Silicon Valley startups discover power of political lobbying

In the last few months, several young tech companies have put their faith in the power of money to influence government policy and regulation. Some lobbied the federal government for the first time, while others expanded lobbying efforts by opening dedicated offices in the U.S. capital.

The companies pursuing these efforts tend to be those challenging existing business models, in areas like the sharing economy and streaming content over the web. And when new business models arise, they often bump up against aging regulations.

To be sure, lobbying by the tech industry isn't new. Microsoft and IBM have been at it for years, and Google now leads the industry in money spent. But the moves by smaller companies are notable in part because they're at odds with the image they present of scrappy start-ups battling the establishment -- the same establishment they're now having to cozy up to.

"These smaller startups have recognized the grim reality that the incumbents they hope to disrupt are well connected in D.C. and state capitals across the U.S.," said Adam Thierer, a senior research fellow at George Mason University's Mercatus Center. "They have made the calculation that either we invest in lobbying or our competitors crush us."

In the last three months, Fitbit, Snapchat and Sidecar all began lobbying in Washington for the first time, each paying D.C.-based lobbying companies to monitor moves by the federal government and lawmakers that might impact their business.

"In general, for startups, it's good to have a firm in D.C. acting as your 'boots on the ground' because it's important to have a presence and your finger on the pulse of issues affecting your company," said a lobbyist at one tech start-up, who asked not to be named.

Some companies have gone a step further and opened their own office in D.C., with their own lobbyist. An in-house lobbyist doesn't have to split time with other clients and helps ensure a company has a "seat at the table" in discussions of policy or regulatory matters.

Uber began in-house lobbying this year, less than a year after it first arrived in Washington, and has already spent $100,000 on its own efforts. Music streaming service Pandora, which has spent almost a million dollars on lobbying in the last four years, registered its own lobbyist in September and quickly spent a further $120,000.

"They are making a rational business decision," said Tim LaPira, a political scientist at James Madison University. "They don't expect an immediate return, but are establishing a long-term strategy and monitoring what the government does in case there is an opportunity that might open up and they can take advantage of it."

Aereo, the New York company that wants to stream over-the-air TV to computer screens, revamped its efforts in D.C. after broadcasters, cable operators and others managed to convince the Supreme Court that its business model should be illegal.

Aereo had already spent $820,000 over two and a half years to pay a lobbying company, and a few months after the Supreme Court ruling it filed papers to begin lobbying activity itself. Less than two weeks later, it was sitting down with former FCC Chairman Tom Wheeler to discuss regulation of Internet video services. The company recently laid off most of its employees, but still hopes to convince regulators that it should be legal.

The need to lobby is often greatest in industries that have strong, established players. Ride-sharing companies are going up against taxi companies, for example, and media streaming companies are taking on broadcasters, cable companies and the recording industry.

These competitors often have deep roots in Washington, are well funded and don't like the disruption the Internet has brought.

"They want to keep the status quo," said LaPira. "If they are successful, they want to keep it that way."

It's difficult to directly compare the amount of money spent by either side, in part because established companies often lobby on a wide range of issues, but the newer players are usually out-spent.

In entertainment, for example, Netflix spent $1.3 million on federal lobbying last year, while the National Cable and Telecommunications Association spent $20 million. Comcast, Time Warner and a host of entertainment and broadcasting companies spent many millions more.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com