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Wireless (Apple) Hardware Technology

Apple Charges For 802.11n, Blames Accounting Law 471

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."
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Apple Charges For 802.11n, Blames Accounting Law

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  • bs (Score:5, Insightful)

    by joesao ( 466680 ) on Tuesday January 16, 2007 @06:21PM (#17636860) Homepage
    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?
  • Wow (Score:2, Insightful)

    by Umbral Blot ( 737704 ) on Tuesday January 16, 2007 @06:22PM (#17636870) Homepage
    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.
  • by Cap'nPedro ( 987782 ) on Tuesday January 16, 2007 @06:22PM (#17636874)
    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?
  • Well understood (Score:5, Insightful)

    by Space cowboy ( 13680 ) * on Tuesday January 16, 2007 @06:22PM (#17636878) Journal

    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...

  • the obvious fix (Score:3, Insightful)

    by fishdan ( 569872 ) on Tuesday January 16, 2007 @06:23PM (#17636884) Homepage Journal
    Is for Apple to leak to a blogger a way to unlock the "feature"...

    Oh, wait.... [theregister.co.uk]

  • by OpenSourced ( 323149 ) on Tuesday January 16, 2007 @06:23PM (#17636890) Journal
    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.
  • Paper thin... (Score:1, Insightful)

    by Anonymous Coward on Tuesday January 16, 2007 @06:27PM (#17636964)
    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.
  • Re:Wow (Score:5, Insightful)

    by steve_bryan ( 2671 ) on Tuesday January 16, 2007 @06:27PM (#17636976)
    How about (c) You are incapable or unwilling to actually read an article before typing your uninformed opinion. The change due to Sarbanes Oxley only applies to new features, not bug fixes. Now you may return to anguished seething about how much you hate Apple and Steve Jobs.
  • by Ungrounded Lightning ( 62228 ) on Tuesday January 16, 2007 @06:30PM (#17637040) Journal
    Has to be at least $1.00. Probably costs 'em several dollars to handle the dollar...
  • by Midnight Thunder ( 17205 ) on Tuesday January 16, 2007 @06:30PM (#17637046) Homepage Journal
    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.
  • by UnknowingFool ( 672806 ) on Tuesday January 16, 2007 @06:32PM (#17637084)
    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.
  • by oskay ( 932940 ) on Tuesday January 16, 2007 @06:32PM (#17637094) Homepage
    I have a first-rev MacBook Pro with the Core (1) Duo. I *wish* I could upgrade from g to n for only $5!
  • by __aaclcg7560 ( 824291 ) on Tuesday January 16, 2007 @06:43PM (#17637314)
    I had the same thought when I heard the pricing on the iPhone and Apple TV.
  • Link Please... (Score:5, Insightful)

    by nonsequitor ( 893813 ) on Tuesday January 16, 2007 @06:46PM (#17637352)
    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?
  • by LunaticTippy ( 872397 ) on Tuesday January 16, 2007 @06:46PM (#17637360)
    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.
  • Option (c) (Score:5, Insightful)

    by EmbeddedJanitor ( 597831 ) on Tuesday January 16, 2007 @06:46PM (#17637370)
    They might want to just take a poke at the act because it makes it hard to conduct business.

    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.

  • Re:Wow (Score:5, Insightful)

    by Trillan ( 597339 ) on Tuesday January 16, 2007 @06:51PM (#17637452) Homepage Journal
    No, Microsoft can't possibly argue that PowerToys don't add new features. But PowerToys is not hardware, and it has been out longer than the Sarbanes-Oxley Act.

    Apple doesn't need a few hundred people spending $4.95 to be profitable. I think they're on to something here in their interpretation of the law, unfortunately. I'm not a lawyer, but you can bet Apple had their lawyers look at it.
  • by Lux ( 49200 ) on Tuesday January 16, 2007 @06:54PM (#17637508)
    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! :)

  • To be fair... (Score:5, Insightful)

    by SnowDog74 ( 745848 ) on Tuesday January 16, 2007 @07:00PM (#17637612)
    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.
  • by soft_guy ( 534437 ) on Tuesday January 16, 2007 @07:16PM (#17637898)
    You know what doesn't make sense to ME? It is that everyone on Slashdot seems to be assuming that this is real when in fact it comes from some guy's blog and he's reporting it as something that someone said on the floor at MacWorld.

    I think I'll wait until Apple actually announces this before I even think about reacting to it one way or the other.
  • by gnasher719 ( 869701 ) on Tuesday January 16, 2007 @07:20PM (#17637956)
    '' 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.
  • by eggboard ( 315140 ) * on Tuesday January 16, 2007 @07:23PM (#17638000) Homepage
    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 [wifinetnews.com], but unnecessary for anyone to pay even if it's attempted to be levied.
  • Re:Link Please... (Score:5, Insightful)

    by soft_guy ( 534437 ) on Tuesday January 16, 2007 @07:25PM (#17638030)
    Right - there isn't a link because this isn't an official announcement from Apple. This is a rumor on some guy's blog that he heard from someone walking around on the floor at MacWorld.

