Microsoft Goes Low Tech In Washington

Stung by attacks, Bill Gates turns to lobbyists and P.R. types

A week before a Nov. 4 Senate Judiciary Committee hearing on competition in the software industry, a couple of heavyweight lobbyists made the rounds on Capitol Hill. Former representatives Thomas J. Downey, a New York Democrat and pal of Vice-President Al Gore, and Minnesota Republican Vin Weber, who's joined at the hip to House Speaker Newt Gingrich, had a plea to committee members: Tread softly on our client, Microsoft Corp. Meanwhile, Microsoft's home-state senators--Republican Slade Gorton and Democrat Patty Murray--blitzed those members with "Dear Colleague" letters imploring fairness in questioning the Colossus of Redmond, Wash., about its business practices.

The effort seemed to work. Only Senate Judiciary Chairman Orrin G. Hatch (R-Utah), who called the hearing and whose constituents include Microsoft rival Novell Inc., had tough questions. Indeed, Microsoft was able to get Charles Rule, an antitrust partner at Covington & Burling now on retainer to the company, to testify on its behalf.

The hearing was just a small victory for Microsoft in a huge lobbying offensive. The campaign was prompted by an Oct. 20 Justice Dept. suit, seeking a $1 million-a-day fine from Microsoft for allegedly violating a 1995 antitrust consent decree. Trustbusters say the company violates the order when it requires PC makers who want to use its Windows operating system to load Microsoft's Internet Explorer Web browser on their machines.

As attacks from the Justice Dept., Capitol Hill, public-interest groups, and marketplace rivals mount, the traditionally apolitical Microsoft is mobilizing to promote a kindlier image in Washington. "We need to increase our dialogue with political leaders so they understand the excellence we stand for," Microsoft Chairman William H. Gates III told BUSINESS WEEK via E-mail.

NADER-PROOF. Microsoft is following a classic corporate blueprint on how to win friends and influence pooh-bahs on the Potomac. It has hired some big guns and ramped up its political giving--to defend itself, the company says. "We've increased our efforts in response to the very concerted campaign by our competitors to use the government against us rather than to compete in the marketplace," says Jack Krumholtz, a Washington lawyer who became Microsoft's in-house lobbyist in 1996.

Until now, Microsoft hasn't been much of a Beltway operator. It has made few political contributions and has preferred to lobby through the Business Software Alliance and its law firm, Preston Gates Ellis & Rouvelas Meeds, where Gates's father is a name partner. But Microsoft is convinced that it must work the Washington opinion-making machine to make sure that its critics don't spur Congress and Justice trustbusters to interfere in its business.

So when consumer activist and Microsoft critic Ralph Nader convened a conference on the software business in November, Microsoft was ready. It enlisted Camille Haney, president of the consulting firm Strategic Alliances Group, to press its case with the Consumer Federation of America and other advocacy groups before the meeting. Microsoft also helped stage a counterconference headed by Charles Kelly, president of the Worldwide Association of NT Users Groups, representing 180,000 programmers who make their living installing and operating Windows NT and related Microsoft products. The group called for the government to lay off the industry. Kelly says he initiated the press event himself, but Microsoft suggested some sympathetic speakers--such as the chief technology officer of Visio Corp. Microsoft's D.C. publicist, Edelman Public Relations Worldwide, also leant a hand.

In another anti-Nader move, Microsoft released results from a survey it had commissioned from political pollsters Peter D. Hart and Robert M. Teeter on Nov. 25. It found that Americans, by a margin of more than 4 to 1, believe the market--not the government--should determine the contents of software products. The survey also found that Microsoft is one of the most admired U.S. companies.

Gates himself has jumped into the lobbying fray. Although he rarely visits the capital, he has been inviting more pols to corporate headquarters--and his palatial home. Patrick J. Leahy of Vermont, the senior Democrat on the Senate Judiciary Committee, visited Gates's office after a November swing through Silicon Valley. And on Dec. 1, Gates appeared on ABC's Nightline, where he argued against government interference in Microsoft's affairs.

The company is also upping its campaign giving. During the 1996 election cycle, Microsoft and its employees boosted contributions to candidates for federal office to $236,784, from $105,484 in the 1994, according to the Center for Responsive Politics.

DEEP POCKETS. Microsoft's Krumholtz says it's just trying to keep up with its rivals. Netscape Communications Corp., for instance, recently hired Christine A. Varney, a former commissioner at the Federal Trade Commission, and Gregory C. Simon, Gore's former domestic policy chief. But Netscape counsel Peter Harter, who says his company spends up to $2 million a year on public-policy matters, asserts that no one else can match Microsoft's might. "Microsoft can simply outspend anybody to influence opinion makers," he adds.

Microsoft isn't in the Washington big leagues yet. But with all the critics it has to deal with in the capital, it could become the Colossus of K Street.

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