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Apple Charges For 802.11n, Blames Accounting Law
If you have a Core 2 Duo Macintosh, the built-in WLAN card is capable of networking using (draft 2) 802.11n. This capability can be unlocked via an update Apple distributes with the new AirPort Extreme Base Station. Or, they will sell it to you for $4.99. Why don't they give it away for free, say with Software Update? Because of the Sarbanes-Oxley Act (which was passed in the wake of the Enron scandal). iLounge quotes an Apple representative: "It's about accounting. Because of the Act, the company believes that if it sells a product, then later adds a feature to that product, it can be held liable for improper accounting if it recognizes revenue from the product at the time of sale, given that it hasn't finished delivering the product at that point."
This explanation doesn't hold water -- then why don't they charge for software updates, and why not charge $1.99, or $0.99, or even $0.01, instead?
Either a) anyone who offers a patch that fixes a bug or adds a feature and doesn't charge for it (which happens all the time, for example: windows update) is breaking the law or b) Apple is delusional / wanted an excuse to charge you more money.
I know which one I believe.
Philosophy.
So why does it cost $4.99 for a feature which tas taken very little work to implement?
OK, so it's fair that they're charging for it - if you believe their excuse, but why not $0.99 or $1?
I thought this was common knowledge - I've been arguing that the effects of Sarbanes-Oxley are detrimental for some time now.
The major problem is that it invites software companies (I'm not making any accusations here) to put out shoddy software, full of bugs and not-ready-for-primetime features, giving themselves the option to *not* charge for upgrades later, perhaps for business-reasons. Bugfixes, you see, are not subject to the S-O ruling. This is not the way I'd like to see the s/w industry go...
Simon.
Physicists get Hadrons!
Oh, wait....
Nothing great was ever achieved without enthusiasm
That's about the most lame excuse I've ever heard. What's with Microsoft updates? They also "complete" the product. What about free updates of all kind?
And even if they believe their own propaganda, why don't charge one dollar, or even one cent? The accounting principle wouldn't be broken.
Rome taught me patience and assiduous application to detail. Virtues which temper the boldness of great, general views.
This explanation only makes sense if you consider the product "not delivered" until the last features are added. This makes no sense whatsoever, because it's not like people are saying, okay, I'm buying this Apple product, but my contract with them says that I get my money back if they don't add features x, y, and z. That would be what should cause an accounting department worry. Looks here like Apple just found a flimsy accounting excuse for trying to collect more money, and ran with it. Given all the negative media attention they are gathering recently, you have to wonder about this sort of thing.
Has to be at least $1.00. Probably costs 'em several dollars to handle the dollar...
Bantam Dominique roosters crow a four-note song. Once you've heard it as "Happy BIRTHday" you can't NOT hear it that way
Either that or someone high up in apple is really jumpy right now and it playing it safe to insane degrees.
After the stock options issue, you bet that they are being over cautious. Now whether they are interpreting the law correctly, is another matter.
Jumpstart the tartan drive.
I guess then it should not be called a "patch" but an "upgrade". A patch implies that it was not working properly in the first place.
Well, there's spam egg sausage and spam, that's not got much spam in it.
I have a first-rev MacBook Pro with the Core (1) Duo. I *wish* I could upgrade from g to n for only $5!
Can someone please post the link to where I buy the unlocking software? After spending $3K on my C2D MacBook Pro, you really think I care about paying another $5?
Sure it could have been a penny, but that may have been construed as trying to sell the feature for less than market value. I'm not an accountant, but I know that you can get in trouble for stock options granted at less than estimated market value for a private (unlisted) company, therefore you have the pick the lowest number that can be seen as a reasonable value. I was lucky to get my shares at $0.02 a piece since when I was granted the options the startup company I started working at had yet to make their first sale. A year later they had to grant options at $0.50 and up.
In all honesty $5 is cheap for a draft-N card. Consider the alternative of buying a PCMCIA Wireless N card and tell me its not a deal?
I worked at a place that abused accounting principles. They'd book revenue on hardware that hadn't shipped or even been made, software that wasn't installed or even sold yet, and move all kinds of valid and imaginary revenue from the vague future to the current quarter like crazy.
I understand why we need laws about when you are supposed to book revenue because I've seen it abused. The whole house of cards collapses hard when growth slows. My job was lost when the dotcom bubble burst and they couldn't hide their baloney in triple digit growth any more. Same thing happened at many other companies.
This seems like an innocent case, but I thought I'd point out there are other possibilities.
