FCC queries Google, others on early termination fees

The U.S. Federal Communications Commission is continuing its investigation into wireless early termination fees but this time is targeting one notable newcomer: Google.

When Google launched its Nexus One phone in early January, the fine print of the user agreement indicated that canceling service in under 120 days would cost customers $550. That includes a $350 equipment recovery fee that Google charges and a $200 termination fee from T-Mobile. Buyers have a 14-day grace period during which they can return the phone and avoid those charges.

It seemed likely at the time those fees were revealed that the FCC might question them, since it had already asked Verizon to explain a recent ETF hike to $350.

On Tuesday, the FCC sent letters to all the operators and Google asking for answers to questions about the 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 FCC explained in its letter to Google.

The FCC wrote that it is concerned that consumers aren’t aware of the fees, particularly because there is no standard across operators and phone retailers for them.

“The combination of ETFs from Google and T-Mobile for the Nexus One is also unique among the four major national carriers. Consumers have been surprised by this policy and by its financial impact. 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,” the letter reads.

The answer to those questions may be particularly interesting. Typically, operators say that they charge the fees because they subsidize handsets and hope to recoup the subsidy over time as the customer pays for monthly service. But in Google’s case, it’s unclear why both Google and T-Mobile would charge buyers fees that combined amount to far more than most ETFs.

The letters to all the recipients include a standard set of questions about how the ETF is determined and in what circumstances it applies.

All the letter recipients have been asked to reply by Feb. 23. The FCC said the inquiry is part of its Consumer Task Force, launched last week to promote cross-agency collaboration on the Commission’s consumer agenda.

Copyright © 2010 IDG Communications, Inc.

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