High tech's government dilemma

CNET News.com's Michael Kanellos writes that the U.S. technology industry needs to move on from holding two opposing views of its relationship to lawmakers.

Michael Kanellos Staff Writer, CNET News.com
Michael Kanellos is editor at large at CNET News.com, where he covers hardware, research and development, start-ups and the tech industry overseas.
Michael Kanellos
4 min read
There are two kinds of government, according to the high-technology community.

The first kind is a collection of plodding blockheads who will destroy innovation and progress through an inability to "get" the high-tech industry.

Name the issue, and some clod working in one of the United States' many capitol domes has screwed it up. The Digital Millennium Copyright Act? It's an abomination--unless you're a software CEO. The Microsoft antitrust verdict? It was a slap on the wrist--or an unjustified witch hunt against an upstanding corporate citizen, depending on your point of view.

A major sticking point is that the tech industry is not facing up to the fact that the challenges of this era are different to those of the past.
The bill for the Controlling the Assault of Non-Solicited Pornography and Marketing Act (Can-Spam) drew the same sorts of reaction. Although some companies lauded the bill, critics said it would be ineffective and unduly harm legitimate businesses.

"I don't think it is enforceable. How does the U.S. enforce spam? How does Virginia stop spam? It is illogical," said Symantec CEO John Thompson, who proposed that Internet access providers begin to charge spammers.

On the other side is the second kind of government--the one that gives out money for research projects.

Everyone loves these guys. This government created the Internet and then turned it over to the public to use. This government rents out its national laboratories for projects such as the one to develop extreme ultraviolet lithography, which uses some of the laser technology from the old Star Wars program. This government also exempts Internet transactions from sales taxes on historical grounds that have become tough to justify.

The dedication in October of a building at the West Coast campus of Carnegie Mellon University highlighted the benefits of public/private cooperation. The building is located at the NASA Ames Research Center in Moffett Field, Calif.--next door to job recruiters from the Defense Advanced Research Projects Agency and a few freeway exits down from the venture capital corridor of Sand Hill Road, according to Carnegie Mellon President Jared Cohon.

"Twenty years ago, one-fifth of the world's Internet traffic went through here," said Eric Schmidt, Google CEO and a Carnegie Mellon trustee, referring to the Ames facility. "These buildings have a history in Silicon Valley that is much deeper than people know."

The problem with this dichotomy is that these two types of governments are made up of the same people.

The public isn't buying into the tech miracle at the moment.
Joe Lieberman, the senator from Connecticut who has proposed putting restrictions on the ability of U.S. companies to move their operations overseas, is the same lawmaker who suggested giving tax cuts and research funds to U.S. companies.

Now, the U.S. tech industry needs to move on from holding two opposing views of its relationship to lawmakers. Why? For one thing, it will need help. Governments in China, Japan, Taiwan, Korea and many European countries are using tax incentives and university funding to position their respective nations as centers of economic development in the 21st century.

"Competition for jobs is going to be the key battle in the next several decades," Intel CEO Craig Barrett said during a press conference at a Semiconductor Industry Association (SIA) gathering in November. "Ultimately, we are all in this together."

To compete better, U.S. federal and state governments will need to increase elementary and secondary education funding and invest in infrastructure, he added.

The public, however, isn't buying into the tech miracle at the moment. It's hard to sell the idea that issuing bonds or granting tax breaks to large, profitable corporations will help bring prosperity to a community, when a substantial portion of that community has been laid off.

Unfortunately, many in the tech industry still think it's 1994, when the public didn't mind corporate perks. For instance, George Scalise, president of the SIA, recently pointed out that China and Taiwan don't tax employee gains from stock options, a provision that encourages companies to locate there. True, but I sincerely doubt that any senator really wants to attract public castigation by proposing such a change for U.S. businesses at the moment.

Similarly, VeriSign drew public scorn for its attempt to generate advertising revenue from misdirected Web queries. Microsoft, AOL and others already get ad revenue when people inadvertently type the wrong address into e-mails, but at least these companies sell products they developed. VeriSign doesn't--it thrives because it got the contract to manage the .com and .net domain names. It's the Halliburton of the Internet.

A major sticking point is that the tech industry is not facing up to the fact that the challenges of this era are different to those of the past. In the '50s and '60s, billions of government dollars went to private-sector companies to devise technology to beat the Soviets.

Now, tech companies are asking for funding so that they won't have to go overseas to stay competitive. In other words, they want money to fight themselves. It's a tough sell.

In an interview at the SIA dinner, LSI Logic CEO Wilf Corrigan inadvertently underscored the difficulties of tactics the industry employed to sell its position. Corrigan said LSI, among other companies, wants to continue to invest in the United States. "I like living here," he said.

Unfortunately, "other companies have huge capital grants," he said. "The U.S. will have to do something, or economics will dictate the results."

That's a good point. However, to some people, this could sound suspiciously like a veiled threat. I asked him whether companies need to change their tactics; to better explain their position or lobby harder for funding.

"Companies don't do that," Corrigan replied. Instead, they move.

Still, when I beg for money, I'm usually at least willing to act like I'm grateful.