Gateway to Cyberspace

P> As everyone knows, Washington equals politics. Now, add Internet business to that equation. Not only was the Internet, through its government predecessor, spawned here, but it has grown into big business in the city and surrounding Maryland and Virginia suburbs -- bigger than anywhere else in the United States.

The numbers prove that claim: The Washington, D.C., area in 1995 had the highest per capita number of computers hooked to the Internet of any region in the country, according to Matrix Information and Directory Services, an Internet demographics firm in Austin, Texas. Last year saw 45,866 area computers on-line, a 103 percent increase over 1994's mere 22,510. Expect the 1996 numbers to dwarf those statistics.

But the Washington area hasn't just wired individual consumers and government workers. Four of the nine largest access and content providers hail from the region -- America Online Inc., Vienna, Va.; NetworkMCI Business, Towson, Md; PSINet Inc., Herndon, Va.; and UUNET Technologies Inc., Fairfax, Va.

Besides some of the most influential Internet players anywhere, at least 65 Internet access providers call the Washington area home. Alex. Brown, Baltimore, predicts the access market will shake down nationally to 50 providers in the next five years, with only about six becoming significant players. Watch for Washington area companies to emerge from the shakedown stronger than before and at the top of the significant player list.

The Washington area is also building an international reputation as home of the Internet. More than half of all international Internet traffic passes through the region, according to the Greater Washington Initiative.

"The D.C. area has always grooved on information," said Anthony Rutkowski, who left his post as executive director of the Internet Society, Reston, Va., to run Internet strategy for General Magic, Sunnyvale, Calif. "It is a natural hub." The Internet Society, an international organization that coordinates Internet development, earlier this month appointed a new president, Donald M. Heath. Heath was executive vice president of Transaction Network Services, Herndon, Va.

Rutkowski sees three reasons why the Washington area is the Internet capital: The federal government's role as Internet user, the large number of Internet service providers and Europe's relative proximity to the area, as compared with Silicon Valley.

"It started here," said Jack McLean, managing partner of the Greater Washington Initiative. "That, all by itself, gives us an extraordinary leg up." The Internet is an outgrowth of ARPAnet, a project of the Defense Department's Advanced Research Projects Agency. Most of the people involved in ARPAnet had ties to the D.C. area -- homes, friends and family.

The National Science Foundation, which was considered the "backbone" of the Internet before it was privatized last year, also is here. But NSF has stepped back by launching a grant program to encourage universities to find ways to unclog Internet traffic. Many people who worked for ARPA and NSF moved on to commercial Internet projects in Washington, including William Schrader, CEO of PSINet.

Internet pioneers also included engineers at Stanford University in Palo Alto, Calif., and Sun Microsystems Inc., Mountain View, Calif. Although California has followed Washington in Internet business and innovation, the West Coast plans to catch up. "Within the last year, Silicon Valley has dramatically reorganized itself around the Internet," Rutkowski said.

While Washington reigns over connectivity, Silicon Valley, with its multitudes of World Wide Web providers and software vendors, concentrates on content. Don't think of it as one region winning out over the other, however. If Washington and Silicon Valley leveraged their different strengths, they could emerge as the strongest Internet partners yet, said Rutkowski. "I look at it as potential synergy," he said. "Everything is homing around D.C. and Silicon Valley."

Still, the perception of Washington as the home of Beltway banditry and political scandals remains a barrier. Rutkowski said when he was first accepted as a "West Coast" person, they let him in on the ultimate put-down: "People on the East Coast can't write good code."

Mark Filteau, president of DynCorp's Information and Engineering Technology Inc. in Fairfax, Va., said, "There's this conception that there's no software horsepower here. We're the people who actually have to slay the customer's dragon and make the program work. We're the kings of the application business.

"They mistake our reluctance to dictate a solution to a customer as a lack of creativity. It's a different kind of creativity here," Filteau added. And that creativity will be critical to making the Internet a business productivity tool -- a challenge still largely unmet, notwithstanding all the hype.

Filteau noted another key distinction. Unlike companies in Silicon Valley or Massachusetts that develop shrink-wrapped software programs, systems integrators often build systems with millions of lines of code. These systems run operations at the Federal Aviation Administration, Internal Revenue Service, Defense Department and Fortune 500 companies. "It takes more discipline to build complex software of millions of lines of code," said Filteau. And it also takes more teamwork and customer communication, which leaves little room for the lone programmer or "cowboy" hacker of Silicon Valley fame, he explained.

Companies getting into or expanding Internet businesses need to be in the two areas to succeed, Rutkowski said. "If companies want to play this game they should be here," echoed McLean. "This is where it began and where the people who understand it are."

Although the smaller Internet service providers represent Washington's connectivity, America Online also means content. "AOL may be a nucleus for Internet content and product development," said Rutkowski.

"We started here because this is where [founder and CEO] Steve Case lives," said Judy Tashbook, AOL spokeswoman. Founded in 1985, the company has grown from eight employees to 4,000 today. AOL recently announced it has outgrown its current office and will move to Sterling, Va.