Google chimes in on Nexus One’s double-whammy early termination fee

It’s not just Verizon (NYSE: VZ) that’s been slammed with criticism over the hefty $350 early termination fee (ETF) that it charges customers who cancel their smartphone wireless plan early. Google (NSDQ: GOOG) has been getting some harsh feedback over its double-whammy termination charges for its HTC-made Nexus One superphone. Just how bad is it? Well, if you buy a Google Nexus One with T-Mobile (NYSE: DT) service (contracted for 2 years) for $179 and decide to cancel your service plan within 3 months of purchase, you’ll get hit with a T-Mobile ETF of $200 as well as a Google penalty of $350. The combined early termination fees from T-Mobile and Google will ding your wallet for a total of $550 if you decide to exit your wireless contract early.

Google calls their early termination charge an “Equipment Recovery Fee,” but the blogosphere is calling it unfair. Traditionally, wireless carriers subsidize the cost of a new handset in hopes of recouping that cost over the course of the 2-year wireless contract. Breaking that contract entitles the carrier to an ETF that helps it get back some of its handset subsidy. In this case, though, Google is subsidizing the handset, not the carrier.

Google has come out in defense of its policies. Google is saying that the Equipment Rental Fee is a necessary evil to help it recover the handset subsidy – a “standard practice for third-party resellers of T-Mobile and other operators,” according to a Google spokesperson. Google is putting up the money to subsidize the handset, and is entitled to charge a fee to recover some of that cost, should a customer decide to part ways with the Nexus One. T-Mobile, on the other hand, is simply providing wireless service.

So, perhaps the blame shouldn’t fall on Google’s shoulders, but rather on T-Mobile itself. Since T-Mobile is simply providing service, it really doesn’t lose any money when a Nexus One customer ditches their new “superphone.” But, that isn’t stopping T-Mobile from charging their standard ETF, which is standard operating procedure for any wireless contract terminations.

Regardless of who’s to blame, it’s clear that a $550 combined penalty for terminating your Nexus One contract isn’t helping Google’s Nexus One sales. Especially considering the problems Nexus One users have been having with T-Mobile’s 3G network.

[Via: WSJ]