IP: How Microsoft Conquered Washington

[David Farber <dfarber () earthlink net>]

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From: ausyankee () hotmail com
Date: Thu, 18 Apr 2002 18:42:43 
To: dave () farber net
Subject: How Microsoft Conquered Washington

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MICROSOFT
How Microsoft Conquered Washington
By spending lots of money--of course--but also by doing lots of creative lobbying you don't know about.
Jeffrey H. Birnbaum
Mon Apr 29 00:00:00 EDT 2002

 

       For a couple of embarrassing years in the mid-'90s, Microsoft's primary       lobbying presence in D.C. was 
"Jack and his Jeep." As the software       giant's sole in-house lobbyist, Jack Krumholtz, then 33, had to battle       
endless traffic jams to get from Microsoft's suburban sales office to       Capitol Hill. "Early on I spent most of the 
day in my Jeep Grand       Cherokee on my cellphone," Krumholtz says. "I hit an all-time low on the       day I was 
parked on a Capitol Hill side street reading through my mail       with the laptop on the steering wheel."     
     
       No longer. After the Justice Department filed its antitrust suit in       1998, Microsoft--a company famous for 
its disdain of       government--undertook the largest government affairs makeover in       corporate history. The 
company now boasts one of the most dominating,       multifaceted, and sophisticated influence machines around, one 
that       spends tens of millions a year. It's no great surprise that one of the       country's wealthiest companies 
can bankroll a beefed-up lobbying       operation when it faces a crisis. But what few people realize is that       
Microsoft has reached the very highest ranks of lobbying so quickly.       Says David Hart, a lobbying expert at 
Harvard's Kennedy School of       Government: "Microsoft has joined the top tier"--with such longtime       
heavyweights as Philip Morris, Lockheed Martin, and AT&T.     
     
       Most companies content themselves with playing defense in Washington:       They fight back when regulators hurt 
their businesses, block bills they       dislike, and occasionally prod lawmakers to pass bills that will help       
them compete. Not only is Microsoft doing all three of those things       well, it is also doing something that only a 
handful of other       corporations even attempt. It is getting to government officials early       and stopping them 
from asking the questions that could eventually cause       it harm. Microsoft execs say privately that they believe 
they could have       prevented the antitrust suit had they co-opted the policy debate sooner.       So their goal now 
is, in essence, to win silence on issues that matter       to the company--the real goal of any truly sophisticated 
lobbyist. And       on issues from privacy to piracy, Microsoft may well be succeeding.     
     
       To achieve its aims, Microsoft has done many of the things you'd expect.       After making some serious 
missteps in late 1998 and early 1999 (such as       trying to deprive the Justice Department of antitrust funding), the 
      company quickly found its footing. It now has 15 high-powered government       affairs staffers led by Krumholtz 
in downtown Washington--three times       more than in the average corporation's D.C. lobbying shop--and dozens       
more in every major state. It retained a dream team of outside federal       lobbyists, including Haley Barbour, the 
former Republican Party       chairman, and Jack Quinn, former White House counsel to President       Clinton. It began 
contributing heavily to right-wing, free-market think       tanks, such as the Cato Institute and the Heritage 
Foundation. And       Microsoft and its employees gave a whopping $4.6 million to federal       candidates and parties, 
Republican and Democrat alike, in the 2000       ele!
ction--more money than any other company but AT&T and more than       double that of its biggest rival, AOL Time Warner 
(the parent of       FORTUNE).     
     
       Spending all that money, of course, engenders resentment. Microsoft's       lobbying is "an attempt to undermine 
a law enforcement effort [the       antitrust suit]," says Ed Black, president of the Computer and       Communications 
Industry Association (funded by such Microsoft foes as       Sun Microsystems, Oracle, and AOL). "It borders on 
obstruction of       justice." Microsoft denies that it lobbies to dissuade law enforcement       officials from 
pursuing the antitrust case.     
     
