January 13, 2010 | by Marin Perez
If you’ve just received a shiny new Nexus One you might want to speed up your evaluation time because returning it too late could be very expensive. Google will be charging a $350 “equipment recovery fee” for N1 owners who break their two-year contract with T-Mobile USA within the first 120 days. This fee will be in addition to T-Mobile’s $200 early termination fee, which means cancelling the N1 will take $550 out of your bank account. Yep, it costs less to buy the phone outright than to buy it with subsidies and cancel within three months.
To be fair, there is a 14-day evaluation period where you can return the superphone without these egregious fees, but this is a clear example of the absurdity of early termination fees. For a long time, mobile operators have said the ETFs are needed to defray the costs of subsidizing handsets. AT&T, for example, eats nearly $400 per unit to get the iPhone to that magic $200 price point.
But with the N1, Google appears to be the one paying the subsidy, so why should I have to pay another $200 to end my T-Mobile service? I understand it’s a business and that breaking the contracts should have some form of penalty, but this is clearly excessive and unduly punitive. Google says it’s standard business practice for third-party resellers and it is another issue they have to get used to as they take a bigger role in distributing smartphones.
Unfortunately, I think we’ll be battling ETF issues as more and more consumers buy smartphones. Verizon Wireless created a minor uproar late last year when they doubled their cancellation fees for smartphones and other advanced devices (Thank goodness I got my Droid before that went into effect).