AT&T Sues Broadcom over VMware Licensing Change to Subscription Model, Refusal to Support Existing Perpetual Products

In 2023, chipmaker Broadcom successfully acquired virtualization and cloud technology provider VMware, thereafter transitioning most product licenses from a perpetual model to a subscription model. Customers who do not repurchase products on a subscription basis are denied technical support.

AT&T, a leading U.S. wireless network operator, is now suing Broadcom over this issue. The lawsuit arises from Broadcom's refusal to fulfill contractual obligations to provide technical support for AT&T's existing perpetual license products, posing a significant impact on AT&T.

In the lawsuit, AT&T detailed the agreement previously reached with VMware, signed in August 2022. The agreement allowed AT&T the option to independently renew technical support services for up to two years after the current contract expires.

The expiration date set by the agreement is September 8. AT&T's attempts to secure one more year of technical support from Broadcom were rejected, effectively denying support unless AT&T purchases a subscription.

As a result, AT&T has taken legal action against Broadcom, alleging that Broadcom is threatening to cease basic technical support for previously purchased VMware perpetual license software unless AT&T agrees to purchase bundled subscription software and services worth hundreds of millions of dollars.

Broadcom has since reduced VMware's original 8,000+ SKUs to four fixed product bundles, requiring all customers to choose subscriptions from these bundles, eliminating the option to subscribe to individual SKUs as needed.

The transition from a perpetual to a subscription model significantly increases the long-term cost of using VMware products. Broadcom's refusal to provide technical support is a disaster for existing customers.

AT&T's request for an additional year of technical support from Broadcom is straightforward. AT&T needs time to migrate away from VMware's product line, stating it will take several years to find alternative solutions.

In light of these facts, the New York Supreme Court has required Broadcom to respond within 20 days of AT&T's complaint filing. The court will proceed based on Broadcom's response.

Broadcom has issued a statement in response to the lawsuit:

"We strongly oppose these allegations and believe we will prevail in the legal process. VMware has been transitioning to a subscription model for years, a standard practice in the software industry, even before being acquired by Broadcom.

Our focus remains on providing our customers with choice and flexibility while helping them tackle their most complex technological challenges."