Buying Congress

By John Moore, Sm@rt Partner
August 3, 2000 8:26 AM PT
URL: http://www.zdnet.com/sp/stories/issue/0,4537,2610748-3,00.html


The Willard Intercontinental Hotel has been a hub of Washington's political
scene for 150 years. It's the very place where the word "lobbying" was
coined to describe those seeking to curry favor with elected officials who
frequented the hotel.

So, it was not at all unusual that the Willard was the site of a recent
$1,000-a-head fund-raiser for Texas governor and Republican presidential
candidate George W. Bush. In a newfangled twist, Bush wasn't pursuing
lawyers, real es tate developers or en er gy tycoons; 27 of the 30 invitees
were members of the local high-tech elite.

Indeed, politics and technology, bastions of the old and the new, are
bumping into each other a lot lately. The sudden wealth generated in the IT
sector has politicians, in particular, salivating. Both Bush and Democratic
presidential candidate Vice President Al Gore are courting the IT sector,
while chief fund-raisers for the Republican and Democratic House campaigns
also have made their pitches.

And the tech industry-especially tech solutions providers-has not
disappointed. With red-hot issues on the table ranging from Internet taxes
to H-1B visas to online privacy, IT bigwigs have poured money at a record
clip into this week's Republican National Convention and next month's
Democratic powwow, as these figures from the Center For Responsive Politics
show: Andersen Consulting has anted up $1 million to help the GOP put on its
show. Internet holding company Safeguard Scientifics has contributed
$500,000, while broadband provider Global Crossing kicked in $250,000.
Hedging its bets, Global Crossing also donated $250,000 to support the
Democratic convention.

"The IT industry is the new El Dorado of political fund-raising, and we
should welcome it," says Alan Hald, chairman of the Computing Technology
Industry Association's (CompTIA) public-policy committee.

The government's growing interest in IT has increased the potential for
regulation, say proponents. And while Hald claims politically involved IT
companies are not necessarily buying influence, you can never have enough
friends in Washington. After all, he says, "new economy" candidates may not
get elected without adequate funding. "Then, fewer legislators will be
listening to what the U.S. IT industry needs to compete," Hald warns.

Turning A New Leaf Hald's line of thinking has become more prevalent in the
IT sector. In the not-so-distant past, many technology types looked upon
politics with indifference, suspicion and contempt. But in recent years, the
industry's political involvement has increased significantly.

Take campaign contributions. Such monies from individuals and political
action committees in the computer equipment and services sector grew 31
percent between the 1991-1992 and 1995-1996 election cycles, according to
the Center For Responsive Politics. And in the 1999-2000 election cycle, the
computer equipment and services sector has forked over about $1.2 million to
the Bush and Gore campaigns-already more than twice the amount the sector
contributed to the 1992 and 1996 Republican and Democratic presidential
campaigns combined.

Within the broader IT segment, Internet services firms are beginning to flex
their political muscle. Take the top 10 services companies from Sm@rt
Partner's recent Smart 100 Companies issue (May 8,
www.smartpartnermag.com/issues). Executives and employees at these firms
contributed about $65,000 to federal political campaigns through June 1,
according to the FECInfo.com campaign finance Web site. The same companies
contributed about $19,000 in the 1998 congressional elections.

The level of involvement among Internet services companies varies from
exploratory dips in the political pool to complete immersion. The
competitive local-exchange carriers (CLEC) provide a prime example of the
latter. Their very existence is owed to an act of Congress: the
Telecommunications Act of 1996. That law opened a new business category by
compelling the regional Bell operating companies to unbundle their local
loops.

"The basic fact is, for us to do our business we have to get the regulators
to change the way they do business," says Tom Koutsky, VP of regulatory
affairs at Covad Communications, a data CLEC and DSL provider.

Covad has a public-affairs staff to advance the company's cause in Congress
and the Federal Communications Commission. So far, it's worked. Koutsky
reports that about a dozen Congressmen have been through Covad's Silicon
Valley headquarters this year.

In contrast, iXL Enterprises is just getting its feet wet. The
three-year-old Web integrator hired Jennifer Hartz to head up community and
government relations in April 1999. Since then, Hartz, a VP at iXL, has
focused primarily on the community-relations aspect of her job.

As for government relations, iXL has "a ways to grow before we have license
to [take] an organized voice," Hartz says. Still, iXL branch offices are
reaching out to mayors in their respective cities. In addition, the
Atlanta-based e-integrator plans to work the public-policy front with its
alliance partners-such as Intel-that already have an established Hill
presence.

High-Stakes Poker By little coincidence, the industry's political
involvement-whether advanced or exploratory-is driven by a common, growing
concern: Elected officials are taking a closer look at IT and the Internet,
and are forging decisions that will affect the industry for years to come.

