AT&T Inc. is suing chip maker Broadcom Inc. in a contract dispute it claims would severely compromise its daily operations and threaten national security.
The telecommunications giant charged Broadcom with attempting to retroactively rewrite existing VMware licensing agreements and force AT&T to pay for expensive subscription-based services following Broadcom’s $61 billion acquisition of VMware. AT&T is seeking injunctive relief to prevent Broadcom from terminating its current software-support services.
“Broadcom is attempting to retroactively alter existing agreements, forcing us into purchasing hundreds of millions of dollars in bundled services,” AT&T said in a lawsuit filed in late August in New York Supreme Court. “Without the support services, AT&T cannot prevent software errors, security vulnerabilities, or system outages that routinely occur.”
AT&T said it has the contractual right to renew support services under an existing agreement, which was signed before Broadcom acquired VMware in 2022. But it asserts Broadcom refuses to renew terms unless AT&T agrees to buy pricey bundled subscription services.
In a statement, Broadcom said it “strongly disagrees with the allegations and is confident we will prevail in the legal process. VMware has been moving to a subscription model, the standard for the software industry, for several years — beginning before the acquisition by Broadcom. Our focus will continue to be providing our customers choice and flexibility while helping them address their most complex technology challenges.”
The 47-page complaint highlights the importance of VMware’s software in the day-to-day operations of AT&T’s infrastructure, which runs across 75,000 virtual machines on 8,600 servers. It also underscores fallout from the Broadcom-VMware megamerger that has roiled the tech industry worldwide. In April, the EU opened an antitrust investigation into Broadcom’s business practices centered around its licensing terms for VMware customers.
“Bullying tactics” by Broadcom, AT&T said in the suit, imperil crucial support services for VMware software that manages AT&T’s services for national security and emergency response. According to AT&T, millions of its customers include police, firefighters and government agencies that depend heavily on VMware’s software for communication during emergencies.
AT&T also warned that without Broadcom’s support services for daily maintenance, security patches and critical upgrades, the company’s “critical operations are just a glitch away from failure,” the lawsuit said.
“Broadcom is attempting to bully AT&T into paying a king’s ransom for subscriptions AT&T does not want or need, or risk widespread network outages that could cripple the operations of millions of AT&T customers worldwide,” AT&T contends in the Aug. 29 filing.
“We’re getting calls all the time with complaints about losing perpetual on-premise licenses and being forced to move to subscriptions that are five to 10 times higher,” Eric Helmer, chief technology officer at third-party support company Rimini Street, which has picked up some disgruntled Broadcom-VMware customers, and has fielded calls around Oracle Corp. and SAP, said in an interview. “These are the dangers and disruptions of costly vendor lock-in. Broadcom sent out renewal notices almost immediately after the VMware acquisition, and didn’t offer a grace period of what to do next.”
