Google Reduces Nexus One ETF, But Not Enough

Google recently lowered the "equipment recovery fee" it is charging those who wish to break their Nexus One contracts early from $350 to $150. That's still $150 too much. Here's why.The Google Nexus One "equipment recovery fee" caused quite an outcry when it was first discovered. All the major wireless network operators in the U.S. charge an Early Termination Fee for those customers who choose to break their contracts before the allotted time is up. The ETFs were put in place to help recover some of the cost of subsidizing handsets. They generally start at $175 (though Verizon charges $350 for some phones) and are lowered each month by $5 or $10 as customers stick with their contracts.

The Google Nexus One is available at a subsidized price of $179 when people choose to sign a two-year contract with T-Mobile. Sounds typical so far. Well, if users choose to break their contract early, they'll have to pay T-Mobile the standard ETF, which is $200. Oh, and an additional $350 to Google as part of its equipment recovery fee. Wait, what?!? Yeah, $550 to break your contract for a device that cost $529.

Google at first defended this extra fee as necessary for it to recoup some of the costs involved in selling the device under contract with T-Mobile. That didn't stop the Interwebs from crying foul about the one-two punch of the $200 + $350 contract-breaking fees.

The Federal Communications Commission cried foul, too. In January, the FCC sent Google (and the four major wireless network operators) official queries about what on earth those ETFs are really being used for.

Google (sort of) got the message. It lowered its ERF from $350 to $150. That's a nice conciliatory effort, but it doesn't go far enough. Users will still be forking over a total of $350 in extra fees if they break their contracts early. That's in addition to the $179 sale price of the device. In other words, there's no way you're skating away from a Nexus One contract without paying the full retail price of the device, because, after all, $350 + $179 = $529.

Users do have a brief window during which they can examine and use the Nexus One with T-Mobile service, but if they choose to escape their contract for whatever reason, they're going to cough up some green.

It will be interesting to see if the FCC thinks Google's move goes far enough? I posit that it doesn't. Google should drop its ERF entirely, as users are already paying enough out of pocket for the Nexus One.