Android Nexus OneAs our pal Jeremy points out in the forums (and is widely being reported today), if you buy a subsidized Nexus One (the one you get alongside a T-Mobile Account) and then cancel within 120 days, you're going to pay more than you would have if you bought the Nexus One unlocked in the first place.

The breakdown:

  • Equipment Recovery Fee charged by Google: $350.
  • Early termination fee charged by T-Mobile: Up to $200.

That's $550 in penalities if you break the contract. Sure, that's causing a bit of an uproar. But is it really greedy? Google sold you a subsidized phone. As in: Somebody (in this case, Google) paid the difference so you'd be more likely to buy a cheaper Nexus One. Google took the hit. Not you.

Then there's T-Mobile. For math's sake, let's say you had a brand-new $50-a-month plan along with your Nexus One. That $50 a month over two years is $1,200 that T-Mobile planned on collecting from you, and you signed a contract stating you'd be good for that money over the 24 months. Sure, you probably have a perfectly good reason for wanting to get out of that contract. Just like the next guy.

Wanna play it safe? Make up your mind during the 14-day grace period. Or, better yet, just buy an unlocked Nexus One for $530. Yes, you pay more up front, but there's no carrier hassle, you can use it on AT&T if you want, and you don't have to worry about anybody breaking your legs if you want out.

This is the real world, boys and girls. You don't get something for nothing. I know, it's coming in the comments. Fine. But if you really want to get mad about something, remember what you're paying for text messages, m'kay?


Reader comments

Take your man pill: There are consequences for breaking contracts


Ugh, ok guys, you really need to read more contracts. Amazon does this. So does Best Buy, Wal-Mart, every non-carrier retailer will do this.

Here's how it works: Google sells you a $530 phone for $180 if you sign a 2yr contract with Tmo, if you keep that contact for 120 days Google gets a commission from Tmo in the amount of several hundred dollars. If you break your contract with Tmo, Google gets nothing and is out the 350 bucks they spotted you. That's why they do this.

This is why it's cheaper to get a phone through Amazon than Tmo, Verizon, etc.

MOST retailers will make you wait 180 days before you can avoid the fees. So Google is actually giving us a deal.

Is it really that hard to keep a phone for 4 months before you sell it on ebay, recoup your $200 ETF from Tmo, and get the next new toy?

The way I look at it, the ETF is to recover device subsidies you receive when entering into a contract. I have no objection to ETFs if they are clearly stated up front, but according to your explanation, during the first 119 days, TMO hasn't subsidized anything, so why do they need an ETF in addition to Google's $350 fee?

The Nexus One only works properly on T-Mobile anyway so why buy one unless you intend to stick with T-Mobile

Some people saying they have 3G issues with tmobile, guess it aint working to great there.

My question is why the fuck did they choose a crappy company like Tmobile, they might as well went with ATT.

This shit needs to get to verizon fast.

Why did they choose a "crappy network"? I think that "crappy network" was the only one who gave Android a chance of day while "charge u out the ass AT&T" was up Apple's butt and "I'm always dissing Apple, but really want Apple, but lost them Verizon" trying to find a way in. There's nothing wrong with T-mobile, plus u roam off AT&T if there no signal and is way cheaper. It's going to Big Red anyways SO JUST WAIT ZOUR TURN!!!!!

When you slam T-Mobile, you should be specific as to where. Their service may be bad in your location, but here down in SoCal, their service is GREAT! I've been on them since '01 and never had any problems.

I think its fair. If they didn't charge this termination fee then what is to stop someone from buying a $180 phone break the contract and pay Tmo $200. Essentially walking away with a Nexus1 for $380.

ok here something i would like a response on. Someone quilifies to get the nexus 1 with a contract, pay the subsized price. the credit card used to place this this order is cancelled and he/she breaks the contract. how would google go about getting the money for the nexus 1 then. That person would jus get a flexpay plan with tmobile, where they pay their bill ahead of time,have no activation fee, and get the lowest rate plans, and sine they already have the phone they would just purchase new sim cards. The system has been cheated! How would that be handled(hope i didnt give anybody any ideas, or did i)

there was nothing mentioned about any kind of fraud, i said what if the person cancelled the card and broke the contract, and where did identity theft come from, unless your the one doing the theft(thats why your not using a name). even if the credit card company has your info, they would have to send it to the collection agency, i would like to know what would google do about that cause that person has gotten their phone now. Even though it would effect their credit they can still start up service with tmobile on flex pay. My main question, to make things easier to understand, will there be some kind of block on the phone so it cannot be used or does that mean that that person has gottren the phone for 179?(because that would be unfair to those that pay for the phone and is stuck on cotract)

The credit card company also has record of the previous charge card number and if you do cancel the card, the charge will be applied to your new card number. This is to protect the merchant against fraud issues.

At least Visa does this. Not sure of other card companies but I cannot see a CC company not protecting the merchant.

