lunch and dinner, to making appointments and calling an uber or lyft. What apple has brought to the table is a great loudspeaker. Emily when i spoke to tim cook itjune, i ask if this ed in apple is interestin getting into ecommerce print he said no. Ecommerce. He said no. Apple is a company that deeply believes in music and was to deliver a great audio expense for the home. We think we reinvented it for the portable audio player, and we think we can reinvented for the home as well. Emily is he right . Or is that not what customers want right now . Through somee his history. In 2006, steve jobs unveiled a , 350, called the ipod and the pitch was to reinvent home audio and sound. That product did not fare too well. Although this was 10 years ago, the product was a massive for lop. Here is ample 10 years later with the same approach, a speaker that sounds better than the competition and integrates with apples products better than the competition, but is not a true leapfrog product, a true ipad, iphone,he and i watch were when they came out in their respective categories. . Mily what do customers want is it ecommerce, and can we expect siri to offer any of these features . The alexa has been a surprise hit. You can control your home, your music. Do home pod want be able to much beyond that. In terms of ecommerce to the home pot, one of the key differences is that the echo is the product. The home pod is an extension to the product. There are thousands of apps , where asto the cloud the homepod relies on the iphone. Or thirdparty applications the iphone apps that work with it are limited to text messaging through apps like wechat, facebook, and skype come and the iser apps are limited, so it work withhat will siri and the home pod. This thing has a processor that come straight from an iphone, so it should be powerful and have these enhancements. Apple had all the tools to come out with a killer product like the echo. It was the first to mainstream voice activation. Apple has been the king of the hardware industry in terms of making it cool looking for several decades. It should have been apple that came out with an echolike device five years ago and not amazon. Emily that was bloombergs mark gurman. A lot of movement in chipmaking. Marvell has agreed to buy cavium. In chipspecializes that control hard disk drives, a market that is no longer good growing. Cavium makes network processors. To aomm could be open broadcom deal, but at a higher price. Qualcomm rejected the 105 billion acquisition offer. Bob donald joins us again odonnell joins us again. We think the combination makes sense. It places adjacent parts of the and the ceoogether of broadcom might be able to settle disputes with apple, which has been the primary thorn in qualcomm side. If they are able to put that together, it adds a tremendous amount of value to qualcomm and broadcom, if it were to be acquired. Emily what about the price on offer . That so far is it possible he offers five dollars or 10 more to get the deal done . Yes. Perspective, he is well leveraged to try to make the deal happen. , 80 aend of the day share people are angling for is a psychologically high price of the last five years, and he has historically not given into those higherpriced amends usually. Price demands usually and it might be a barter whether the transaction gets done at that price. Emily there has been a lot of consolidation in the industry, chart 5038 shows you how chip sales have been rising at their fastest pace since 2010 globally, and yet more consolidation than ever, fewer players. Look, it is hard to compete out there if you are a small or specialized player. A conglomeration of different technologies put together by these companies. Is now competing on modems and all these other things. All of these companies recognize they have to have a combination of different components because whether it is automotive, phone, iot come all areas require multiple types of technologies, and that is important. Two things i will throw out there appeared number one, there is a concern from a monopolistic perspective around wifi and bluetooth. There is too much control consolidated there. Culturallyhing is broadcom and qualcomm are different types of companies, and there is a concern if that would have an impact on talent loss if this deal were to go through because there has been discussion about that. Great point i want to make, but unlike other , hawk has emily someone said to me hawk gets what he wants. Idea of whatlear he wants and what segments he once to keep, and more importantly, one segments he wants to divest. The wifi business is in overlap, a 7 billion business that can be funded quickly. Fromther part of this is far left field, but at the same time if they were able to put a motor on the licensing part of the business, could that be sold off . A whole host of problems from a regulatory perspective. Emily how does the Cavium Marvell fit in . There is a nice combination of technologies, to relatively smaller players coming together. There is this idea of Cloud Computing coming down to the edge, and this combination and cavium is talking about arm servers, and this culmination would give them the capability to create interesting products on the edge, and that could be a big deal. Interestingly enough the main competitor to marvell and cavium will be broadcom. Emily broadcom will be everybodys competitor at this point. What are the consequences of that . You have to be in semis. Go big or go home. You cannot afford to be a small nich player and think you will go somewhere. Manufacturingve capacity, product, and distribution channel, and you cant do that if youre a small company. The only thing i thought of when i was thinking about this is what if samsung came in and said we want qualcomm, because samsung a screen, memory, radios im not saying anything like that will happen, but when you think about the ways this world could go, that would not be the strangest deal ever done. That does it for this edition of the best of Bloomberg Technology. We bring you the latest in tech throughout the week. Be focusing in on Driverless Technology and General Motors unveiling its nose duringith wheel. You will not want to miss it. And remember, all episodes of Bloomberg Technology are Live Streaming on twitter. Check us out at bloombergtechtv. Weekdays. That is all for now. This is bloomberg. David at one point, your father left your mother. Ginni it was sudden, and my mother found herself with four kids, no money. David lets talk about ibm for a moment. Ginni we are the champions for business. David when you are meeting with President Trump or other president s, do you see ceos willing to say, mr. President , that is not a good idea . Ginni my experience is people are respectfully honest and give their opinions. David do you feel a certain responsibility . Ginni women do need role models. We are still a small minority that run these companies. David the state fit category. Ginni i do box with a person. The difference is he does not get to hit me. [laughter] would you fix your tie, please . David people w