Bill Gates Goes To Washington

He casts a giant shadow over Silicon Valley. But Microsoft Corp. Chairman William H. Gates III has never been much of a player in Washington, long viewed by the boyish billionaire as a distant and not terribly important swamp. But that's starting to change.

As techno-illiterate lawmakers and regulators increasingly make decisions that shape the future of the information industry, Gates is beefing up Microsoft's lobbying forces. The company's dominance over the software business has made Gates a tempting antitrust target. And as Microsoft pushes into new media, it finds it has much more at stake these days in Washington. Among Gates's key concerns: lifting export controls on encryption software, cracking down on software pirates at home and abroad, preventing curbs on legal immigration for foreign software writers, and fending off Clinton Administration trustbusters.

"POUNDS THE PAVEMENT." Last June, Big Green hired D.C. attorney Jack Krumholtz as its first Washington-based lobbyist. And it has commissioned such Beltway heavyweights as libertarian activist Grover G. Norquist, who's tight with House Speaker Newt Gingrich (R-Ga.), and former New York Representative Thomas J. Downey, a buddy of important Hill Democrats. Although Gates's official representation in Washington still is small--Krumholtz and an aide--his presence is being felt. Recalls Senator Alan K. Simpson (R-Wyo.), who unsuccessfully pushed a bill to curb legal immigration: "The guy flooded my office with hundreds of people."

Before hiring Krumholtz, the software giant pressed its agenda through the aggressive Business Software Alliance trade group and the Washington office of the Seattle law firm of Preston Gates Ellis & Rouvelas Meeds, where Gates's father is a partner. The BSA, which includes IBM, Novell, and Sybase, is viewed by competitors as controlled by Microsoft.

BSA and Microsoft have called for relaxing export controls on encrypted software, which Gates considers vital to providing secure credit-card transactions online. "Other companies may sign letters" to support lifting limits, says ally Jerry Berman of the Center for Democracy & Technology. "But Microsoft pounds the pavement." BSA supports legislation introduced on May 2 by Senator Conrad Burns (R-Mont.) to lift U.S. export controls. So far, the Clinton Administration has opposed any easing, fearing criminals will create an ultra-secure computer network that the feds can't crack.

Although it hasn't yet won the encryption fight, Microsoft has made progress elsewhere. It has pressed the White House to curb software piracy, and helped kill for now lawmakers' attempts to limit immigration of high-tech workers. Now, Microsoft is girding for battle as it tries to enter new, regulated fields. Example: ensuring that digital-TV standards backed by regulators are compatible with computers. "With the convergence of telecom and computers, the policy debate in Washington becomes a lot more relevant," says Krumholtz.

Still, Microsoft has yet to play the traditional corporate lobbying game. Gates rarely visits Washington: But last year, when the Justice Dept. was stepping up its antitrust probe of Microsoft, he called on President Clinton, Gingrich, and other power brokers. And for a $7.4 billion company, the Microsoft clan makes puny campaign gifts. Federal Election Commission records show the company's employees have given just $61,600 since 1995 to federal candidates.

But Gates has never followed the beaten path. If, in his way, he plays politics with as much moxie as he competes in the marketplace, Gates could become a power on the Potomac.