Companies shift strategy, take the offensive
By Declan McCullagh
Staff Writer, CNET News.com
March 27, 2006 4:00 AM PST
In 1997, Microsoft was so disdainful of federal bureaucrats that it created a Web site specifically to keep regulators at bay.
At the time, future CEO Steve Ballmer quipped "to heck with Janet Reno," and a press release by co-founder Bill Gates accused the government of "trying to slow Microsoft down."
Since then, however, the company's approach toward Washington has evolved from confrontation to cooperation: At $46 million over seven years, Microsoft by far outspends any other technology company on lobbyists. And Gates' incendiary press release has since vanished from Microsoft's Web site.
What a difference a decade makes. In the last few years, technology firms have not just opened lobbying shops, but they've also begun to use their growing political muscle for offense. Instead of merely fending off new regulations and taxes, many companies have begun to join in the classic Washington game of pushing for them--as long as someone else is the target.
A CNET News.com analysis shows that spending on lobbyists by large information technology firms more than doubled between 1998 and 2004, the period for which complete records are available. During those years, the total amount of influence purchasing by 37 prominent computer and Internet firms on registered lobbyists totaled $227.5 million, according to federal disclosure records. The total rises to $430.1 million if it includes the work of lobbyists hired by telecommunications companies such as Verizon Communications and AT&T.
The trend is a major shift in strategy for technology companies. Where the industry once assailed Beltway bureaucrats for their interference, it now routinely hires lobbyists--causing some to speculate that technology firms may have become a little too cozy with Washington for their own good.
"Most of the high-tech community thought, 'Washington is 3,000 miles away. What do we care?' All of the sudden, you see them ramp up their lobbying dramatically--and their contributions to campaigns." Larry Noble, executive director, Center for Responsive Politics
"Business just goes there, plays a sucker's game and finds itself being treated with disdain," said Fred Smith, president of the Competitive Enterprise Institute, who has written extensively on relationships between businesses and politicians. "The way you get businesses continually coming to you and begging favors from you is to constantly rejigger the rules. Chaos is a great way to extract money."
The influence-buying practices of all industries have fallen under increasing scrutiny in recent months because of a federal investigation centering on lobbyist Jack Abramoff, who pleaded guilty in January to fraud, tax evasion and conspiracy to bribe public officials. His plea agreement (click here for PDF) says an unnamed aide identified only as "Staffer A" received illegal bribes for "stopping legislation regarding Internet gambling."
No technology companies have been publicly accused in any of the recent lobbying scandals, and their spending from 1998 to 2004 was still far behind that of counterparts in other industries, such as Boeing ($57.6 million); General Electric ($94.1 million); and Northrop Grumman ($62.2 million). But lobbying among tech companies is clearly on the rise, and the numbers disclosed in federal records actually underestimate total spending.
Faux 'grassroots' campaigns
Under the 1995 Lobbying Disclosure Act, it's legal for companies to lobby through membership in coalitions or by funding faux "grassroots" campaigns. And many industry representatives who act as lobbyists are not registered as such: Neither CEO Mitch Bainwol nor President Cary Sherman of the Recording Industry Association of America were listed in a government database of lobbyists in 2005.
Growth in lobbyist spending was inevitable because "we have been in a period in which it's widely recognized that the technology sector is potentially subject to regulations," said Roger Cochetti, group director of U.S. public policy for the Computing Technology Industry Association, which counts board members from Ingram Micro, Symantec, Lenovo and Xerox. "And in this environment, most major technology companies support a government relations program of their own."
Spending by political-action committees, or PACs, affiliated with technology and telecommunications companies also has risen. During the 2000 election, those PACs gave $7.1 million to politicians, a total that rose to $8.6 million by the next presidential-election cycle, four years later.
In 1998, only 12 companies in this category--including Hewlett-Packard, Microsoft, Intel and Oracle, along with the telecommunications and cable companies--had created PACs. Since that time, PACs have been formed by Amazon.com, Dell, Yahoo, Cisco Systems, Electronic Arts, Sun Microsystems and RSA Security.
The new lobbying efforts have already paid off on some high-profile issues, such as the argument that Internet providers should not open a "fast lane" that would favor some Web sites over others. E-commerce and Internet companies such as Amazon, eBay, Google and Microsoft have been lobbying to give the Federal Communications Commission power to enforce such "Net neutrality."
"Google's mission is to organize the world's information, and our mission in Washington is to keep the Internet a free and open place for our users to get information," said Alan Davidson, Google's first staff lobbyist. "So everything kind of flows from that."
"I can definitely see how the technology industry is taking part of the slot machine culture of Washington. Put a little money in, get a lot of money out." Jim Harper, director of information policy studies, Cato Institute
Sen. Ron Wyden, an Oregon Democrat, introduced a bill on March 2 that would grant the FCC this authority. Wyden and his corporate allies say the measure is necessary because executives at Verizon, BellSouth and the newly merged AT&T and SBC Communications have talked about the desirability of a two-tiered Internet.
"They're going on the offensive in a major way," said Adam Thierer, an analyst at the Progress & Freedom Foundation and the author of a book on telecommunications regulation. "They're aggressively and pre-emptively asking for prophylactic regulations from the FCC. No matter how you cut it, it's an offensive effort."
The beginnings of another offensive took place in 2004, when Intel, Sun, Gateway, Royal Philips Electronics and other tech firms announced their support for a bill that antagonized the recording industry. The measure would have let the Federal Trade Commission punish record labels for selling music CDs with copy protection technology that violated government regulations.
Historically, Silicon Valley's attempts to influence politicians have been defensive in nature--almost libertarian-leaning--and aimed at opposing laws or regulations viewed as intrusive.
America Online and Microsoft bankrolled part of the lawsuit to defeat the 1996 Communications Decency Act. Also that year, California tech firms joined together to oppose a state ballot measure, Proposition 211, that was designed to make it easier for shareholder lawsuits to succeed, even if there was no evidence of corporate fraud.
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