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FCC probes Googlephone's double dip cancel fees

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The US Federal Communications Commission has questioned whether Google properly warns Nexus One buyers that the subsidized version of the inaugural Googlephone carries not one but two early termination fees.

If you purchase the Nexus One with a two-year T-Mobile wireless contact, Google knocks $350 off the price of the unlocked version of the phone. But if you cancel your contract after an initial 14-day grace period and before 120 days have elapsed on the contract, you're subject to what is in essence an early termination fee from each company. Combined, the two fees could be as high as $550.

The T-Mobiled Nexus One carries a $529 price tag (versus $179 for the unlocked version). But if you cancel the contract prematurely, you may end up paying $729 for the thing.

Google calls its charge an "equipment recovery fee" - even though it's not actually recovering the equipment. "Please note that the Equipment Recovery Fee is imposed by Google and not your chosen carrier and is in addition to any early termination fees that may be charged by your chosen carrier in connection with termination of your wireless plan prior to fulfillment of your chosen carrier’s service agreement term," read the Nexus One terms of sale.

According to T-Mobile's terms of service, it charges $200 if you terminate the contract with more than 180 days remaining; $100 with 91 to 180 days remaining; and $50 with 31 to 91 days remaining. With less than 31 days remaining, you pay either $50 or your recurring monthly charge - whichever is lower.

On Tuesday, in a letter to Google, the FCC said it regards the company's equipment recovery fee as an "early termination fee," or ETF, like the fee charged by T-Mobile. "We recognize that there may be various rationales for ETFs," the letter reads. "At the same time, these fees are often substantial (and in some cases are increasing) and have an important impact on consumers’ ability to switch carriers.

"We therefore believe it is essential that consumers fully understand what they are signing up for - both in the short term and over the life of the contract - when they accept a service plan with an early termination fee."

In a statement sent to The Reg on January 12, Google seems to claim that dual return fees were not uncommon. "Google provides a subsidy for devices purchased with T-Mobile USA service," the statement reads. "If a consumer cancels service after 14 days, Google recoups this subsidy in the form of an equipment recovery fee. After 120 days, the equipment recovery fee will no longer apply.

"This is standard practice for third party resellers of T-Mobile and other operators, and you will find similar policies for other mobile service resellers."

But the FCC says the dual fees attached to the Nexus One are unique among US carriers. "Consumers have been surprised by this policy and by its financial impact," reads the commission's letter to Google. "Please let us know your rationale(s) for these combined fees, and whether you have coordinated or will coordinate on these fees and on the disclosure of their combined effect."

Google declined to comment on the apparent contradiction. "We strive to be as transparent and straightforward as possible about the terms and conditions associated with purchasing the Nexus One with a service plan," reads another statement from the company, shared with The Reg today. "We look forward to discussing these efforts with the FCC."

Though Google's terms of sale describe its equipment recovery fee, it is not mentioned on the order page - though there is a link to the terms of sale. T-Mobile does include such notice on its order pages.

The FCC also sent letters to the other major US carriers asking about ETFs, including AT&T, Verizon, and Sprint. Google and the carriers have until February 23 to respond. ®

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