Google has cut the early termination fee (ETF) for its Nexus One smartphone from $350 to $200, coming on the heels of an inquiry from the Federal Communication Commission (FCC) about the high price, according to the Wall Street Journal.
The Nexus One is distinctive for lacking any "lock-in" to a major wireless carrier. Buyers of a Nexus One without a network plan only have to pay the $535 fee up front, and pay no cancellation fee.
But those who buy the phone at a reduced rate with a T-Mobile contract -- currently the only carrier offering a plan for the phone -- originally had to pay a $350 fee to Google, on top of a $200 ETF for T-Mobile, if they canceled the contract within the first two months of service.
That led to the FCC sending a letter to Google as part of its larger inquiry into wireless carrier cancellation fees. "The purpose of this letter is to gather information about whether customers are adequately informed about Google's Equipment Recovery Fee in connection with its offering of the Nexus One to customers who agree to a two-year contract with T-Mobile," the agency said.
"We've been working with T-Mobile to improve our customers' overall Nexus One experience through a reduction in the equipment recovery fee (ERF) associated with purchasing the Nexus One with a T-Mobile service plan," Google said in a statement.
ETFs are a bone of contention in the wireless industry. Critics claim that they "lock in" customers to long-term contracts with a carrier to avoid paying high penalties, while supporters say the fees are necessary to subsidize the sale and marketing of high-end phones at a low cost.
Numerous lawsuits brought at the state level, and threatened regulation at the federal level, led all four major wireless carriers -- AT&T, Sprint, T-Mobile, and Verizon Wireless -- to prorate their termination fees over the life of a two-year contract.
Media watchdog group Free Press, a staunch foe of termination fees, praised Google for cutting the ETF on the Nexus One. "This is clear evidence that the wireless industry needs an active cop on the beat to look out for consumers," said Free Press policy counsel Chris Riley.
The wireless carriers' responses to the FCC inquiry are due on February 23.
Currently, the Nexus One only works on GSM networks, which prevents it from being usable with Sprint, Verizon Wireless, or most AT&T networks. Google has claimed that a version of the Nexus One will be available for Verizon Wireless customers soon.