Transcripts For BLOOMBERG Best Of Bloomberg Technology 20170

Transcripts For BLOOMBERG Best Of Bloomberg Technology 20170430

Our exclusive with the ceo ahead. First to our lead. This week saw a showdown brewing in washington, cracking open the Net Neutrality debate. Fcc chairman ajit pai unveiled his game plan for rolling back Net Neutrality rules at a speech wednesday in the nations capital. Passed in 2015 by a democratic majority fcc, the Net Neutrality rules and to prohibit internet to prohibit Internet Service providers from favoring or discriminating against online applications, content, and services. Now democratic senator Edward Markey from massachusetts responded to the chairmans repeal, saying, it makes no sense. We cannot keep the promise of Net Neutrality openness and freedom without the rules to ensure it. Pai and the Trump Administration and the ceo should inspect a tsunami of resistance. The ceo said the rules as they stand have made a digital divide. We spoke to fcc digital chairman ajit pai from washington, d. C. Ajit this will be a political debate that will engage millions of people, but we are going to stay focused on the facts and the laws. The facts are americans by and large believe in an open internet but want to have an infrastructure investment. They want the next Generation Networks to be built out. I think what the fcc does not need heavyhanded regulation that saddles businesses with lots of rules that simply deincentivize from building those networks. That will be the course were charting henceforth. Caroline if these rules are changed, then they will invest . Im looking at the profits of at t, 14 billion. 8 billion if you are comcast, shares have risen since the original ruling. Of Net Neutrality. They dont seem to have really been hurt. Ajit if you look at the actual numbers with respect to investments, they are down 5. 6 for the top 12 broadband providers in this country. And that does not even include the smaller providers who are not included within that statistic. We have heard from cable, wireless, telephone and other providers who told us these title ii regulations, as they are called, are impeding them from executing on their business plans. They dont spend as much. They cant get as much financing. And as 22 isps told us, title ii hangs over our businesses like a black cloud. That is the kind of regulatory uncertainty and overreach that we want to remove. Every american deserves faster, better, cheaper internet, and i am committed to delivering it to them. Caroline so you take away some regulation and oversight. How can you ensure the right rural areas are indeed provided for . Ajit two things, title ii takes us in the opposite direction and reduce competition and increase what is called digital redlining. Companies have more of an incentive to look at rural areas or lowincome urban areas and say, you know what, youre not going to get enough of return on investment. Lets not deploy. Secondly, we want to make sure everybody has Internet Access they need and want, so i have a very proactive, proconsumer agenda to promote Internet Access, especially for those on the wrong side of the digital divide. Caroline so you are taking some replacement regulation advice, you are looking for suggestions. What do you think will come to the fore when you ask for this sort of advice . Ajit that is precisely the reason why we started this conversation. As i said in my speech today, this is the beginning of the discussion, not the end, so we want to hear from the american public, what is the best way to preserve those core values of a free and open internet, of more competition, and investment in infrastructure . I am confident we will be able to find a way that will appeal to consumers in the time to come. Caroline you are talking about consumers, very worth fighting for. You will hear their voices. Youve already heard the voices of perhaps smaller startups that might be affected by this, 800 startups and investors led by y, they are concerned about the rollback of Net Neutrality. You have also heard from the bigger players, the 40 proper internet companies, voicing their discontent. The letter you received today from the 800 tech startups, say, rather than dismantling regulations that would allow the Startup Ecosystem to thrive, we urge you to focus instead on policies that would promote a stronger internet for everyone. How can you allay those sorts of fears . Ajit a free and open internet is what delivered unparalleled comfort for the american consumer. 20 years ago, who would have for seen that google, amazon, netflix would become household names not just here in the United States but around the world . They thrived because of the light touch regulatory approach that started in the Clinton Administration and proceeded through the bush in and the first six years of the obama administration. That is precisely the kind of framework i believe will promote startup entrepreneurship everywhere in this country Going Forward. So i am committed to giving them a chance to succeed, but title ii does not allow them or others to do that. Caroline then why are they so worried . Ajit a lot of people have stirred up a lot of hypothetical harms and hysteria based on what they think will happen. If you look at the fccs 2015 decision, you will look in vain to find any example of systemic market failure where Internet Service providers were acting to block access to local content, so we wanted to take a factbased approach to figure out a way to preserve those core values, a free and open internet, allowing entrepreneurs to thrive, and invest in infrastructure and increased competition. Those are the kinds of things that will allow everyone in the internet economy to benefit. Caroline so thus far, the argument is more competition will basically promote the likes of at t and comcast to play by the rules and make it a fair and open internet for the content providers. Is there anyway you think this could be or should be measured . Are you