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Mr. Gates Goes To Washington

The software billionaire learns a lesson about money, power and political finesse

By Joshua Quittner

TIME magazine 03-16-98

(TIME, March 16) -- Some of the Senators on the Judiciary Committee may not have heard of the Gates Library Foundation, which helps wire libraries to the Internet. So they were surprised when phone calls started coming in to their offices with the good news from one of Bill Gates' charitable trusts. The callers just wanted the Senators to know that the foundation had donated generously to libraries in their states--$1.67 million, all told.

If the calls were part of an effort to soften Gates' image in Washington, they didn't work. "I don't think they get it," says Republican Senator Mike DeWine of Ohio, chairman of the Senate antitrust subcommittee, whose state received $70,000. "Microsoft is now a monopoly," he says. "But they have not adjusted to the fact that they now have to follow different rules."

Finesse matters as much as money when you're playing politics, which could be the toughest lesson that the chairman of Microsoft has to learn. When Mr. Gates went to Washington last week, he hoped to relieve some of the pressure that's been brought to bear on his growing empire. With Microsoft, the world's largest software company, facing a sapping antitrust action waged by the Federal Government--and 11 similar suits filed by state attorneys general--the $47 Billion Man was going on the offensive by running with the ball himself. Luckily for Gates and Microsoft, the game still has a lot of play left.

Gates visited one Senate office after another Monday trying to lather on a little of his personal charm. But even his escort, Vin Weber, a former Congressman who's now a full-time Washington fixer, couldn't smooth Gates' prickly edges. "It was like fingernails on a blackboard," said a participant in one of the meetings. "You'd think with all that money he's paying to his advisers they'd tell him how to behave in front of a U.S. Senator."

He behaved better during the four-hour grilling before a Senate panel presided over by Republican Orrin Hatch of Utah--especially given the adversarial trap that had been set for him. Room 216 of the Hart Senate Office Building has seen its share of drama. But for sheer media mass--as measured by the number of cameras--Gates' first congressional testimony was great one-day theater.

Wearing a baggy blue suit and white shirt, Gates broke through the throng of journalists and staff members to shake some manicured hands. After he'd provided virtually every Senator in the room with a frameable photo-op, he pushed his way to one end of the green felt-covered witness table and coolly greeted Sun Microsystems' Scott McNealy, chief of the Gates bashers. The committee staff--hoping for as many fireworks as possible--placed McNealy directly to Gates' left, next to Microsoft's other archrival, the aggrieved Jim Barksdale of Netscape Communications Corp.

But no matter how they baited him, Gates held his famous temper and stuck to his message: Microsoft is not a monopoly; anyone can upend the topsy-turvy software industry with a cool new idea. As he put it later, "At the end of the day there's only one question: Are we allowed to innovate? We'll make sure that this boils down to that one question."

Not surprisingly, the Senators had a few questions of their own. They wanted to know about Microsoft's licensing agreements with computer makers that effectively banished Netscape from the desktop. They wanted to hear why Microsoft decided to make its Internet browser inseparable from its operating system, Windows 95. And they wanted to know how the company set the price for the browser at zero. "I think there is a single, basic question underlying our inquiry," said chairman Hatch. "Is there a danger that monopoly power is--or could be--used to stifle innovation in the U.S. software industry today?"

The Justice Department clearly believes there is. Federal trust busters--whose hand had to be strengthened this week-- say Windows 95, installed on more than 85% of the world's desktop computers, is by definition a monopoly. Nothing illegal about that. The problem, they say, is that Microsoft has been using its control of the desktop to pry its way into new markets. Microsoft has "done almost everything they can think of to put us out of business," Barksdale told the Senators. He should know: Netscape's browser was unrivaled after its launch in 1994. But pressured by Microsoft, which was giving a virtually identical product away, Netscape saw its market share plummet. Now the company gives away not just its software but the underlying source code as well.

The only thing on which Gates, his competitors and the Senators agreed was that further antitrust legislation is unnecessary. The real issue is how to enforce existing laws. Hatch plans to schedule yet another hearing--this time without Gates.

Perhaps Hatch felt slighted that he didn't get any of the brownies and cookies Microsoft sent to another Senator after the hearing. No matter. It's unlikely Gates is hankering to return. The 42-year-old Harvard dropout may be the world's smartest and richest businessman, but as he learned last week, that and $1.60 get you a cup of chowder in the Rayburn cafeteria.

--With reporting by John F. Dickerson and Bruce van Voorst/Washington
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Cover Date: March 16, 1998

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