Getting To Know The Hill

By JEFFREY H. BIRNBAUM/WASHINGTON

Common sense would dictate that the burgeoning high-tech industry of northern Virginia and southern Maryland should take the lead in lobbying the nation's capital on behalf of technology interests. Not so. Executives who live just outside the Washington Beltway had to be dragged into the political fray by Charles Manatt, former chairman of the Democratic National Committee and now U.S. ambassador to the Dominican Republic. Manatt struggled for years to organize the executives but didn't get it done until a conference of business leaders from the Potomac River region last year led to a breakthrough. "It was a difficult sell, and it still isn't easy," Manatt says.

Lobbying at the federal level is an acquired taste even for people in proximity to the capital. Like the rest of the tech community, Washington-area execs long kept politics and government at arm's length, believing that all they needed to do was to make profits and create jobs and the lawmakers would leave them alone. But they have come to understand that they ignore Washington at their peril. The Justice Department's antitrust suit against Microsoft in 1998 scared all tech companies smart, and the firms closest to the seat of power are on their way to becoming the most active advocates of the new economy there.

Washington lobbying has changed as a result. Not long ago, lobbyists were a lot like their caricature--fat, cigar-smoking men who handed out envelopes stuffed with hundred-dollar bills to compliant lawmakers. Some people who fit that description (except for the cash) still exist, and they're fun to have lunch with. But these days lobbyists are more likely to be advertising executives, public relations specialists, telemarketers, academics and, increasingly, real-life business executives.

Lawmakers love to hear directly from CEOs. The business leaders that lawmakers want to see most, though, are the up-and-comers who run fast-growing e-commerce companies. With their cachet and cash, tech executives are in high demand on Capitol Hill. Especially those who work and live a 30-minute drive away. Indeed, geography was the genesis of what can be thought of as the New Washington Lobby. In the spring of 1999, Mark Bisnow, an executive at Virginia's MicroStrategy and a former Senate aide, rented a bus and took nine Democratic Senators on a tour of his own company, America Online and PSINet, among other locals. The legislators were surprised to see so much computer wizardry so close by. At the end of the tour, Senate minority leader Tom Daschle of South Dakota said contentedly, "We're starting to watch technology companies a little like we watch sports."

But at that point the home team was at the bottom of the lobbying league. California's Silicon Valley remains home to the high-tech industry's loudest political megaphone, TechNet. Based in Palo Alto, it gives campaign donations in roughly equal proportions to Republicans and Democrats and serves as a clearinghouse for information and policy proscriptions about the new economy. But Chuck Manatt's pleading and Mark Bisnow's bus tour persuaded the upstart firms in Virginia and Maryland to band together to give TechNet a run for its PAC money. Led by AOL, Washington-area tech companies formed CapNet last summer to serve as TechNet's echo on the East Coast. It operates much like TechNet except lawmakers don't have to fly across the continent to pick up their campaign-finance checks. The CapNet political-action committee has raised $140,000 so far and by Election Day hopes to reach $200,000. Supplemented by personal donations from stock-rich executives, it's already a force inside the Beltway.

TechNet and CapNet insist that they complement each other. AOL, for instance, belongs to both camps because of its merger with Netscape. Still, the two Nets are likely to clash occasionally. CapNetters such as MCI WorldCom, Network Solutions, Teligent and Proxicom are heavily involved in the Internet and telecommunications, while TechNet is a little more software oriented. CapNet is more focused on local issues, like relieving traffic snarls near Dulles International Airport. "We push for policies that would help the region accommodate growth," says Vic Fazio, a former Democratic California Congressman and lobbyist who co-chairs CapNet. "We don't want the quality of life in northern Virginia to deteriorate to the point that you can't attract firms or workers."

That danger must seem remote to the starry-eyed lawmakers who have continued to clamor to visit the affluent Dulles corridor. In May alone, CapNet and its member companies were host to 44 members of the House and Senate in eight forays. The visitors included House Speaker Dennis Hastert, the nation's most prominent Republican, and three of the Senate's most prominent moderate Democrats--Evan Bayh of Indiana, Bob Graham of Florida and Joseph Lieberman of Connecticut. CapNet has specialized in educating rather than simply financing politicians. "We've had almost a hundred members of Congress out for a visit, including the Congressional Black Caucus," boasts Tim Hugo, CapNet's executive director.

Lawmakers certainly need instruction. What most legislators know about the Internet would fill a Post-it note. Such ignorance is bliss for the high-tech industry. Not since the days of oil barons and railway tycoons has Washington been so in the thrall of a group of corporate executives.

Both political parties and their presidential candidates have been bidding shamelessly for high-tech affections, and e-companies have won a string of victories in Congress as a result. These include a moratorium on new taxes on e-commerce, limitations on lawsuits against firms involved in Y2K glitches, and a bill that accepts the validity of personal signatures sent over the Net.

Washington's high-tech celebrities have played a role in these victories. Steve Case and George Vradenberg of AOL, John Sidgmore of MCI WorldCom and venture capitalist Mario Morino are among the most sought-after dinner companions in official D.C. In the past year in particular, lawmakers and top Executive Branch decision makers have come to appreciate that the equivalent of the Larry Ellisons, Michael Dells and Bill Gateses of the world live near enough for a drop by. "For a lot of people on the Hill it was always, 'Go to Silicon Valley for technology,'" says Morino. "But we could become at least as powerful as the valley because of our proximity."

Morino sees another advantage as well. Several entrepreneurs who have situated their firms outside Washington were at one time politicos or bureaucrats. And that can make a major difference. Had Microsoft not hated Washington so deeply for so long, it might have gathered enough friends there to at least blunt the Clinton Administration attack that now threatens to break up the company.

Dulles-area techies are determined to avoid repeating that kind of mistake by working hard to make friends in Washington. And now that AOL's Steve Case isn't being asked anymore, "How was your trip from the Coast?" and congressional types all know how close AOL is, the schmoozing is sure to go a lot smoother.

Jeffrey Birnbaum is Washington bureau chief of FORTUNE and wrote The MoneyMen: The Real Story of Fund-Raising's Influence on Political Power in America