Why Silicon Valley is Mobilizing Its Forces in Washington

Tech giants can no longer count on a gentle touch from lawmakers and regulators.

By + More
Apple CEO Tim Cook enters the stage during the Apple Developers Conference in San Francisco, Monday, June 11, 2012. Apple says it's introducing a laptop with a super-high resolution "Retina" display, setting a new standard for screen sharpness. The new MacBook Pro will have a 15-inch screen and four times the resolution of previous models, Apple CEO Tim Cook told developers at a conference in San Francisco.

Silicon Valley has kept a careful distance from Washington, D.C., lest the gridlock rub off. Or the pettiness. Or the dismal action-to-talk ratio. But some of the nation's most influential technology firms, including Google, Amazon, Facebook, and eBay, are finally joining the political fray inside the Beltway. 

[Slideshow: Obama's crackdown on corporate America.]

 They're forming a new lobbying group called the Internet Association, with a mission to "strengthen and protect an open, innovative and free Internet."

The move signals that e-commerce and other activities associated with the Internet are no longer viewed as delicate new industries that need to be cultivated carefully. "When you have 60 percent market share in a tiny little business, nobody pays any attention to you," says Reed Hundt, who was chairman of the Federal Communications Commission in the 1990s under Bill Clinton. "But some of these firms are now too big to go unnoticed."

With a regular and perhaps powerful presence in Washington, big Internet firms will assure their views are heard by legislators, policymakers and regulators. Campaign donations—lobbyists' stock in trade—are sure to follow. Here are some of the policy issues technology firms care most about.

Antitrust. Microsoft became a famous antitrust target in the 1990s, in a landmark case that dragged on for years before reaching a settlement. Apple is now involved in an antitrust lawsuit involving e-books. The Federal Trade Commission is looking into whether Google has a monopoly on web search, as are European regulators. There's a long list of breakthrough firms that ended up fighting antitrust charges, because they remained dominant in industries that grew from marginal to mainstream. Today's tech giants would like to keep that list from getting longer.

[See why Mark Zuckerberg will be a great CEO (Some Day)]

Privacy. Data mining has become big business, with companies like Google and Facebook gathering gobs of information on their users. As consumers grow more uneasy about the practice, Washington could jump in with new laws or regulations that limits the use of data, which could crimp profitability at companies where it's a key part of the business model.

Online piracy. Media companies have a genuine problem with the unauthorized use of their content by third-party sites, usually foreign, which robs them of revenue. But Congressional efforts to address that earlier this year, with legislation known as SOPA and PIPA, produced howls of protest from Internet firms that feared it would create an abusive new corps of Internet cops. Congress relented, but alternative legislation is likely in the future.

[See how Washington is wrecking the economy, Part 3.]

Taxes. Who isn't worried about taxes, especially with the government in desperate need of new revenue? For Internet firms, there are two concerns: New state-by-state efforts to gather sales tax on e-commerce, and the possible reform of corporate tax rules. In general, Internet firms would prefer one national standard for e-commerce taxes instead of hundreds of local variations, along with corporate tax rules that allow them to continue booking some revenue at lower rates in certain foreign locations.

Immigration. Tech firms tend to have the highest demand for foreign engineers and other highly skilled immigrants, whose numbers in the United States are limited by an annual quota on the so-called H1-B visas issued each year. Many business leaders argue that Congress should raise the cap or come up with some other way for companies to get the talent they need, but the issue repeatedly bogs down amid more-controversial—but largely unrelated—battles over illegal immigration.

Weak tech know-how. The late Alaska Sen. Ted Stevens generated guffaws in 2006 when he referred to the Internet as "a series of tubes." Yet breakthrough technology draws the interest of regulators and legislators, even if they don't understand it. So it's best to make sure they do. "When you get to be successful, you're part of the political process whether you like it or not," says Hundt. Google, Amazon and the other titans have figured that out.

Rick Newman is the author of Rebounders: How Winners Pivot From Setback To Success. Follow him on Twitter: @rickjnewman.