Though we don't like it, we understand why we get stuck with an early termination fee (ETF) if we decide to cancel our cell phone contract before its end date. We get a discounted phone for signing a service agreement so it's natural that your carrier gets to ask for that money back if you skip out early.
The Nexus One, of course, is no exception to this rule. If you cancel your T-Mobile contract after the 14-day grace period, you'll have to shell out anywhere from $50 to $200 depending on when you cancel. That's all well and good, but a close look at Google's terms of sale reveals that Google also slaps you with a hefty fee of its own.
According to the document, Nexus One buyers who purchase the phone at the subsidized price of $179 will be liable for an "equipment recovery fee" if they terminate their contract between the end of the grace period and the first 120 days of service. You read that correctly, you could be forced to pay $550 for terminating early.
According to the terms of sale, "the equipment recovery fee is not a penalty but is for liquidated damages Google will incur as a result of such cancellation." It goes on to say, "these damages may include, but are not limited to, loss of compensation and administrative costs associated with such cancellation or changing of wireless service provider(s), market changes, and changes in ownership."
Equipment recovery fees can be a little dubious. First off, the total $550 fee is more than the price of the unsubsidized model ($529). Granted, it's only $21 more, but I'd love to see a breakdown of exactly how that $550 is distributed. And while I get that Google is probably receiving a commission for selling the phone, that's still a lot of money for a party that does not profit from a customer's monthly bill (although in Google's case anything is possible).
Essentially, Google is acting as the retailer here and other third-party retailers like Wirefly.com charge similar fees when you return a phone. Yet, with other retailers you're not always paying an ETF to both the retailer and the carrier. What's more, with other phones you have a choice of either purchasing from the retailer or the carrier. Purchasing from the latter could result in different fees if you cancel, but we're not offered such a choice with the Nexus One. We have to buy from Google if we want the phone.
Suddenly my enthusiasm for Google's Nexus One purchase model is fading. Verizon seems to have set a new standard for penalizing customers and it's under investigation by the FCC for doing so. I agree that customers should repay their handset rebates for not fulfilling their contract, but it gets a little fuzzy when they're also repaying commissions, activation and administrative costs. It's outrageous, exorbitant, and unfair.
And on a similar note, according to its fine print T-Mobile gets to charge its ETF "if you choose to end your service before the end of your term, or if we terminate it early." So I get penalized if you decide to skip out? This may be common as well, but it's still not cool.