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The folks at Phandroid took the time Jan. 11 to read the fine print on Google’s Terms of Sale for its Nexus One smartphone and found an alarming detail.
Consumers who buy a subsidized Nexus One through their carrier and cancel the account before 120 days must pay Google an Equipment Recovery Fee in addition to the Early Termination Fee they would pay to their carrier.
The ERF is the difference between the full price of the Nexus handheld device without service plan, which is $529, and the price of the subsidized device. Let’s take the only current subsidized option available to us — T-Mobile — to complete the equation.
Currently, consumers can buy a Nexus One through Google for $179 with a two-year contract from T-Mobile. According to Google’s ERF, a T-Mobile customer who buys the device and cancels his or her service contract before four months is up would pay $350 — again, the difference between the unsubsidized cost, $529, and the serviced cost.
That’s on top of the $200 cancellation fee users would pay to T-Mobile for nixing an agreement with more than 180 days left on the contract.
So, a user who cancel his or her deal after the first two weeks but before 120 full days will have to pay Google and T-Mobile a combined $550, or roughly the cost of the unsubsidized device.
How does that Blondie song go? Oh yeah, “One way or another, I’m gonna find ya, I’m gonna get ya, get ya, get ya, get ya.”
But don’t take my word for it. Here is the fine print in the Terms of Sale:
You read it right: Google charges your credit card $350 for canceling the service to make up for “liquidated damages Google will incur as a result of such cancellation.”
“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.“
Update: A Google spokesperson just explained to me that Google subsidizes the devices purchased with T-Mobile USA and that the ERF is a way to recoup its investment:
“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.“
Google is essentially protecting itself from users who buy the phone for $179, procuring service from T-Mobile, but then cancel the contract with T-Mobile and hand the device off to another carrier.
That’s one way Google would certainly lose a lot of money on devices, but how many people would really do that? In any case, it’s clear Google is taking the hard line on protecting its interests, now that it is the merchant of record for the Nexus One and subsequent smartphones.
The caveat is that you can bring the device back within 14 days without financial repercussions, ideally making it possible for Google to repackage and resell your Nexus One.
This might not be a bad option for those Nexus One owners suffering from T-Mobile 3G service problems in the full week since the device came to market.
I received the Nexus One from Google Jan. 11 and have tested it throughout the day. I can attest to the oscillation between EDGE (Enhanced Data for Global Evolution) and 3G service in the service indicator at the top of the screen. When it does work, the phone fairly flies.
More on that in a full review of the phone this week.