4 ms·

In a way it's better than the Microsoft tax which set, for a time, a lower bound on the price of a computer because one had to pay approximately the same amount

In a way it's better than the Microsoft tax which set, for a time, a lower bound on the price of a computer because one had to pay approximately the same amount for a low-spec computer as for a high-spec one. Eventually if you're making 20% margin on the components and that margin is lower than the cost of the Windows license, you have two options: use an incompatible operating system or not sell the computer. From what I understand, in the 80s and 90s, if you sold computers with Windows or DOS OEM, your license agreement probably said that you had to pay the tax on every system sold, regardless of the actually installed operating system.

pvg 9y ago
a lower bound on the price of a computer They charged around $50 and computers cost over $1000, I don't think that was really the problem with the Microsoft MS-DOS/Windows tax.
- projektfu 9y ago
  It started becoming a problem when Wal-Mart started offering cheap PC's, and they were running LindowsOS because there would be no profit margin if they paid $50 for a copy of Windows.
  - pvg 9y ago
    That was 2002 and it obviously wasn't a problem since Wal-Mart was able to offer those PCs. Microsoft was barred from the OS-bundling type of deals by their '94 consent decree.
mdasen 9y ago
That's an argument that Qualcomm would push. If Qualcomm charged a flat $25/phone, that would hugely drive up the price of low-cost phones. However, why should Qualcomm get more money if a manufacturer includes a better display or camera? Qualcomm isn't adding more value, the better display or camera is adding the additional value. Qualcomm is just demanding more money. Microsoft is saying that Windows makes a computer better by $N and so manufacturers need to pay that. If you sell a computer with an integrated monitor (rather than an external display), there's no reason for Microsoft to get more money. One big difference between Microsoft and Qualcomm's situation is that technologies like CDMA, UMTS, and LTE are official standards that only use patents from those willing to commit to FRAND licensing (fair, reasonable, and non-discriminatory). Microsoft never agreed to FRAND licensing while Qualcomm did. Because Qualcomm wants a percentage of the selling price, it refuses to license the patents to, say, Intel or MediaTek. If they licensed the patents to Intel, Qualcomm couldn't then ask for royalties from Apple on devices that use the Intel modem. For example, when you buy an iPhone, Qualcomm can't come up to you and say, "you're using our patents so you owe us money." Likewise, if you sell the iPhone to someone else, they similarly can't ask for money from that person. But Qualcomm wants to get a percentage of Apple's selling price, not a percentage of Intel's selling price on the modem alone. You brought up Microsoft's practice of requiring an OEM that uses Windows on some machines to pay for Windows for all machines, even ones shipped without Windows. In fact, Qualcomm has a similar arrangement called "no license-no chips". If you want access to Qualcomm's modems for your high-end phones, you must agree to elevated royalty rates for Qualcomm's patents even on your devices that don't use Qualcomm chips. Much of the information in this comment comes from: https://www.ftc.gov/system/files/documents/cases/170117qualcomm_redacted_complaint.pdf https://www.ftc.gov/system/files/documents/cases/170117qualc.... It's a decent read.
- projektfu 9y ago
  Interesting. It seems it should be illegal to require someone to pay for IP in a phone that doesn't contain it. I wish the Microsoft trial had made that practice explicitly illegal.
  - mdasen 9y ago
    All the phones contain Qualcomm IP so it's a variant of what Microsoft did. With FRAND licensing, you can challenge the royalty rates in arbitration or court. Let's say that a court would set the royalty rate at $5 and we somehow know that and let's rewind a couple years before Intel was seriously making modems. LG comes up to Qualcomm and says, "we need those Qualcomm modems for our $650 flagship phone, but we're happy using non-Qualcomm lower-end modems in our cheap phones." Qualcomm says, "Great! We'll sell you the chips for $N per chip and you agree that you'll pay patent royalties of $15/phone." LG could retort, "but the patents are only worth $5/phone and you agreed to FRAND licensing! We'll see you in court!" Qualcomm confidently says, "well, we might be required to FRAND license you our patents, but nothing requires us to sell you chips. If you challenge our preferred $15 royalty rate, good luck selling a $650 phone with a low-end modem in it. You'll be paying $5 royalties, but you won't have a flagship phone and those are the only phones you make money on." Because phone manufacturers had no other high-end modem option, they had to agree to Qualcomm's preferred royalty rate rather than a true FRAND rate that a neutral third party would say is fair. If they went without Qualcomm's modems, they could make low-end phones with low-end modems, but the money is in the flagship phones. At the same time, no company had enough incentive to invest in a high-end modem. It would take many years and many billions to get close to Qualcomm's modems and they might still stay one step ahead. Plus, all that royalty money could be poured into making sure their chips were always a step ahead. If you're thinking about competing, what's your business model? Pour billions into a few generations of LTE chips that no one buys in the hopes that you'll produce a generation close enough that customers will dump Qualcomm? Even if they buy your chips, unless they're willing to write-off Qualcomm, they're still on the hook for the higher-than-fair royalties. If Apple didn't force the issue with Intel, nothing would have happened. Apple made a big bet there that they could break Qualcomm's hold. It's different from Microsoft's case since the devices without Qualcomm chips would still have to pay Qualcomm a royalty, just a lower one that was either negotiated or set by a court/arbitrator. Imagine if Microsoft owned the BIOS and had committed to license it to anyone under fair, reasonable, and non-discriminatory terms of $1. Then they turned around and said, "if you want to run Windows on any of your computers, we'll only sell you Windows if you pay $20 for the BIOS on all the machines." If you cut Windows out of your company entirely, you'd still need to pay Microsoft the $1 for the BIOS. But you couldn't run a PC company without Windows - just as you couldn't be a phone company without Qualcomm modems. Technically, nothing requires them to sell you Windows or sell you modems. FRAND only requires the BIOS/IP portion. By tying the two together, they can make it so that you pay elevated rates because you can't forgo the Windows/modems on all your devices. To paraphrase Rick and Morty, that just sounds like what Microsoft did with an extra step.
gnu8 9y ago
Don't gloss over the fact that Microsoft forbade computer manufacturers to sell a computer without their operating system. They didn't have the option of paying for the license and not installing the OS, or paying for the license but installing a different OS. This was done solely to prevent competing operating systems from gaining any share of the market. Microsoft is an evil company that must be destroyed.
- golergka 9y ago
  "Good" and "evil" are leaky and useless abstractions on such scale.
- chx 9y ago
  No, they did none of that. Microsoft had a scheme which the OEMs could agree to where they paid a fixed amount of money multiplied by the number of machines sold. Thus they had zero incentive to sell with anything else when they already paid for Windows. And if you wanted to say, I will only pay after say 95% they said, then we will not make this agreement with you, this is only for OEMs who pay after all their computers...

