AT&T is fighting back against Broadcom’s efforts to change the terms for existing VMware users, suing the company over alleged breach of contract.

Since Broadcom purchased VMware, the company has been aggressively increasing prices and alienating customers by canceling existing licenses in favor of subscriptions that cost orders of magnitude more. AT&T appears to have had enough and is suing Broadcom.

The telecom company outlined its complaint, and asked the court for injunctive relief.

Plaintiff AT&T Services, Inc. brings this action for breach of contract, breach of the implied covenant of good faith and fair dealing, declaratory judgment, and injunctive relief against Defendants Broadcom Inc., as successor-in-interest to VMware, Inc., and VMware, Inc.1 AT&T’s allegations are based on knowledge as to its own acts, and on information and belief as to all other matters except where expressly indicated.

Broadcom Allegedly Reneging On Contracts

AT&T goes on to describe Broadcom’s habit of canceling perpetual licenses in favor of expensive subscriptions.

Almost immediately, Broadcom began reshaping VMware’s business model from selling stand-alone perpetual software licenses to selling more expensive subscription software licenses bundled with additional products and services. As its new owner, Broadcom has every right to change VMware’s business model prospectively. What it cannot do, however, is retroactively change existing VMware contracts to match its new corporate strategy. But that is exactly what Broadcom seeks to do here.

AT&T then accuses Broadcom of trying to hold it hostage by withholding support.

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.

Not only is Broadcom contractually obligated to continue providing the software support services, but without them AT&T has no way to ensure the VMware software installed on approximately 8,600 AT&T servers that deliver services to millions of AT&T customers worldwide will continue to operate.

AT&T goes on to say that many of the services being run by VMware instances are critical to the US government, as well as public safety organizations, such as emergency personnel, firefighters, paramedics, and police officers.

AT&T acknowledges that its original support period expires on September 8, 2024. However, the two parties signed an amendment to their agreement in 2022, one which gives AT&T the option to renew and extend support for up to two additional years.

Although AT&T has already advised Broadcom that it is exercising its option to renew support services for at least another year, Broadcom is refusing to honor AT&T’s renewal.

Instead, Broadcom states it will only continue to provide support services if AT&T agrees to purchase scores of subscription services and software that: (1) AT&T does not want or need; (2) would impose significant additional contractual and technological obligations on AT&T; (3) would require AT&T to invest potentially millions to develop its network to accommodate the new software; (4) may violate certain rights of first refusal that AT&T has granted to third-parties; and (5) would cost AT&T tens of millions more than the price of the support services alone.

AT&T’s Is An Increasingly Common Story

The telecom company goes on to say that many critics and customers predicted that Broadcom would engage in this behavior when its purchase of VMware was first announced. The company is correct, with many at the time expressing concern over what the future might hold.

Unfortunately, those fears have been realized, with organizations around the world having their own horror stories related to their interactions with Broadcom. In fact, EU cloud organization CISPE has appealed to regulators, saying “public sector bodies, large European businesses, SMEs and start-ups are all threatened by egregious and unwarranted new contract terms and price increases.” The organization went on to warn that Broadcom’s actions would decimate the EU cloud.

“As well as inflicting financial damage on the European digital economy, these actions will decimate Europe’s independent cloud infrastructure sector and further reduce the diversity of choice for customers,” said Francisco Mingorance, secretary general of CISPE. “Dominant software providers, in any sector from productivity software to virtualisation, must not be allowed to wield life or death power over Europe’s digital ecosystems.”

Some customers have had enough, and are increasingly looking at competitors’ offerings. In fact, evidence suggests Broadcom’s tactics recently cost it a 24,000 license customer.

With large customers like AT&T willing to go through the expense of a lawsuit over Broadcom’s actions, it’s a safe bet the VMware owner’s troubles are just beginning.