Lets see, they probably have your social security #, so if you cancel your credit card and they for some reason can't get it from your credit card, then they will probably send bill collectors after you and your credit will get messed.

thats the thing as i said they would send it to the collection agency, and it would give u bad credit, but the person still got the phone at the discounted price, and can still reactivate it for t mobile on flex pay, some wont care as long as they got the phone, they can jus rebuild their credit over time. so i want to know what are they doing to prevent this. I am a sales rep for tmobile(with the telesales department), and i what to know what can be done to keep this from happenig

I think you guys are missing something here -- ETFs are one thing, but there's some double-dipping going on here that's just not right. Hear me out...

Let's say you go to Big V and buy a Droid for $200. You cancel early and you pay the $350 ETF. This covers their end of the phone's subsidization and the breach of contract -- seems hefty, but you canceled early and it's an expensive device, so it seems pretty fair (after all, you've payed $550 for the device, which is about right).

In the case of the Nexus One, you're paying *two* ETF fees. So, one company is subsidizing the phone (Google?) and you're right that they should be able to recoup their costs. The other company is... what? piggy-backing? Getting money for nothing? That's bull, IMO.

One ETF is fair, but two is outrageous. In this case, you pay $180 for the phone, plus $350 for the Google ETF, plus $200 for t-mobile, you've just payed $730 for a $530 phone. I have a feeling Uncle Sam is going to step in the middle of this one (And I hope they do), just as they did Verizon's "advanced device" ETF.

You're confusing things here. Buy a Droid Eris from Amazon and cancel, and you get hit with Amazon's $200+ fee plus Verizon's $350. Buy from Verizon, and you only have to pay their $350 fee. Why? Because at Verizon they can sell you a $500 phone for $100 because they lock you into a $2,400 contract. They make their money back. Amazon does not.

The issue is a third party retailer, not buying direct from a carrier.

The 3rd party provides a discount NOT the carrier if you buy from Amazon or in this case Google. So Google is out $350 bucks. If you keep your contract for 120 days, Google gets a commission from Tmo, covering their $350 loss and the discount they gave you. The $200 Tmo cancellation fee is to dissuade you from canceling your Tmo contract, and has nothing to do with Google.

Still, it's a good deal. Keep your phone 4 months, drop Tmo, pay $200 bucks (the fee goes down over time), sell the N1 on ebay for $300 (it's already unlocked, you know), take your $100 profit and go get the next new thing. This way, it's like not even having a contact.

I have no complaints.

I agree with this 100%. ETF's are in place so that providers can recoup the cost of subsidized cost of the phone, which in this case are fair. But since its Google subsidizing the phone and not T-mobile, or so it seems, the double dip with ETF is some serious BS.

Well both parties are trying to avoid a loss.

Seriously guys, this is the deal Google is offering:

1. Get N1 for $180 on 2yr contact
2. Break contract in 4 months when something better comes out
3. Pay $200 Tmo ETF, avoid Google's (it's been 120 days)
4. Sell already unlocked N1 on ebay for $400
5. Make $200 profit
6. Use $200 to get the latest phone on a 2yr contract
7. Repeat process
8. Your net cost: $180 (original price of N1)

Are you all seriously complaining about this deal? What? You want the phone for $180, a $200 ETF, so you can sell it on ebay brand new for $500 and make a profit while screwing Google out of $350? That's the only motivation I see in not keeping a cutting-edge phone for a measly 4 months.

Be careful, you're using way too much common sense, you're going to confuse people here /sarcasm off/

I totally agree with you in that the reason that some are complaining is that it (Google) rained on their money making scheme. Because if they were loyal Android users this would not be happening. I venture to say that they maintained their wireless contract with what ever carrier they are with.

While the N1 supports AT&T bands, it's hardly accurate to imply you can simply buy and unlocked N1 and use it on AT&T. On AT&T you have no 3G, and an Android phone without 3G is a waste. If all you want is a phone, sure, but then why spend all this money on the N1?

For all practical purposes, this is as locked to T1 as much as the iPhone is locked to AT&T.

not everyone needs 3G when walking around. NAV and traffic work just fine over Edge and I have WiFi everywhere else. The voice quality and 2G calling experience on AT&T has been way better than what I got with a 3GS iPhone. Not being locked into an iPhone or a particular provider is a big selling point for some people. I'll gladly pay full price just to get out from under the telcos thumb.

No, you CAN simply buy an unlocked Nexus One and use it on AT&T. Took me longer to get the battery cover open than it did to pop in the SIM card and boot it up. To imply otherwise is wrong. Am I missing 3G? Absolutely. But as I (and loads of others, I suspect), don't yet have T-Mo 3G in my town, this is currently the best route. Likely will be a moot point when the Verizon version comes out.

the bummer deal is that the nexus one doesn't support AT&T 3g so it will have much slower internet on AT&T i would recommend waiting and not jumping the gun here because it isn't worth it.