       But political donations and other trappings of traditional lobbying are       just part of Microsoft's formula. 
The company has also been having       immense success in Washington by doing lots of things you don't expect.       
For example, it has launched a Website designed to ignite grassroots       support that's the envy of the 
influence-peddling world. Microsoft's       Freedom to Innovate Network (FIN) started in the summer of 1998 "with       
five boxes of supportive letters to Bill Gates that we found in a       storage room," says John Kelly, the company's 
director of external       affairs. Microsoft solicited additional advocates by putting a link on       Microsoft.com, 
by culling the thousands of e-mails Gates receives each       day, and by promoting the FIN at the Comdex computer show 
in Las Vegas.       Today more than 250,000 people are signed up and willing to approach       their lawmakers on 
Microsoft's behalf. In the last two months of 2001      !
 alone, hundreds of e-mails were sent to 30 lawmakers identified by the       FIN as key to passing a Microsoft 
priority, fast-track trade authority,       which could help the company increase its sales abroad.     
     
       On another front, in its last fiscal year Microsoft donated $36.6       million in cash and $179 million in 
software to good causes--many of       which helped the company get cozy with politicians, from Senator Hillary       
Clinton to House Speaker Dennis Hastert, who support the charities. But       Microsoft has found even more creative 
ways to insinuate itself into       legislators' good graces. House Majority Leader Dick Armey is among the       many 
lawmakers who are hopelessly confused by fast-moving tech issues       and who eagerly take advantage of regular 
teaching visits to Capitol       Hill by Microsoft experts. "I'd been trying to figure out broadband for       a year; 
I was going nuts," Armey confesses. "So I talked to Microsoft,       their technical guys. They helped me understand." 
In addition to       one-on-one sessions, the company conducts brown-bag lunches for       Congress' 178-member 
Internet Caucus and has hosted about 200 lawmakers,      !
 aides, scholars, and presidential wannabes at tutorials in Redmond, Wash.     
     
       Have Microsoft's efforts paid off? Consider the triumph of the       translators. At a 2000 meeting of state 
attorneys general, several       attendees voiced concerns about privacy invasions by way of cookies,       those 
electronic earmarks that get attached to the computers of       consumers who visit certain Websites. The attorneys 
general implied that       they would take legal action to solve the problem. Microsoft was ready.       Its newly 
expanded government affairs division includes people whose job       it is to translate what politicians want into the 
jargon of software       engineers. For two days, the Microsoft translators negotiated with the       company's 
engineers and the government officials. The result a year       later was Microsoft's Internet Explorer 6.0, an updated 
browser that       gave consumers better control over cookies--and silenced the legal       threat. "It was a win-win," 
says Brad Smith, Microsoft's deputy general       counsel!
.     
     
       An anti-cookie lawsuit isn't the only problem that Microsoft has been       able to head off. The company has 
also helped stall federal privacy       legislation by trumpeting P3P, an international protocol Microsoft       helped 
develop that automates how much personal data Internet users can       keep hidden from Websites they visit. And the 
company has been able to       wangle significant government assistance in key areas. One of       Microsoft's major 
headaches, for example, is copyright violators--people       who share Microsoft software and sell illegal duplicates. 
The company's       lobbying was instrumental last year in tripling the federal government's       budget for cracking 
down on such piracy. Microsoft also spearheaded the       effort to persuade the Bush Administration to commit more 
than $70       million to improve cybersecurity in the wake of the Sept. 11 attacks,       which helps Microsoft by 
discouraging software theft and encouraging     !
  people to feel safe on the Web.     
     
       Despite all this, Microsoft still probably couldn't have done what it       says it could have--avert an 
antitrust suit. That's just arrogance.       After all, this emblem of American technological prowess is also one of    
   the most scrutinized companies in the world. But what Microsoft has done       in Washington in the past few years 
just gives it new cause for       arrogance--it has created a model for influencing government that other       
companies are sure to follow.     
Reporter Associate: Melanie Nayer

http://www.fortune.com/indexw.jhtml?channel=artcol.jhtml&doc_id=207250

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