http://www.latimes.com/news/asection/20000312/t000023728.html


LA Times
Sunday, March 12, 2000

Internet Firms Gain Foothold in Washington
Policy: Debates over privacy and taxation force many high-tech firms
to set up lobbying branches. Move to influence legislation is a sea
change from prior attitudes toward dealing with government.

By JUBE SHIVER JR., Times Staff Writer

WASHINGTON--Girding for battle over Internet taxation, online
privacy, data protection and other key cyberspace issues, a wave of
dot-com companies is setting up shop in Washington.
In recent weeks, EBay, Amazon.com, Excite@Home Corp. and the
Internet marketing giant DoubleClick Inc., among others, have hired
Washington lobbying staffs, rented office space and stepped up
political giving to influence whether and how the federal government
regulates the multibillion-dollar electronic commerce industry.
The companies join Yahoo, which opened up a Washington office
last year, and arrive on the heels of NetCoalition.com's creation last
July. NetCoalition.com is the first Washington lobbying group of
purely Internet-based companies and includes founding members America
Online, Inktomi Corp., Lycos Inc. and the-globe.com, as well as three
of the four companies now opening permanent Washington offices.
The presence of so many Internet companies in Washington
represents an about-face for an industry that once fancied itself too
busy inventing the future to worry about government policy. And at
least one high-tech executive, Cypress Semiconductor President T.J.
Rodgers, calls the cozying up to federal bureaucrats a "major
mistake."
But as the Internet and computer technology have moved into the
mainstream of American life--and as high-tech stalwarts such as
Microsoft Corp. and Intel Corp. have come under government
scrutiny--the relationship between Internet marketers and the
government is becoming more charged.
"These companies are trying to get out in front of issues," said
Tod Cohen, who is leaving his post as a vice president of new
technology at the Motion Picture Assn. of America to join EBay's
recently established Washington office. "They are saying, 'It's not
worth it to stay on the sidelines and endure what Microsoft is going
through right now' " in its landmark antitrust battle with the Justice
Department.
Industry Had Been Slow to Woo Congress
The high-tech industry learned the value of having a Washington
presence more than a decade ago, when the Federal Communications
Commission began developing a standard for digital television with
little input from software or computer hardware makers.
But after months of jawboning, Apple Computer Co., one of the few
Silicon Valley companies with a Washington office in the late 1980s,
persuaded Compaq Computer Corp. and then Microsoft, Intel and others
to join in. Their input eventually led to an industry standard that
accommodated both the computer industry and broadcasters.
"Until recently, our industry has been really lax with respect to
Washington," said James M. Burger, a Washington lawyer who led Apple's
effort in the late 1980s and early 1990s to rally the industry around
a digital TV standard.
"If you asked a Silicon Valley CEO whether he wanted to speak to
Congress or a big corporate customer he'd choose the customer every
time," said Burger. By contrast, CEOs from the highly regulated
telephone industry would give you "a different answer," he added.
Of course the high-tech industry has long been involved with
specialized trade and industrial policy issues and sought to make
sales to the vast federal government. But the arrival of Internet
firms in Washington will dramatically ratchet up high-tech's lobbying
presence and threatens to deepen the political divide with Silicon
Valley purists like Rodgers, who want no part of government.
"By the very way it works, Washington undermines the free minds
and free markets that are the cornerstone of Silicon Valley's
success," added Rodgers, an outspoken executive whose firm makes
computer microchips. ". . . For that reason we should not normalize
our relationship with it."
For most of its short life, the high-tech lobby has enjoyed the
embrace of both Capitol Hill and the White House.
Painting themselves as the architects of a New Economy that has
driven unemployment to historic lows, high-tech firms have won a
string of legislative victories on Capitol Hill.
Those wins range from convincing Congress to allow a greater
number of highly skilled foreign workers to enter the United States
and winning greater federal protection from private lawsuits in the
event of Year 2000 computer crashes to getting an extension of
lucrative tax credits for high-tech research and development and
receiving a three-year moratorium--until October 2001--on new Internet
taxes.
"There is virtually no stigma against the high-tech community . .
. ; they are basking in the glow of the economic prosperity of the
last 10 years," said Charles Lewis, executive director of the Center
for Public Integrity, a public interest group that tracks lobbying
activities in Washington.
But the industry's vaunted political prowess has come under siege
with the emergence of such issues as Internet taxes, privacy and
