FCC to Google: A $350 “Equipment Recovery Fee”? What’s Up With That?

Published on January 27, 2010
by John Paczkowski

The Federal Communications Commission, which has sent letters to all major carriers regarding their wireless early-termination fees, has expanded its investigation to include an industry newcomer: Google.

On Tuesday, the agency sent a letter to the search company inquiring about the $350 “equipment recovery fee” it has attached to its new Nexus One phone. Levied in addition to a $200 termination fee from T-Mobile, Google’s charge means that Nexus One users who cancel service in under 120 days face a total of $550 in penalties.

“The combination of ETFs from Google and T-Mobile for the Nexus One is unique among the four major national carriers,” the FCC said in its letter. “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.”

Among the other questions put to Google:

  • Does the ETF itself vary by device (e.g., higher ETFs for advanced devices)? If higher ETFs apply to a certain class of devices, exactly how is that class defined?
  • Are ETFs prorated so that the customer’s liability decreases over time? If so, what is the exact schedule by which they are prorated?
  • Press reports and public statements from wireless companies have attributed ETFs to several different factors. What is the rationale for your ETF(s), and how specifically do the structure and level of those ETF(s) relate to that rationale?

Google (GOOG) has previously dismissed questions likes these, claiming fees like those it has implemented are “standard practice” for third-party resellers of mobile service, who are only trying to recoup subsidies they offer customers who sign up for multiyear service contracts.

But that doesn’t quite explain why the fees charged by Google and T-Mobile together amount to far more than most ETFs. Now that the FCC is asking, Google will have to offer a more complete explanation.

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