If you were thinking about getting yourself one of Google’s [GOOG] new smartphones, the Google Nexus One, you may want to think again, as ArsTechnica are reporting that early termination fees on the Nexus One are high.
If you purchase a Nexus One on a T-Mobile two-year contract, the handset is going to cost you $179, plus your monthly contract fee. However, if you decide to cancel your contract early, you will have to pay an early termination fee to Google as well as T-Mobile.
For the pleasure of canceling your contract early, within the first 120 days of the contract, Google will charge you an ‘Equipment Recovery Fee’ of $350. On top of this, you will have to pay an early termination fee to T-Mobile of $200. This makes a total of $550 in early cancellation fees, plus the cost of your handset which is $179, bringing the total up to $729.
Comparing Costs: Contract vs. SIM-Free
This is considerably more than the $529 it costs to purchase the Google Nexus One without a contract, exactly $200 more. So, if there is any chance you are going to cancel your contract within the first 120 days, you may be better off purchasing the SIM-free model. The SIM-free model gives you the flexibility to switch carriers or plans without incurring hefty fees. Additionally, owning an unlocked phone can be beneficial if you travel internationally, as you can use local SIM cards to avoid roaming charges.
Understanding Early Termination Fees
Early termination fees (ETFs) are designed to recoup the costs that carriers and manufacturers incur when they subsidize the price of a handset. When you sign a contract, the carrier often sells you the phone at a reduced price, expecting to make up the difference over the life of the contract through your monthly payments. If you cancel early, the carrier loses out on this expected revenue, hence the ETF.
In the case of the Nexus One, Google’s Equipment Recovery Fee is particularly high, reflecting the company’s investment in the device. This fee is separate from T-Mobile’s ETF, which is standard across many of their contracts. The combined fees can be a significant financial burden, especially if you are not fully committed to staying with the carrier for the full term of the contract.
It’s also worth noting that these fees can vary depending on the carrier and the specific terms of your contract. Some carriers offer prorated ETFs, which decrease the longer you stay with the service. However, Google’s Equipment Recovery Fee does not appear to be prorated, making it a substantial cost if you decide to cancel early.
In conclusion, while the Google Nexus One is an attractive and powerful smartphone, potential buyers should carefully consider the financial implications of signing a contract. The high early termination fees can make canceling your contract within the first 120 days prohibitively expensive. For those who value flexibility and the ability to switch carriers without penalty, purchasing the SIM-free model may be the better option. Always read the fine print and understand the terms of your contract before making a commitment.
via Ars Technica
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