online access. Internet companies believe they should be free of sales
taxes and allowed to police themselves in the area of online privacy
and open access. And they have grown concerned about attempts by
lawmakers and regulators to intervene.
"The issues are more politically charged now," said Jill A.
Lesser, vice president for domestic public policy at America Online.
"They involve more consumer-oriented matters . . . , and our business
models depend" on Washington treading gently.
That may not happen.
The Federal Trade Commission, for instance, launched probes last
month into the privacy practices of both Amazon.com and DoubleClick,
focusing on the two companies' use of "cookies," or small computer
files that can track Web surfers and possibly prepare customized
content for them.
And in a San Jose speech this month, President Clinton echoed the
regulatory concern, warning Internet firms to strengthen their
Internet privacy policies.
"People are worried about this," Clinton told attendees at a
conference sponsored by the Aspen Institute. ". . . Do you have
privacy policies you are proud of?" Clinton challenged.
Meanwhile, Time-Warner Inc.'s planned merger with America Online
has triggered a public uproar over the deal's potential to limit
Internet access. The issue split the industry and forced the two
companies to pledge recently to give rival Internet service providers
"open access" to their high-speed cable TV lines if their union is
approved.
Even support for a permanent ban on Internet taxes, which many
saw as an inevitable follow-up to the current three-year moratorium on
Internet taxes, seems vulnerable.
Texas Gov. George W. Bush, the likely GOP presidential nominee,
has said that the government should continue evaluating whether the
moratorium should be continued as Internet sales grow. And lobbyists
representing retailers indicate they are making some headway in
challenging support for a continued ban on Internet taxes.
"We've been saying that sound economic policy requires a tax
system that doesn't favor one type of sale over another or one type of
shopper over another," said Lisa Cowell, executive director of the
e-Fairness coalition, a Washington group representing 1.5 million
retailers. "There's a greater awareness in Congress about that now.
The educational process is paying off."
Some say high-tech is facing tougher going in Washington because
the issues have grown more complex and because politicians and
Internet users have become more knowledgeable about technology. Four
years ago, members of Congress were just beginning to put their
offices online. Today virtually all legislative offices are online.
In addition, the Internet industry suffers handicaps that some of
its other media colleagues don't face: Internet companies are
geographically concentrated in a handful of states, and, unlike other
media concerns in Hollywood or publishing, Internet companies are not
known for their glad-handing ways.
But Internet companies have two potent weapons: money and jobs.
"When I go on the Hill I tell people this is a jobs issue," said
Josh Isay, a former aide to Sen. Charles E. Schumer (D-N.Y.) who was
hired in January by DoubleClick to head its Washington office. "Of the
last 300,000 created in New York state, one-third came from Internet
sector, outpacing financial institutions and real estate. So, in order
for this economy to continue humming like it is, it is very important
that government sees high-tech as the engine of economic development."
Yet DoubleClick, whose privacy policies have also drawn the
attention of attorneys general in New York and Michigan, has learned
how to play the lobbying game the old-fashioned way. It recently hired
former New York state Atty. Gen. Robert Abrams to head its new
advisory board and also signed on New York City's former consumer
affairs commissioner, Jules Polonetsky, as its new chief privacy
officer.
The $18 million the online and personal computer industries are
expected to make in campaign contributions this year is less than what
many older media industries like telephone carriers, broadcasters and
Hollywood will spend. However, political giving by Internet companies
is growing faster than any other sector, according to the Center for
Responsive Politics, a Washington research group.
Lobbyists for online firms react with disdain to any suggestion
that they are maturing into yet another version of the stereotypical
back-slapping influence peddler.
"I don't think we have to play golf and schmooze" to be
effective, said Paul E. Misener, who recently left his Washington law
practice and a stint at the Federal Communications Commission to head
up Amazon.com's Washington office as vice president for global public
policy.
A key for Internet companies may be in their relationships with
consumers. Some groups representing consumers increasingly view
Internet companies as opponents.
"What's good for dot-com companies is not necessarily in the
interest of Internet users themselves, whether we're talking about the
failure to prevent cyber attacks, e-mail spam or just general
incompetence where the privacy rights of users are concerned," said
Edward Segal, president of the Washington-based consumer watchdog
group Internetlobby.org.