- The problem with H.264 is much more severe than just the costs of the licensing fees. The exact pricing for 2011 and onwards may not yet be decided upon, but its absolutely problematic that there's a single entity (MPEG-LA) with the power to enforce licensing terms and prices. Even if the licensing fees in 2011 happen to be "cheap" there's zero guarantee it'll stay "cheap". When reading the currently available documents on H.264 licensing it appears clear that the overall strategy is to "be cheap now, then get more expensive over time" and while the milking part may be pushed to a later date it'll eventually happen.
- On the internet 100000 free-units is a joke. Every download counts, most downloads don't actually generate a new "customer" and a mildly interesting software will easily hit the 100000 downloads limit. To make matters worse: How to count downloads if you don't restrict distribution of your software to your own sites?
- H.264 licensing terms are unfair to small players. There's a cap for annual licensing fees ($5 million) that big companies will easily hit, meaning each product shipping after the cap is basically free, while small companies not hitting the cap will bleed for every product delivered. This shifts market balance in favor of big players, hindering competition and innovation. The cap was $3.5 million in 2005-2006 and $4.25 million in 2007-2008 - so over time it got harder for small players to hit the maximum annual royality, not easier.
- The licensing terms are absolutely incompatible with free (speech) software. There are open-source implementation of MPEG formats, meaning you can download, alter and redistribute the source-code - but without a license from MPEG-LA you're not allowed to actually use that software, so you're denied a very essential FOSS right. Even if you had the right to use the open-source MPEG-compliant code you cannot transfer this right to somebody downloading your open-sourced code. You're always dependent on MPEG-LA licensing usage rights. Being at the mercy of a monopolistic 3rd party isn't exactly what FOSS is about.
- Given that that MPEG licensing is incompatible with FOSS the widespread use of such encumbered formats questions the viability of FOSS on the desktop. Surfing the internet and watching embedded videos isn't possible within an intact FOSS environment in an MPEG-dominated world, users always would depend on proprietary and non-open components components like Flash carrying a MPEG license.
- Currently everything hints at per-content licensing fees being considered at MPEG-LA. This means not only technology providers are at the mercy of MPEG-LA but also content producers and providers.
For me that's enough to answer the question of why we need to push free-for-all-under-all-circumstances-wit