Reaction
Following the difficulties with receiving piecemeal royalties, Microsoft switched to a fixed-priced contract with MITS, who would pay $31,200 for a non-exclusive license of 6800 BASIC.[22] The future sales of BASIC for the Commodore PET, the Apple II, the Radio Shack TRS-80 and others were all fixed-price contracts.
In early 1976 ads for its Apple I computer, Apple Inc made the claims that "our philosophy is to provide software for our machines free or at minimal cost",[24] emphasising that Apple BASIC was free.[25]
Microsoft's software development was done on a DEC PDP-10 mainframe computer system, with Allen having developed a program that could completely simulate a new microprocessor system. This allowed Microsoft to write and debug software before the new computer hardware was complete. The company was charged by the hour and by the amount of resources (such as storage and printing) used, the "$40,000 of computer time" mentioned in the letter. As a result of these software developments, the 6800 BASIC was complete before the Altair 680 was finished, with the 680 hardware arriving months late.[26]
Hal Singer of the Micro-8 Newsletter published an open letter to Roberts, pointing out that MITS promised a computer for $395, but that the price for a working system was $1000. He suggested a class action lawsuit or a Federal Trade Commission investigation into false advertising was in order. Hal also noted that rumors were circulating that Gates had developed BASIC on a Harvard University computer funded by the US government, and that customers should not pay for software already paid for by the taxpayer.[27] Gates, Allen and Davidoff had used a PDP-10 at Harvard's Aiken Computer Center, the computer system of which had been funded by the Department of Defense through its Defense Advanced Research Projects Agency; Harvard officials were not pleased that Gates and Allen (who was not a student) had used the PDP-10 to develop a commercial product, but determined that the computer itself, which technically belonged to the military, was not covered by any Harvard policy; the PDP-10 was controlled by Professor Thomas Cheatham, who felt that students could use the machine for personal use. Harvard placed restrictions on the computer's use, and Gates and Allen had to use a commercial time share computer in Boston to finalize the software.[28]
In 2008, Homebrew member Lee Felsenstein recalled similar doubts about Gates' $40,000 number: "Well, we all knew [that] the evaluation of computer time was the ultimate in funny money. You never pay that much for the computer time and I think that research will show that they were using someone else's computer time; someone else was paying for that. It could have been Honeywell where Paul Allen was working. So we all knew this to be a spurious argument."[29]
According to Felsenstein, Gates' letter "delineated a rift [between] the actual industry where there's trying to make money and there's those hobbyist where we're trying to make things happen";
"The industry needs the hobbyists and this was illustrated by what happened eventually. When National Semiconductor, which made their own microprocessor chips in '77 or '78, decided they needed a BASIC ... they asked, 'What's the most popular BASIC?' And the answer was Microsoft BASIC because everybody had copied it and everybody was using it. So we made Microsoft the standard BASIC. National Semiconductor went to Microsoft and bought a license, they were in business that way. This was the marketing function and the hobbyists did the marketing with a complete antipathy of the company in question. There were other BASICs and, you know, some of them might even have been better. ... [Gates' later success] was in a certain measure because of what we did, that he said we shouldn't do, we were thieves to do it, and all.[29]"
Jim Warren, Homebrew Computer Club Member and editor of Dr. Dobb's Journal, wrote in the July 1976 ACM Programming Language newsletter about the successful Tiny BASIC project.[30] The goal was to create BASIC language interpreters for microprocessor based computers. The project had started in late 1975, but the "Open Letter" motivated many hobbyists to participate. Computer clubs and individuals from all parts of the United States and the world soon created Tiny BASIC interpreters for the Intel 8080, the Motorola 6800 and MOS Technology 6502 processors. The assembly language source code was published or the software was sold for five or ten dollars.