Man, you really need that seminar!
This is actually a real problem. If you sell a product that has upgradable firmware then you need to only recognise revenue as you provide the service. For example let's say you sell a device for $1000 and provide free firmware upgrades for 1 year. You might structure this that the base product is worth $900 and the 12 months tech support is worth $100. You then recognise the revenue as $900 at time of sale and $100/12 per month.
For a product that has free firmware upgrades "forever", you might introduce some reasonable lifetime (like 3 years), perhaps the typical depreciation period for the product.
Now Apple beancounters fucked up. They recognised all revenue immediately. They should have really defered some of the revenue recognition but they wanted to look all shiny for Wall Street (Enron, on a smaller scale). By chraging for this upgrade they're probably hoping to create a loop hole.
Needless to say, MS most likely just moons the act and does not care any more than they care about the DOJ nailing them with anti-trust.
Engineering is the art of compromise.
I believe MS already defers some of the income from Windows sales by considering the product partially delivered and feeds that into the support teams over time. The practice would predate Enron though, and was probably started to keep the stock price stable. Ie: they can show a more steady income stream on paper despite long product cycles.
:)
If only Apple were so savvy!
*ducks*
802.11n was never advertised openly and originally as part of the capabilities of the products in question. For that matter, Quicktime Pro's feature sets are not advertised as part of standard Quicktime... but you don't see anyone complaining that users have to pay a license fee to unlock the Quicktime Pro bundle of features that already exist on your Mac in a disabled state.
For that matter, the same can be said of many different types of software. If you get a digital converter box from your cable company, by virtue of having the box you aren't granted access to every channel the box can theoretically decode.
'' Here's how Apple can get around SOX: Put the update on their site, list it as BETA, let anyone register to be a "Beta Tester" for the application, ... ''
I could imagine that Sarbanes-Oxley is very sensitive about any attempts to get around it.
Please note that while iLounge's article is interesting, it's based on two unnamed Apple representatives, quoted without their position at the company being mentioned. This is fine, but let's not take this as an official Apple position or statement. I'm a regular print and online journalist, so I asked Apple about the $5 charge. They said they don't comment on rumors and speculation, and repeated that the updater would be available on the CD with the new AirPort Extreme update that will ship in February. To me, that's like saying, "hint, hint." The CD will have an unlocked updater that can be used with any compatible Core 2 Duo or Xeon Macintosh. Thus, Apple may or may not have a Sarbanes-Oxley issue (stranger things have happened), and they may or may not charge $5 for the updater. Nonetheless, an unlocked "enabler" application will be in the hands of thousands of early purchasers (like myself). I've written more about this on my Wi-Fi blog in a post about why I think the $5 charge is unlikely, but unnecessary for anyone to pay even if it's attempted to be levied.
Freelance tech journalist for the Economist, MIT Technology Review, Macworld, and others
You pay for new features. Like Spotlight, Dashboard, etc. Patches (things that repair existing functionality), of course, are free.
It's (supposed to be) like paying for a "new OS" -- like paying for Vista as an "upgrade" from Windows XP.
Additionally, since there's no penalty for not upgrading (you still get patches), you could stick with your old version. For example, if you like the Windows update cycle of a major change every five years, you could choose to update from OS X 10.1 to OS X 10.5. This would be at least as big a change as the change from XP to Vista, and not merely "patches" as you claim.
I'd be willing to bet that they're deliberately misinterpreting the law. They won't be the only ones, many companies have very publicly complained about how terrible sarbox is and how they are bleeding money just trying to audit where their money is bleeding to, and many of those are clearly performing what amounts to theatrics. (Compare making ridiculous statements such as "sarbox bans us from ever giving foo away for free" to a law requiring all non-folding knives over 5 inches in length to be "sheathed" in public, with people protesting by jabbing their knives into their legs and wailing about how the terrible, terrible law forces them to sheathe their knives in their legs.)
No different from all the companies who canceled or froze their pension plans after the pension protection act last year. Apparently asking corporations to honor their contractual promises or be liable for the results if they did not take certain steps to help ensure that the pension they're promising can be paid is just so very terrible. Naturally, they're calling for the act to be repealed so they can go back to offering pensions they obviously have no intention of honoring.
In 10.4.8 update, Apple added EAP-FAST wireless authentication. That 'feature' was not present when many people 'entered into their contract of sale willingly' with their Macs. Are you saying that all of those people should now be charged for this and any other additional features because it was not there originally?
Stop apologising for Apple.
