WASHINGTON — On Feb. 24, Microsoft Chief Technology Officer Craig Mundie sat in on a "big boys" conference call with the Federal Communications Commission. Others on the line were the chief executives of Time Warner Cable and Comcast and the chairman of the FCC.

Three weeks later, the FCC made a major decision regarding cable set-top boxes that favored Microsoft and the cable companies — and rejected months of lobbying by Intel and others in the computer and electronics industry.

Five years ago, Microsoft would not have been in on such a call and probably would not have prevailed. But the phone conference with the FCC is one result of a carefully crafted strategy, the culmination of years of work by the company to undo damage from its landmark federal antitrust case and make new friends in the nation's capital.

And it needs those friends. As one FCC commissioner put it, Microsoft is back on the "regulatory radar screen."

But, as Mundie said in a recent interview, he's been preparing for this moment for 10 years.

The renewed interest stems from a long-awaited development in technology and entertainment: the arrival of the "age of convergence."

In yesterday's analog world, television programs were delivered on TVs, radio shows on radio. Today's technology has complicated the situation by enabling cable, computers and all manner of electronic devices to deliver the Web, phone service, music, video and other digital content.

As a result, federal oversight in the telecommunications arena is extending into software companies such as Microsoft, and the company has been anticipating the change. Positioning itself for new ventures in telecom and entertainment, Microsoft is crafting tactical alliances with other companies and political power brokers and pushing policy positions on critical telecom issues in D.C.

What's more, its positions and alliances seem to shift with neck-turning speed.

The company is back "in the thick of things" because of convergence, said outgoing FCC Chairman Michael Powell, who added bemusedly that it will be interesting to "watch the coming convergence of lobbying and public positions."

"Regulatory limelight"

The subject of the February afternoon call was integration of cable TV with computer technology such as Microsoft's Windows Media Player.

But that's just one example of digital media the company is actively developing and marketing. Other technologies it's working on involve phones, wireless communications, TV on the Internet, music and movies.

Mundie would disagree that Microsoft is the one on the regulatory radar screen. It's the interaction of "all these non-PC things," he said, that's forcing attention on the company.

"The issues we've long been concerned about," he said, "are now coming into the regulatory limelight."

Telecom and broadcast companies have traditionally been in regulated industries, Mundie said. Now others, including Microsoft, find themselves "squarely confronted' with convergence.

"So we've been trying to deal with these issues prospectively," Mundie said.

In other words, unlike the mistakes it made during the antitrust suit, Microsoft is working to stay out of fights and make as many friends as possible.

The conference call with Time Warner's Glenn Britt, Comcast's Brian Roberts and the FCC's Powell is a good example of that strategy. Mundie joined the heads of the two largest cable companies in America in an agreement to work out a time frame to merge their software and set-top boxes and hold off a government mandate on how to do it.

Never mind that only a couple of years ago, Microsoft opposed cable operators on this matter and sided with Intel and software groups.

"Worlds that used to be safely separate are no longer so," Powell said. "If you're a software company, you can't safely sit back and let the telcos — phone and TV corporations — define the digital age. It's your age, too."

FCC Commissioner Kathleen Abernathy agreed. "As Microsoft becomes involved in the provision of services that historically have been subject to extensive regulation," she said, "it will increasingly become a player in regulatory debates before Congress, the FCC and other agencies."

A TCI warning

Cable-television pioneer John Malone predicted much of this, but more as a warning. In 1998, the one-time head of former cable giant TCI told cable companies that Microsoft would one day want to be the ultimate gatekeeper, ready to swallow cable, communications and entertainment companies.

Indeed, as early as 1997, Microsoft invested heavily in what would become America's No. 1 cable operator, Comcast. But the convergence technology wasn't available yet, and Microsoft was busy fighting the antitrust suit over Windows. Then that case settled, and so did the dust.

Last November, however, a report by an investment analyst with D.C. connections helped renew interest in Microsoft in the capital.

The 24-page report was written by Blair Levin, an analyst at Legg Mason and one-time chief of staff for former FCC Chairman Reed Hundt. In it, Levin tracked Microsoft's attempts to extend its market-dominating Windows operating system into areas beyond traditional computer use, including the handling of voice, video and data in the home.

Levin pointed out that the company was positioning itself with competitors and government to survive "key regulatory proceedings" as part of this effort.

Currying favor

Fights over copyrights provide an interesting example of Microsoft's current D.C. presence and how it switches priorities and sides.