    Also, even if you believe the "article", you could get the software patch for free by buying the new 802.11n Airport Extreme base station from Apple which in theory you would need anyway in order to use this.

    If you think about it for a second, this idea doesn't even make sense. How is it not just free software that they give in order for the router to work? Apple gives out lots of free software.

    This thing sounds like someone talking out of their ass. Possibly it is a fake rumor that someone at Apple planted to track down a leaker.

    Do you detect a note of skepticism in my post? It is because I don't believe a word of this.
  • by Anonymous Coward on Tuesday January 16, 2007 @07:32PM (#17638130)
    Pay to keep up or don't get anymore patches.

    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.
  • Re:Wow (Score:5, Insightful)

    by mr_matticus ( 928346 ) on Tuesday January 16, 2007 @07:47PM (#17638362)
    It's NOT a simple upgrade to a driver. It adds an entirely new function to the device on a new protocol not interoperable with other equipment. Enabling it is a simple firmware update, but it is a material change to a shipping product.

    It's not about free patches being illegal, it's about Apple not reporting its hardware properly. You can't make a substantive, material change. From the perspective of government oversight, the products Apple has been shipping did NOT have n-capable hardware. Now they do, but you can't go back and re-file the paperwork. You have to report the upgrade in accounting filings, and you can't report something in your accounting files that doesn't cost anything. With the company being under investigation for its accounting practices, it's best not to take any risks at all while under the probe.

    If federal regulators respond to the story and say "Apple can ship this update for free without worrying about legal implications" you can bet your ass that the $4.99 fee will be dropped. Like they want to deal with handling a bunch of $5 transactions and shipping out physical CDs instead of pushing a software update.
  • by Anonymous Coward on Tuesday January 16, 2007 @07:53PM (#17638428)
    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.
  • Re:Wow (Score:3, Insightful)

    by steve_bryan ( 2671 ) on Tuesday January 16, 2007 @08:15PM (#17638716)
    they needed to charge $5/download just to cover the consultation fees

    You probably meant this to be a humorous comment. On the off chance you were serious it should be pointed out that Apple is a large multinational company and as such they have an entire legal department. They are paid a salary, not consulting fees. Ocassionally they may be given a biscuit for a particularly nice trick.
  • by skinfitz ( 564041 ) on Tuesday January 16, 2007 @08:32PM (#17638930) Journal
    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.
  • by EmbeddedJanitor ( 597831 ) on Tuesday January 16, 2007 @09:20PM (#17639604)
    Sarbanes-Oxley is primarily there to protect the shareholders from companies not disclosing that they still owe their customers something (which is a debt against the payment you have received).

    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.

  • by dreamlax ( 981973 ) on Tuesday January 16, 2007 @10:04PM (#17640138)
    Yes it is. If you bought the hardware you paid for everything. There are no 'free parts' - all the components are part of a whole. The fact that something isn't enabled is completely irrelevant - you were charged for it and paid for it.

    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.

  • What about Xbox? (Score:4, Insightful)

    by Corngood ( 736783 ) on Tuesday January 16, 2007 @10:29PM (#17640428)
    How is this different from Microsoft adding 1080p support to the 360 (for free)?
  • by Achromatic1978 ( 916097 ) <robert@c[ ]mablue.net ['hro' in gap]> on Tuesday January 16, 2007 @10:40PM (#17640566)
    They didn't have to say anything. If I know that a card can do 'a b and c', but is sold in a bundle that happens to /advertise/ only 'a and b', that didn't magically lower the cost of said hardware for manufacturer, ie "/I/ /paid/ for it.". Your failure to advertise a /known capability/ of that card that is only off through imaginary limitations does not negate the ability of it to do it, nor should I have to pay for it.

    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".

  • by Herby Sagues ( 925683 ) on Tuesday January 16, 2007 @10:51PM (#17640682)
    It is VERY different. Microsoft is baaad. Apple is gooood.
  • by Achromatic1978 ( 916097 ) <robert@c[ ]mablue.net ['hro' in gap]> on Tuesday January 16, 2007 @11:50PM (#17641314)
    Going from memory, the network card is Broadcom, or such, yes?

    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.

  • by gbulmash ( 688770 ) * <semi_famous.yahoo@com> on Wednesday January 17, 2007 @12:23AM (#17641570) Homepage Journal
    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.
  • Come on.. (Score:2, Insightful)

    by yoyhed ( 651244 ) on Wednesday January 17, 2007 @02:08AM (#17642446)
    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.

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