pvg 9y ago

a lower bound on the price of a computer They charged around $50 and computers cost over $1000, I don't think that was really the problem with the Microsoft MS-DOS/Windows tax.

projektfu 9y ago
It started becoming a problem when Wal-Mart started offering cheap PC's, and they were running LindowsOS because there would be no profit margin if they paid $50 for a copy of Windows.
- pvg 9y ago
  That was 2002 and it obviously wasn't a problem since Wal-Mart was able to offer those PCs. Microsoft was barred from the OS-bundling type of deals by their '94 consent decree.

mdasen 9y ago

That's an argument that Qualcomm would push. If Qualcomm charged a flat $25/phone, that would hugely drive up the price of low-cost phones. However, why should Qualcomm get more money if a manufacturer includes a better display or camera? Qualcomm isn't adding more value, the better display or camera is adding the additional value. Qualcomm is just demanding more money. Microsoft is saying that Windows makes a computer better by $N and so manufacturers need to pay that. If you sell a computer with an integrated monitor (rather than an external display), there's no reason for Microsoft to get more money. One big difference between Microsoft and Qualcomm's situation is that technologies like CDMA, UMTS, and LTE are official standards that only use patents from those willing to commit to FRAND licensing (fair, reasonable, and non-discriminatory). Microsoft never agreed to FRAND licensing while Qualcomm did. Because Qualcomm wants a percentage of the selling price, it refuses to license the patents to, say, Intel or MediaTek. If they licensed the patents to Intel, Qualcomm couldn't then ask for royalties from Apple on devices that use the Intel modem. For example, when you buy an iPhone, Qualcomm can't come up to you and say, "you're using our patents so you owe us money." Likewise, if you sell the iPhone to someone else, they similarly can't ask for money from that person. But Qualcomm wants to get a percentage of Apple's selling price, not a percentage of Intel's selling price on the modem alone. You brought up Microsoft's practice of requiring an OEM that uses Windows on some machines to pay for Windows for all machines, even ones shipped without Windows. In fact, Qualcomm has a similar arrangement called "no license-no chips". If you want access to Qualcomm's modems for your high-end phones, you must agree to elevated royalty rates for Qualcomm's patents even on your devices that don't use Qualcomm chips. Much of the information in this comment comes from: https://www.ftc.gov/system/files/documents/cases/170117qualcomm_redacted_complaint.pdf https://www.ftc.gov/system/files/documents/cases/170117qualc.... It's a decent read.

