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Republicans split on Microsoft

Republicans in Congress are divided over Sen. Orrin Hatch's aggressive initiative to examine Microsoft's business practices.

Microsoft has caused rifts in the cutthroat technology industry for years, but now its competitive practices are dividing a more tightly knit institution: congressional Republicans.

Today's appearance by Microsoft CEO Bill Gates before Sen. Orrin Hatch's (R-Utah) Judiciary Committee represents the federal government's latest attempt to determine the propriety of the software giant's business practices. But the personal initiative by Hatch--whose actions are apparently independent of a formal investigation by the Justice Department--has drawn growing criticism from other Republicans, underscoring a widening rift within the GOP.

Hatch, whose state is home to Microsoft rivals Novell and Caldera, billed the hearing as part of an ongoing examination of competition in the high-tech industry, which is the nation's leading exporter. Despite the session's amorphous public billing, "Market Power and Structural Change in the Software Industry," it was no surprise the hearing immediately focused on Microsoft.

"The divisions break down to some degree between those favoring a free-market philosophy and those who believe in at least some See special coverage: Face-off degree of government regulation in antitrust matters," said Republican consultant Dan Schnur, who also works with a bipartisan high-tech lobbying group called the Technology Network.

The dispute underscores the growing importance of high technology on Washington's political agenda. Unlike more established sectors of the economy, the technology industry is known for a fierce independence that makes it a difficult target for politicians of either party.

Lining up to defend Microsoft are a number of senior GOP members, most notably former Congressman Jack Kemp, who has vigorously attacked the government's actions against the company in the weeks leading up to today?s hearing.

"The federal government has unleashed an aggressive effort to regulate the business activities of Microsoft and to micromanage the entire computer software industry in the name of maintaining competitive markets," he said in a statement last month.

Face-off AP photo
High tech arrives on Capitol Hill. (AP)
Senior party members like Kemp, now codirector of the conservative grassroots group Empower America, join Microsoft's home state Sen. Slade Gorton (R-Washington), who has long defended his high-profile constituent and hosted a press conference held by Gates yesterday on Capitol Hill.

On the other side of the GOP divide are leaders like Hatch and Sen. Conrad Burns (R-Montana), who call on the government to look into allegations of monopolistic practices by Microsoft.

"Right now, Congress is very supportive of what Justice is doing. For an incredibly probusiness Congress it's surprising, but there it is," said Jamie Love of the Consumer Project on Technology, which is staunchly opposed to Microsoft's business practices.

At a Judiciary Committee hearing last year, a cross-promotional contract Microsoft signed with EarthLink Network came under fire because it prevented the national Internet service provider from informing some subscribers of alternatives to Microsoft's Internet Explorer browser.

Hatch has criticized the software giant in other forums as well. At a conference in Washington last week, the senator said the government may need to form an "Internet commerce commission" to prevent Microsoft from building its own proprietary Internet.

In addition, Burns praised the Justice Department's efforts last year, saying in a statement that he had been approached by "hundreds" of software companies with concerns about Microsoft and its business practices. Other pro-antitrust rumblings in Republican circles have come from the Progress & Freedom Foundation, a conservative think tank that reportedly has strong ties to House Speaker Newt Gingrich (R-Georgia).

The simmering intraparty dispute spilled onto the Senate floor Thursday, when Gorton spoke to his colleagues about the issue.

"Unfortunately, a member of this body from this side of the aisle, the party known for its embrace of free-market principles and rejection of big-government solutions, has joined [Scott] McNealy in his efforts by calling for a hearing," he said, referring to Sun Microsystems' chief executive, long an outspoken critic of the Redmond giant. "I am flabbergasted. It is truly a strange day when business speaks out against free enterprise and promotes big government."

Gorton has always defended Microsoft, which employs the majority of its 22,000 or so employees in his home state. The senator criticized "attacks" on Microsoft and suggested that there was a similar lack of balance in another congressional hearing last November.

Still, today's performance on Capitol Hill could be more a lesson in respect than anything else. Gates likely scored points for actually showing up, which wasn't in his original plans, and he even managed to negotiate for more pro-Microsoft representation in testimony.

"If you contrast Gates's behavior this week with Microsoft's past interaction with the Justice Department, you'll see a very pronounced growth in their willingness to deal with the Washington power structure," Schnur said. "It's not just Microsoft--it's an industrywide phenomenon."

Clearly, Microsoft has learned the importance of playing politics. As of this year, there are about 75 registered lobbyists working the political system for the company, and Microsoft spent $660,000 on government affairs for the first six months of last year, according to the nonprofit Center For Responsive Politics.

By tech industry standards, the software giant has proven to be fairly generous with campaign contributions as well, doling out $163,000 so far this year. Last year, the company donated $74,000 to Republicans, $16,000 more than its contributions to Democrats--a trend that CSP says is continuing this year.

"Politicians are motivated by self-interest, not necessarily what helps competition or consumers," said Bob Levy, a senior fellow at the Cato Institute. "Republicans are advocates of free markets when it's convenient."