going to look for any sort of oversight . I know that you dont want it to be heavyhanded, as you say. Ajit that is one of the reasons why we will ask for public input on what the Regulatory Framework should be. We know that title ii is not the right answer, but as we will see, and i will be publicizing the entire text of my proposal tomorrow, we tee up a number of different ideas for how to do it. We will ask the public, is there anything else we should be thinking about Going Forward . I think there is a way to do it, and we will try to find the best way in the time to come. Caroline therefore when you go out and start discussing, trying to bring some republicans as well as democrats into your line of thinking, what do you think will be the best way of getting certain democrats, who are still against this, on board or convinced . What is your key line of clarity, do you think . At the moment, you want to stick with the facts. Ajit look, we obviously are going to be doing more of a factbased approach than we did previously. The bottom line is this, the arguments i am making today are precisely the arguments made by president clinton in the 1990s. The arguments that were made by clintons fcc chairman in the 1990s. The arguments that were made by Democratic Senators in the 1990s. This is not some radically political fringe argument i am trying to make. It is the light touch approach that served the United States well under democratic and republican administrations alike. So i want to take the political heat out of this argument to the max extent possible. I understand it will be difficult to do, but at the end of the day, americans are best served with a light touch framework that focuses on the facts, adheres to the longstanding legal principles, and respects the basic principles of economics. The more heavily you regulate something, the less likely you are going to get more of it. Caroline coming up, twitter shares soared wednesday after the social network said user growth picked up in the First Quarter. We will dig into whether this growth will boost twitters bottom line next. And a reminder that all episodes of Bloomberg Technology are now Live Streaming on twitter. Check us out. It is bloombergtechtv, weekdays 5 00 p. M. New york, 2 00 p. M. San francisco. This is bloomberg. Caroline twitter, it reported earnings this week. It finally seems to be addressing its biggest challenge attracting new users. The social network reported average monthly active users rose 6 in the First Quarter compared to the same period last year. This growth comes as twitter posted a year over year drop in quarterly revenue. We held a deep dive and were joined by the Forrester Research director Melissa Parrish in new york and editor at large cory johnson. Melissa to some degree, sure, it is a bit of a trump effect, but i would say it is more about seeing the name twitter in the press more than it is growth being directly attributed to the president. I think the name has been associated with Current Events more and more and more especially in this last quarter, so sure, we can attribute some of it to the political events taking place and the conversation around to that. Caroline cory, whether it is trump or not, does this lure advertisers to start spending more with twitter . Cory we know the answer to that. The answer is no. User growth, great. 4 sequentially yearoveryear. The user growth has been pathetic at twitter and has been for quite a long time. If you look back to the ipo, 27 growth over 3. 5 years. That is not a big growth business. You would think they could pull money out of users. 2. 8 growth is better than it has been. A lot better than its been. It still stinks. You know, and is still on a small base compared to facebook, compared even to instagram, we saw pressure from that today. So those user numbers are weak. If you add to that their ability to monetize if users are not growing much, with all the data they said they would get about users and find out how to pull numbers out of that, what is the question . What is the revenue base and how fast is the revenue base growing . And the revenues were weak, down on a yearoveryear basis for the first time ever. But more importantly, the value of a twitter user is going down a lot. How much they can charge for each user is getting worse and worse. They cant blame it on international. International is still about 79 of the users. The advertisers are just not willing to pay to reach twitter users, and thats a real problem for this business. Caroline melissa, to corys point, there was a great quote in the bloomberg story saying, when facebook grows at four twitters a year, that tells you there is something really wrong here. Is there something really wrong, or are we just seeing a bit of changing in how they will be charging, and will revenue eventually pick up . Melissa i do think revenue will eventually pick up. But look, i am a marketing analyst rather than an analyst for investors or financial analyst. I think when i look at it, it is true. Revenues have been declining and that is a scary story to hear. They are doing things that will be more appealing, make them more appealing to advertisers in the future. They are doing some hygiene. They are getting rid of some ad products that they know dont work, they are focusing on cleaning up some measurements. These are small things , admittedly, but they are things that look like they are going in the right direction. Are substantial changes really needed . Yes, i think so, both in terms of the core product and the ad product. I think we need to see some real innovation rather than some of the incremental changes, but from my perspective, the moves that they are putting in place should make them a bit more palatable to advertisers in the future, yes. Caroline that was Forrester Research director melissa parish and editor at large cory johnson. Alphabet also out with earnings this week. They came on the heels of alphabets stock seeing record highs in trading. We