Apple are trying to cover their tracks. If some shareholders want to hound Apple at some point for some less-than-stellar performance on Wall St, they could easily bring up the fact that Apple recognised this revenue too early and thus brough the profits forward a few quarters (meaning that profit that should have happened a few quarters later did not show up). If you had just bought Apple's shares you might have reason to be pissed.
While the accounting is a drag, it is not that huge a deal. It only takes a few minutes to figure out a revenue realisation policy that you will use for a particular product. The real issue though is that many companies sell unfinished products and want to recognise revenue immediately. This makes for poor products and engineering: "Just ship it to get revenue this quarter. We'll fix it next quarter". Sarbanes-Oxley counters this which is good for product development.
Engineering is the art of compromise.
Not necessarily. Imagine if there were license costs involved. Apple didn't want to add that to the cost of the Mac as this would decrease revenue and not everyone would use it. If you don't want to use it, you don't pay the licensing fee. So in a sense, you weren't charged for it.
Think of it like an XBox Live subscription. All XBoxes have the ability/capability to use the Live service, but you need to pay a fee to use it. It's not included in the price you pay (excluding any bundled deals) because not everyone will use it.
The same example could be said about many things. You commonly buy a collective of objects, but don't always use them all.
How is this different from Microsoft adding 1080p support to the 360 (for free)?
Another example. I want to buy an Audi. I was reading a brochure on it. It tells me that the car is capable of 151mph. It has an asterisk saying "* electronically limited to 130mph in US and Canada". Now, I'm not sure on the inherent legality thereof, but you can bet if I wanted to remove that limiter and took it to my Audi dealer to do so, and they wanted to charge me anything /beyond/ the labor for removing said limiter, I'd be mad as hell.
Now, you might point to that 'labor' word and say "well, there /is/ labor, and that's what you're being charged for"... I don't buy that. You'd better believe that that wireless card was supplied with a skeletal driver for (a?)/b/g/n, not (a?)/b/g only.
Apple just found a way to double charge you for the same thing, and apologists like you are defending them.
Say ATI sells you a new PCIe card. You know through various channels that this card is PCIe. But guess what, it only runs at PCI speeds, and guess what, "$5 gets you the 'upgrade' to use PCIe" - people, here on Slashdot and elsewhere would be screaming bloody murder, diseminating this patch left right and center, and wailing the house down, and you know they would (and rightly so) - but here's yet another free pass for Apple from the "loyal following".
I'm a geek. I know what cards do what. I know that an Intel EtherExpress Pro card ran at 10 and 100mbps. That a seller might say "Intel EtherExpress Pro network card, 10mbps networking" is up to them. I am not required to subsidize the fact that they /understated/ the abilities of the hardware. I know the card does this, I made my value judgment on the cost of the computer based on that, and then ran into, through false limitation alone, this underutilization of my hardware. That it was advertised as such is no Get Out Of Jail free. I arbit the value of a product by its contents, not by the marketing budget and accuracy thereof.
Reminds me of cell phones. It's depressing reading review after review that says the manufacturer put 85 capabilities in a phone, then the phone company that sold it to you has had half of them crippled or shut off entirely in the firmware.
Start a happiness pandemic
Firstly, anyone owning a Core 2 Duo Mac (that paid for it themself) is not going to have trouble paying an extra $4.99 to enable state-of-the-art wireless technology. Hell, even someone with a minimum-wage job who got it as a gift could shell that out.
Secondly, everyone's stance on this seems to be "extortion for extra profit". Please. Their reason sounds legitimate to me, but let's look at what Apple even has to gain from this:
Currently, over 50 million people own an Apple product (I'm getting this from a quick Google search, and all the following numbers are just arbitrary guesses to prove my point). Let's say half of those are iPods. And of the 25 million computers, how many are the new Core 2 Duo mac? Let's say 1 million (that's being generous, I'm sure, as this is a higher-end model, correct?). And how many of the owners of these are going to need (or want) 802.11n? Let's say half. So 500,000 people at $5 a pop, 2.5 million dollars.
And Apple is what, a multi-billion dollar company? Does everyone here really think they'd do something to upset their customers like this over 2.5 million dollars? I don't think so. They could simply raise the price of every computer $5 for the same effect, with less backlash.
I realize these numbers are incredibly rough estimates, but my point is there's no way they're making enough money off this (with the bad press and all) for it to be some evil for-profit extortion.
WHO NEEDS SHIFT WHEN YOU HAVE CAPSLOCK/ DAMN1