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Two Bucks for 100 Mbps 802.11n Enabler

After several days of rumors, Apple confirmed on 18-Jan-07 that it would, in fact, charge a small fee for the 802.11n enabler that will allow owners of most Intel Core 2 Duo- and all Xeon-based Macs to get the faster network speed. (Just the 1.83 GHz Intel Core 2 Duo iMac lacks the appropriate chips.) The fee will be $2, not the $5 fee that was widely reported.

While going to the effort of charging only $2 seems absurd, an Apple spokesperson explained that accounting rules now require that “significant feature enhancements, such as 802.11n,” come with a charge. and The Wall Street Journal produced stories that disputed Apple’s particular characterization, with experts noting that Generally Accepted Accounting Procedures (GAAP) don’t per se require a charge.

But experts in both articles supported the general principle Apple was citing: you can’t record revenue for a given good or service if you later deliver improvements. Instead, a company must either value the item as a set of parts, and book revenue only as each part is fulfilled, or defer revenue until all parts are in place. Apple would thus have been able to accept the cash for its Intel-based Macs with 802.11n, but that cash would have been prevented from appearing in its earnings reports, affecting its profit under GAAP.

For instance, a tractor company that delivered a backhoe that was designed to accept a part that would double its fuel efficiency, but was sold before that part was available, would not be able to record any revenue for the tractor unless they sold the fuel part separately. If the fuel part was included in the price of the tractor, income from it couldn’t be recorded. As with many GAAP issues, this doesn’t affect actual cash on hand.

By attaching a value to the update, even one as low as $2, Apple is allowed to book that upgrade revenue separately as the final part of the feature set that’s delivered. In recent years, Apple hasn’t had to worry about this with operating systems because it always charges for them.

A report from MacScoop over the weekend states that Apple will likely charge Tiger users $30 for Boot Camp. Boot Camp is a software addition in beta testing that enables Intel-based Macs to boot into Windows XP Service Pack 2 (“Apple Opens Boot Camp for Windows Users,” 2006-04-10), and which has been promised as an included part of Leopard. The reason could be the same.

The 802.11n enabler will be available in February from the online Apple Store and will be included with the new AirPort Extreme Base Station at no cost. Future Macs will ship with the faster 802.11n standard already turned on, but Apple couldn’t state when that would happen. It’s also unclear whether if you purchase a Mac today, you’ll still be required to pay the $2 for an enabler since the feature is now announced.

Because the enabler won’t be locked in any fashion, and because it’s needed just once per computer, we anticipate that it will be in wide circulation. Apple might use its normal means of preventing software from being distributed if the enabler appears on mainstream sites, but the company is unlikely to cry “piracy!” for software it feels compelled to charge a “nominal fee” to offer.

I wrote an extensive run-down of AirPort Extreme’s revision and 802.11n in “AirPort Extreme Updated” (2007-01-15).

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