"You can either proactively work with these folks, or be subject to their
uninformed opinions and decisions," says Steve Papermaster, CEO of Austin,
Texas-based ASP Agillion, and executive council member of TechNet, a
national IT advocacy group that includes Cisco Systems, Hewlett-Packard,
Intel and Oracle, among others.

According to a recent CompTIA membership poll, the biggest political
concerns for integrators and resellers are Internet taxation, the IT
workforce and privacy.

The threat of taxes on Internet access and e-commerce purchases has been a
key rallying nexus for the IT industry over the past two years. In 1998,
industry advocates helped secure the Internet Tax Freedom Act, which placed
the present three-year moratorium on new and discriminatory Net taxes. A
bill to extend that moratorium through October 2006 cleared the House
earlier this year.

Hald gives the IT industry high marks for working with key legislators to
influence the development of Internet tax policy. He calls the industry's
effort "a major win."

But the battle is still alive. Some tech heavyweights are back on the Hill
testifying against new Internet tax legislation, which would authorize an
interstate sales and use tax that could be applied to e-commerce. "There are
so many pieces of legislation to keep us busy," says Jim Hunt, CEO of Ernst
& Young Technologies and chair of CompTIA's Internet Tax Task Force.

Workforce and Internet privacy, meanwhile, are emerging issues that industry
has just begun to address. The most visible legislation in the workforce
arena has focused on H-1B visas, which let highly skilled foreign workers
temporarily enter the country. In 1998, a bill raised the ceiling on the
number of H-1B visas issued annually from 65,000 to 115,000. Bills to
increase the quota once again are pending this year.

Another workforce thrust-tax credits for IT training expenses-is making some
headway at the state level but has yet to move in Congress. Industry,
meanwhile, is still getting a grip on Internet privacy issues, although
industry organizations are expected to form a coalition to focus on privacy
legislation.

Against this legislative backdrop, "there's a greater realization of the
importance of the things that get decided in Washington," says Randy Dove,
executive director of government relations at Electronic Data Systems Corp.,
which has been active in public policy for years.

But if fear of damaging legislation isn't enough to inspire political
involvement, there's also the Microsoft antitrust case. The DOJ's dogged
pursuit of Bill Gates & Co. provides ample evidence that the government
can-and will-impact IT.

CompTIA's Hald believes the Micro soft case has en gaged mainstream systems
integrators. "Since it is now clear that government will affect how we can
compete, resellers/integrators are much more willing to engage in issues
since they directly affect their businesses," he says.

Too Involved? Despite the increased awareness, some execs assert that IT
companies are not as fully engaged politically as they could be. "Technology
companies have not been very good at articulating their message," says
Covad's Koutsky. "They haven't played traditional D.C. politics; they've
eschewed it."

But T.J. Rodgers, CEO of Cypress Semiconductor, would argue that high tech
is already too mixed up in the political process. In a white paper he penned
for the Cato Institute, Rodgers contends that "The political scene in
Washington is antithetical to the core values that drive our success in the
international marketplace, and risks converting entrepreneurs into statist
businessmen."

CompTIA's Hald, for one, says he is "not concerned the entrepreneurs will
turn into bureaucrats" or become co-opted by the political process.
"However, I am concerned that entrepreneurs will attempt to use government
rather than open markets to wage competition," he says.

"Unfortunately, Washington won't stay away from the high-tech community,"
Hald laments.

And as long as that's the case, expect IT and politics to make for strange
bedfellows.


How To Get Involved
Fast-growing Internet services companies are hard-pressed to hire engineers,
much less corporate lobbyists and policy wonks.

For those companies, participation in IT advocacy groups provides a way to
get involved in Washington without opening a government-relations office in
D.C., according to Steve Papermaster, CEO of ASP Agillion.

Organizations such as CapNet (www.capnet.org), CompTIA (www.comptia.org),
the Information Technology Association of America (www.itaa.org) and TechNet
(www.technet.org) all are working to advance the IT agenda.

The price of participation varies. For example, a company wanting to join
CapNet, a political action committee representing various high-tech fields,
would have to pay $5,000. A company also must be a member of the Greater
Washington Board of Trade, with which CapNet is affiliated, in order to
join.

A reseller membership in CompTIA, meanwhile, costs $150 to $5,000, depending
on the company's size. Individual memberships cost $49. Full member dues for
ITAA range from $660 for a company with less than $250,000 in revenue to
$44,000 for a company with more than $200 million in revenue.

In return, members receive legislative updates and a voice in how
public-policy decisions are made. But there also are near-term, tactical
benefits.

Joel Pelinger, president of Solar Systems, views the ability to help educate
political decision-makers as a plus. "We're educating the people at the
steering wheel," he says.

-J.M.