AT&T filed a lawsuit against Broadcom on August 29 accusing it of seeking to “retroactively change existing VMware contracts to match its new corporate strategy.” The lawsuit, spotted by Channel Futures, concerns claims that Broadcom is not letting AT&T renew support services for previously purchased perpetual VMware software licenses unless AT&T meets certain conditions.
Broadcom closed its $61 billion VMware acquisition in November and swiftly enacted sweeping changes. For example, in December, Broadcom announced the end of VMware perpetual license sales in favor of subscriptions of bundled products. Combined with higher core requirements per CPU subscription, complaints ensued that VMware was getting more expensive to work with.
AT&T uses VMware software to run 75,000 virtual machines (VMs) across about 8,600 servers, per the complaint filed at the Supreme Court of the State of New York [PDF]. It reportedly uses the VMs to support customer service operations and for operations management efficiency.
AT&T feels it should be granted a one-year renewal for VMware support services, which it claimed would be the second of three one-year renewals to which its contract entitles it. According to AT&T, support services are critical in case of software errors and for upkeep, like security patches, software upgrades, and daily maintenance. Without support, “an error or software glitch” could result in disruptive failure, AT&T said.
AT&T claims Broadcom refuses to renew support and plans to terminate AT&T’s VMware support services on September 9. It asked the court to stop Broadcom from cutting VMware support services and for “further relief” deemed necessary. The New York Supreme Court has told Broadcom to respond within 20 days of the complaint’s filing.
In a statement to Ars Technica, an AT&T spokesperson said: “We have filed this complaint to preserve continuity in the services we provide and protect the interests of our customers.”
AT&T accuses Broadcom of trying to make it spend millions on unwanted software
AT&T’s lawsuit claims that Broadcom has refused to renew support services for AT&T’s perpetual licenses unless AT&T agrees to what it deems are unfair conditions that would cost it “tens of millions more than the price of the support services alone.”
The lawsuit reads:
Specifically, Broadcom is threatening to withhold essential support services for previously purchased VMware perpetually licensed software unless AT&T capitulates to Broadcom’s demands that AT&T purchase hundreds of millions of dollars’ worth of bundled subscription software and services, which AT&T does not want.
After buying VMware, Broadcom consolidated VMware’s offering from about 8,000 SKUs to four bundles, per Channel Futures. AT&T claims these subscription offerings “would impose significant additional contractual and technological obligations.” AT&T claims it might have to invest millions to “develop its network to accommodate the new software.”
VMware and AT&T’s agreement precludes “Broadcom’s attempt to bully AT&T into paying a king’s ransom for subscriptions AT&T does not want or need, or risk widespread network outages,” AT&T reckons.
In its lawsuit, AT&T claims “bullying tactics” were expected from Broadcom post-acquisition. Quoting Ars Technica reporting, the lawsuit claims that “Broadcom wasted no time strong-arming customers into highly unfavorable subscription models marked by ‘steeply increased prices[,]’ ‘refusing to maintain security conditions for perpetual license[d] [software,]’ and threatening to cut off support for existing products already licensed by customers—exactly as it has done here.'”
“Without the Support Services, the more than 75,000 virtual machines operated by AT&T⸺impacting millions of its customers worldwide⸺would all be just an error or software glitch away from failing,” AT&T’s lawsuit says.
Broadcom’s response
In the lawsuit, Broadcom alleges that AT&T is not eligible to renew support services for a year because it believes AT&T was supposed to renew all three one-year support service plans by the end of 2023.
In a statement to Ars Technica, a Broadcom company spokesperson said:
Broadcom strongly disagrees with the allegations and is confident we will prevail in the legal process. VMware has been moving to a subscription model, the standard for the software industry, for several years – beginning before the acquisition by Broadcom. Our focus will continue to be providing our customers choice and flexibility while helping them address their most complex technology challenges.
Communications for Office of the President, first responders could be affected
AT&T’s lawsuit emphasizes that should it lose support for VMware offerings, communications for the Office of the President and first responders would be at risk. AT&T claims that about 22,000 of its 75,000 VMs relying on VMware “are used in some way to support AT&T’s provision of services to millions of police officers, firefighters, paramedics, emergency workers and incident response team members nationwide… for use in connection with matters of public safety and/or national security.”
When reached for comment, AT&T’s spokesperson declined to comment on AT&T’s backup plan for minimizing disruption should it lose VMware support in a few days.
Ultimately, the case centers on “multiple documents involved, and resolution of the dispute will require interpretation as to which clauses prevail,” Benjamin B. Kabak, a partner practicing in technology and outsourcing at the Loeb & Loeb LLP New York law firm, points out.