projektfu 9y ago
Interesting. It seems it should be illegal to require someone to pay for IP in a phone that doesn't contain it. I wish the Microsoft trial had made that practice explicitly illegal.
- mdasen 9y ago
  All the phones contain Qualcomm IP so it's a variant of what Microsoft did. With FRAND licensing, you can challenge the royalty rates in arbitration or court. Let's say that a court would set the royalty rate at $5 and we somehow know that and let's rewind a couple years before Intel was seriously making modems. LG comes up to Qualcomm and says, "we need those Qualcomm modems for our $650 flagship phone, but we're happy using non-Qualcomm lower-end modems in our cheap phones." Qualcomm says, "Great! We'll sell you the chips for $N per chip and you agree that you'll pay patent royalties of $15/phone." LG could retort, "but the patents are only worth $5/phone and you agreed to FRAND licensing! We'll see you in court!" Qualcomm confidently says, "well, we might be required to FRAND license you our patents, but nothing requires us to sell you chips. If you challenge our preferred $15 royalty rate, good luck selling a $650 phone with a low-end modem in it. You'll be paying $5 royalties, but you won't have a flagship phone and those are the only phones you make money on." Because phone manufacturers had no other high-end modem option, they had to agree to Qualcomm's preferred royalty rate rather than a true FRAND rate that a neutral third party would say is fair. If they went without Qualcomm's modems, they could make low-end phones with low-end modems, but the money is in the flagship phones. At the same time, no company had enough incentive to invest in a high-end modem. It would take many years and many billions to get close to Qualcomm's modems and they might still stay one step ahead. Plus, all that royalty money could be poured into making sure their chips were always a step ahead. If you're thinking about competing, what's your business model? Pour billions into a few generations of LTE chips that no one buys in the hopes that you'll produce a generation close enough that customers will dump Qualcomm? Even if they buy your chips, unless they're willing to write-off Qualcomm, they're still on the hook for the higher-than-fair royalties. If Apple didn't force the issue with Intel, nothing would have happened. Apple made a big bet there that they could break Qualcomm's hold. It's different from Microsoft's case since the devices without Qualcomm chips would still have to pay Qualcomm a royalty, just a lower one that was either negotiated or set by a court/arbitrator. Imagine if Microsoft owned the BIOS and had committed to license it to anyone under fair, reasonable, and non-discriminatory terms of $1. Then they turned around and said, "if you want to run Windows on any of your computers, we'll only sell you Windows if you pay $20 for the BIOS on all the machines." If you cut Windows out of your company entirely, you'd still need to pay Microsoft the $1 for the BIOS. But you couldn't run a PC company without Windows - just as you couldn't be a phone company without Qualcomm modems. Technically, nothing requires them to sell you Windows or sell you modems. FRAND only requires the BIOS/IP portion. By tying the two together, they can make it so that you pay elevated rates because you can't forgo the Windows/modems on all your devices. To paraphrase Rick and Morty, that just sounds like what Microsoft did with an extra step.

gnu8 9y ago

Don't gloss over the fact that Microsoft forbade computer manufacturers to sell a computer without their operating system. They didn't have the option of paying for the license and not installing the OS, or paying for the license but installing a different OS. This was done solely to prevent competing operating systems from gaining any share of the market. Microsoft is an evil company that must be destroyed.

golergka 9y ago
"Good" and "evil" are leaky and useless abstractions on such scale.
chx 9y ago
No, they did none of that. Microsoft had a scheme which the OEMs could agree to where they paid a fixed amount of money multiplied by the number of machines sold. Thus they had zero incentive to sell with anything else when they already paid for Windows. And if you wanted to say, I will only pay after say 95% they said, then we will not make this agreement with you, this is only for OEMs who pay after all their computers...