dug into the report with the ceo of carl worth and someone from the department of research. Take a listen. Mike we were surprised the stock was not up more. The earnings beat by about 4 , the stock is up 4 , so investors are treating this as the same company it was before the earnings came out. In our minds this is a Higher Quality company, and investors are not showing that in terms of rising sentiment. We are still as confident in alphabet before the earnings came out. Confident. Caroline so mike is c. Harry, i want to get your point of view because i have been speaking to an executive and asking, look, what about the youtube controversy, the backlash from advertisers, the slowing down of wanting to link yourself with certain videos . They said this would be a modest effect in the mediumterm. In the longer term, we could see improvement as they change the business. Are there worries around this, harry . Harry in q1, it would not affect the business. The ad boycott only happen in the last month or so. It really started in u. K. In it , and it has spread to the u. S. If you look at youtube as an entity, most of its revenue is generated from the small to mid tale of advertisers, and it is the one stop shop for them. For the largest brand advertisers who really want to be in brandsafe places, youtube is a scary place to run, and it really was not built for those largescale brand advertisers. Youtube was sort of caught proverbially with its pants down where there is now a lot of press around great advertising and great advertisers running against hate speech and other problematic content. But what you are seeing is that google is now having to approach this problem and deal with it, and i think there is a little bit of chinks in the armor of youtube Going Forward trying to deal with us. This. Caroline chinks in the armor, mike. Mike, you are not worried about youtube at all . Mike we are not too concerned. I was waiting to come on here, and i was watching you earlier with the commentary that google only expects a modest impact. I think that is very telling. I think this was a major blow to potential sentiment, a blow to the pr for google. And here they are, and it is only going to have a modest impact. I think in our minds, they have done a good job of identifying the problems and working to correct it. Our sense is google is seeing everything from the inside, not seeing a major major impact yet, so i would typically go with that commentary in terms of the forward impact. Caroline harry, if we are moving away from youtube and other areas, we were concerned about the money plowed into socalled moonshots. Ruth porat, the cfo, came in and got a rein on it. Do you feel more at ease . Perhaps the have a handle on the spending . Harry i dont think it has made a major contribution to their revenue. You can see from the numbers that the core business is still advertising across search and video. You know, i think that they are going to be careful about spending their money in the right places. The key thing for them as they have to find that next growth area. Who knows whether these types of problems associated with content are going to have longterm effects on their video business. I think search is pretty safe, but their video business i think over the longterm, if it is not seen as a safe place for brands to run, it will have a material impact. You may not see it next quarter or even the quarter after, but i think over the next few years, you wont see 80 of video budgets into youtube digitally. And so these moonshots really are a way for them to diversify their revenues into different areas. Caroline still ahead, we stick with earnings and dig into another tech giant that has reported this past week. Amazons full scorecard next. Plus, tmobile out with another subscriber win. Ceo john legere joins us to break down the companys numbers for the year later this hour. This is bloomberg. Caroline now amazon may be diving into the Driverless Cars race. The tech giant has formed a team that is dedicated to developing selfdriving technologies, well beyond the realm of cars. This according to the wall street journal. Now at least 12 employees were assigned to the group a year ago to examine how driverless vehicles could help amazon deliver packages more quickly. Now this is not the first time we have heard amazon could make a play in the autonomous driving sector. Earlier this year, amazon was approved for a patent for a rudimentary Management System to help selfdriving vehicles on the best lanes for their driving needs. Speaking of amazon, the ecommerce giant came out with earnings this week. James mcgreevey of forrester and jitendra of Bloomberg Intelligence join us to break down the numbers. Jitendra the whole investment cycle amazon embarks on, they are saying that, hey, we can deliver the topline growth, so itll be ok if we increase spending to bolster our growth story. From a profit perspective, the north american margins are studied, but the International Sort of losses continue because they are extending aggressively here, and have a lot of opportunities to expand prime internationally, so the growth runway continues, but more importantly, they are showing that they can execute against these numbers. Caroline i want to dive into our bloomberg again. It is quite phenomenal to show even though we are at these lofty, heady heights for amazon, we have not one single sell on the stock across all analyst recommendations. Largely they are buys, a few holds overall. The stock trades higher in afterhours. Lets get james mcgreeveys point of view. Was it aws and prime that stood out for you . What about the margins from amazon . James certainly we are happy to see aws perform well. It was good to see the numbers come back up. But really for this company in the long run, we need to see it can fire on all of these cylinders, but the u. S. Business in particular. The margins are small, will continue to be s

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