One way movie and TV studios can protect their copyrights on the Internet is by inserting a "broadcast flag" into their digital programming. The flag is a marker that can help them prevent illegal downloads.

A federal case on whether to insert the flag pits the FCC, Hollywood, TV networks and the music industry against several public-interest groups and the American Library Association. Movie makers want protection from piracy; but public-interest groups and software makers don't want a lot of restrictions on downloads.

Michael Powell, outgoing FCC chairman

Only a few years ago, Microsoft opposed the flag, because such an approach attempts to tell software designers what to include and sets limits on the Internet.

But now, Microsoft cannot afford to tick off its fledgling friends from Hollywood, the movie moguls it will need to provide content as it ventures into new video technology.

"All tech companies, especially Microsoft, want to cooperate with the studios because they want a hand in content-distribution systems of the future," said Fritz Attaway, a lawyer at the Motion Picture Association of America. And so neither Microsoft nor the lobbyist group it dominates, the Business Software Alliance, took sides in the flag case.

At the same time, Microsoft is trying hard to cozy up with its new buddies among advocacy groups, including the Consumers Union, the Media Access Project and Consumer Federation. These groups wielded their power last year when they helped destroy the billion-dollar media-consolidation plans of major corporations.

Microsoft's lobbyists know power and, in fact, hired Consumer Union counsel Frank Torres a couple of years ago.

"This company has matured a great deal," said Jack Krumholtz, Microsoft's chief representative in Washington, D.C. "We've learned a lot with antitrust litigation about concerns voiced by consumer advocates. We learned we had to step up to do things in a different way."

Shifting coalitions

One instance of this "different way" is its decision to support a petition involving a television issue that was drawn up by the New America Foundation, a think tank that fights so-called Big Media. "We tried a long time to get Apple [Computer] to sign on, but Microsoft stepped forward here," said James Snider, senior fellow at New America.

But all this "reaching out" can get tricky. Microsoft won cachet with consumer groups and Hollywood three years ago, when it joined them in a coalition to endorse "net neutrality," which would force cable operators to open access to their broadband systems to smaller Internet service providers such as EarthLink. That move pitched Microsoft against those cable operators, including one in which it has a sizable stake.

Currently, as a potential provider of television through the Internet (called IPTV), Microsoft sides with its new phone-company partners, BellSouth and SBC Communications. It contends that IPTV should not be subject to the same rules and local city franchise taxes as the cable companies. Guess who objects to that? Those same cable operators.

All this gamesmanship has not gone unnoticed by Microsoft's new consumer-group friends. They are happy to be used and be useful, but they remain skeptical.

"Microsoft has been making some genuine efforts to reach out to the public-interest community," said Harold Feld of the Media Access Project. "But nobody forgets that this is Microsoft, and that the reason they behave is that they have to. It's not as though the people have forgotten the antitrust case."

Mark Cooper, legal strategist with the Consumer Federation, acknowledged that Microsoft has been willing to fight on the federation's side. "But we won't give them a pass just because we were on the same side last week. That linkage doesn't work," he said.

Seeking FCC approval

The changing dynamic is evident in how Microsoft has handled some components of its upcoming new version of Windows, code-named Longhorn.

It would have been inconceivable a few years ago for Microsoft to ask the FCC to approve one function in its software. But because the entertainment industry wants piracy protection before it will allow digital videos to be downloaded, Microsoft put the digital-rights-management components of Windows Media Player and Longhorn through an approval process before the FCC.

"Was that a milestone?" said Krumholtz. "Perhaps it was." But he added, "I don't think we're on a path toward federal regulation of software." Neither Microsoft nor FCC staff members want the agency to become the "Federal Computer Commission."

Nonetheless, Microsoft executives, including Mundie and Andy Moss, the company's director of technical policy, have visited the FCC more frequently in the past year than they probably have in the previous several years combined, an FCC attorney said. Mundie understands the "impact of politics on their products," Powell said.

"We have certainly stepped up in terms of our engagement in Washington," Krumholtz said. "We are much more visible [in D.C.] than we were when I started this job 10 years ago."

Jon Cody, an assistant counsel to the FCC chairman, said Microsoft will continue to have a greater advocacy presence in D.C. through a full range of issues, including the possible overhaul of the 1996 Telecommunications Act.

Mundie said he's happy that D.C. politicians and regulators are finally coming to where his company "has been working for a long time."

Now, Microsoft must figure out ways to keep them all there, on its side, even as it moves around the playing board.

Alicia Mundy: 202-662-7457 or amundy@seattletimes.com