January 12, 2010
Posted by Josh Levy

We got pretty upset when Verizon announced a new $350 early termination fee (ETF) on all "advanced phones," doubling the fee for many companies.

Now get this: Google and T-Mobile have unveiled an even more outrageous, expensive scheme. Here it is (thanks to Ars Technica for parsing this all out):

Because Google is selling its new Nexus One smart phone independently of T-Mobile — even though the phone uses T-Mobile's wireless service - if you choose to cancel your contract, you're actually dealing with two separate vendors. Google handles the phone subsidy, and T-Mobile handles the service contract.

Under Google's terms, if you cancel your contract within 120 days, you'll owe a $350 "equipment recovery fee," supposedly to recoup the amount subsidized by Google when it sells a Nexus One for $179 (though the public doesn't know how much phones actually cost the carriers).

Then, under T-Mobile's terms of service, you'll be charged an ETF of $200 for terminating your contract within 180 days; the fee decreases as you get closer to completing the term of the contract.M ost of the time, these fees are imposed to repay the service provider for offering a device subsidy. Here, however, T-Mobile does not pay any subsidy on the device, so the fee is nothing more than a penalty if you no longer want their service.

Put these two together, and you'll get hit with a whopping $550 in fees if you cancel your contract within the first four months of signing. That's on top of the phone's $179 price, which of course you do not get back.

To be blunt: WTF Google and T-Mobile? A $550 ETF is unprecedented and it's outrageous.

Google and T-Mobile both give you 14 days to get out of your contract without a fee. So if you do decide to buy a Google phone, do yourself a favor: Make your decision to stay or leave fast.

Both Congress and the FCC have already taken notice of Verizon's ridiculous $350 penalty. If Google and T-Mobile can't find a quick fix to this new gouge, we suspect they'll land on Washington's radar as well.

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