Upgradeable Intel Chip Lands in a Cultural Mud Pit

Last Updated Sep 27, 2010 11:36 AM EDT

The other day I mentioned that Intel (INTC) had tried to shore up margins by limiting the capabilities of chips and then allowing consumers to upgrade through a software download -- for an extra $50 a head. I discussed the direct business implications, but a strong reaction from blogger and writer Cory Doctorow shows that Intel and other companies have a new problem: a cultural dynamic that will affect how they market products.

First, a quick summary from Engadget:

An eagle-eyed Engadget reader was surfing the Best Buy shelves when he noticed this $50 card -- and sure enough, Intel websites confirm -- that lets you download software to unlock extra threads and cache on the new Pentium G6951 processor. Hardware.info got their hands on an early sample of the chip and discovered it's actually a full 1MB of L3 cache that's enabled plus HyperThreading support, which translates to a modest but noticeable upgrade.
Intel wants to move into the hardware equivalent of what software companies have been able to do for years: Sell an initial product with hidden capabilities and then let consumers buy an upgrade without having to deliver anything more than an unlocking code. It reduces manufacturing and logistical complexity, saves money by driving up volume on the single physical form of the chip, and could develop both a direct relationship with consumers and significant additional margin dollars.

Doctorow refers to this concept in the words of media scholar Siva Vaidhyanathan by calling it an "if value, then right" proposition. In other words, consumers who value additional features or uses of a product or service purchase additional rights:

But it's a principle that flies in the face of the entire human history of innovation. By this reasoning, the company that makes big tins of juice should be able to charge you extra for the right to use the empty cans to store lugnuts; the company that makes your living room TV should be able to charge more when you retire it to the cottage; the company that makes your coat-hanger should be able to charge more when you unbend it to fish something out from under the dryer.

Moreover, it's an idea that is fundamentally anti-private-property. Under the "If value, then right" theory, you don't own anything you buy. You are a mere licensor, entitled to extract only the value that your vendor has deigned to provide you with. The matchbook is to light birthday candles, not to fix a wobbly table. The toilet roll is to hold the paper, not to use in a craft project. "If value, then right," is a business model that relies on all the innovation taking place in large corporate labs, with none of it happening at the lab in your kitchen, or in your skull. It's a business model that says only companies can have the absolute right of property, and the rest of us are mere tenants.

That gets us to the cultural phenomenon that will bedevil corporations for years. People don't agree on what constitutes a product any more.

At one point they did. You'd buy a book or a stove or a typewriter and took possession of a physical good. All goods were physical. You might be able to pay for optional features, like getting a car with tinted windows or leather upholstery, but those represented separately-added aspects that themselves were physical goods. And if you didn't want to pay, but were handy enough, you might even be able to build the extra features yourself.

In a world where semiconductors control the operations of a car or computers and software is patentable, the essential nature of products and their features change. Instead of physically adding additional capabilities, the manufacturer puts everything in but locks it away and is only willing to unlock features if you pay. The factory only does a first level of assembly. Either the device itself or the product it powers is a secondary configuration facility.

The maddening thing for Doctorow and many others is that the purchase of the physical device no longer allows you to do as you want to your property, because you no longer have property. Instead, you have a combination of property and licensed rights, meaning that no matter what you pay, you essentially remain a tenant, not an owner. This becomes only stronger if the manufacturer insists that the U.S. Digital Millennium Copyright Act of 1998 makes it criminal for you to remove any restrictions and to release full functions without paying additional money.

Presumably someone who objected to the notion would have no problem with a company making two different chips that could have the same capabilities, but in which some were eliminated. If you bought chip A and wanted more capability, you'd have to buy chip B and physically swap the two devices, probably at a higher cost than $50.

What should concern corporations that consider shipping hampered products is that someone like Doctorow is intimately comfortable with digital life and culture. If he gets irritated over having to unlock features of a general and yet hobbled device, how are less electronically savvy people react? Communicating and negotiating this difference between physical products and those that are both physical and virtual will become tricky. Now is the time to try and get it right.

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    Erik Sherman is a widely published writer and editor who also does select ghosting and corporate work. The views expressed in this column belong to Sherman and do not represent the views of CBS Interactive. Follow him on Twitter at @ErikSherman or on Facebook.