Sounds about right to me. And people actually got mad about this?....... Come on GG wanna get paid to!! ha.

for me, the problem is if only ONE of them is subsidizing the phone but BOTH are charging fees. it is fair for one to subsidize the phone, and receive money back if they don't earn the money expected (i.e. due to early termination).

if T-Mobile is covering the subsidy.. then google should not charge any fee, period. and TM can decide if they want to incorporate a similar "advanced device" fee like verizon to make up the money.

if Google is subsidizing.. then it is unfair for T-Mo to lock into a contract. that is the whole reason for the contract/etf. so the carrier makes back their money on subsidized phones. but if they are not subsidizing, no need for either. same problem as the original iphone, where there was a contract/etf when at&t had not subsidized it at all.

and if they have a subsidy arrangement and are both going to charge.. it should not exceed the $350 difference between the subsidized and full costs.

I always thought that the ETF was a way for the cell companies to recoup some of what was lost in selling the phone cheap. They loss nothing on a cancelled contract if they aren't the ones that sold me the subsidized phone. Without the phone it's only a service. What are they truly losing?

So it seems that in the first 120 days, they are double charging for the ETF. After the 120 days I can see TMO collecting the $200, but inside the 120 google gets the $380.

The ETF being a means for the phone company to recoup the subsidy is actually only a half truth. Yes it does go to support that, but it is mostly a means to keep customers from breaking their contract. The phone companies sell service not phones, and the contracts are their means of holding on to subscribers and the revenue they bring.
It is very much like the fees to break a lease (in my current situation equivalent to 2 months rent minimum), the apartment company gets the unit back but they lose money on not having a tenant in the unit for however long it takes to redo the unit and they have to spend money redoing the apartment on short notice (usually they have lead time) and all the costs of finding a new tenant.
If you want to be able to break your contract on a whim sign up for month to month service and get the phone unsubsidized. Otherwise, you sign a contract that imposes responsibilities on both parties for a set term, you want to leave early, you need to accept the penalty that the contract you signed imposes.
It may seem distasteful to be "double dipped" but if you don't like the contract terms then don't sign the contract. Google needs to wait for T-Mobile to pay them for your subsidy, you drop out before T-Mobile pays and Google isn't paid and they are out the funds. T-Mobile is also out a subscriber in the deal, and that hurts their bottom line too. Both companies are hurt, whether we like to think they are or not.

This speaks more to the culture we live in today, some people want to go thinking they are smarter than they really are. The fact that this would happen was obvious to many. And if someone is complaining about this type of practice then they are not fully aware of one important fact, Google like any other company, is after all in the business of making money, not loosing it.
I see nothing wrong with any of this and I wish more companies would start using this practice. After all we have a choice as a consumer, we may not like the choices, but they're choices nevertheless. My 2 cents, keep the change!!

Didnt they breakdown the cost of the Nexus One and find it to only cost Google $170 to make? Ill never understand why cellphones cost so much money without a contract when they dont cost much money to make?

It costs about $180 in parts, but you are ignoring the research and development, prototyping, design, hardware testing, software development and testing, licensing, factory retooling, advertising, labor, patent fees, legal, and all the other costs associated with cell phone manufacturing. Those are the actual biggest costs, it is greater than the sum of its parts.

But $300+ profit on each unsubsidized phone? That should be more than enough to cover R&D. When you buy a computer you are not paying that much over the actual cost of the components.

Yes, but a computer is a more homogenized marketplace with R&D costs spread widely. The OEM has a much simpler job of testing and developing products. The computer manufacturer does not need to invest as much time in making all the components work together as the blueprint is relatively static and the component manufacturers write the drivers. Additionally, there is less necessary work on certain aspects of design, legal costs are lower, etc... $300+ profit may seem like a lot, but that is before the variable and fixed costs (office space, factories, and the energy to run them are not cheap) not covered under parts is taken into account. At the end of the day the actual profits are probably a bit less astronomical.

Profit is the money that is left "after" all the expenses are paid. They do not make $300 profit on each phone. There is a large corporate structure that has to be paid for. All the engineers that developed the product had to be paid during the development. They get to recoop their costs (investments). Break it down in its simplest form. Go to Wendy's. They already purchased the parts for your lunch. They have prehired the people to be there in case you dropped in for lunch. They built a building and got electricity there to cook the burgers and light the place. They spent a lot of money to get you in the front door - to sell you a $.99 burger that contains $.20 of meat. They hope to sell enough burgers at an inflated (retail) price to make that money back plus some. And in the midst of all that, they want some money sent home to Wendy's corporate to pay the CEO, etc.

That is how business works. You don't like paying for all that? Don't buy it.

What is so hard about stick with a network that is cheap? If u can't do a contract, then buy it full price, if u can't do neither, then u don't get nothing. U all must be kids cause I'm 22 and know's that nothing is free and u get what u pay for. I pay for a cheap network, so I don't bitch about how spotted it is cause I GET WHAT I PAI FOR!!!!!! If this is sooo bad, then get an iphone and see how much u be putting out on a corner. Hell u get a good deal on a $80 plan and u have google voice to save you min's so what is the issue, u save in the long run.

Actually, after thinking about this a bit, a TOTALLY fair proposition would be if Tmo didn't charge their ETF for the first 120 days but Google did. Tmo isn't subsidizing the phone at all until they pay Google their commission after 120 days. Google drops their ETF after they get their commission by Tmo, so as far as Google is concerned, you're square with them. But if you cancel in the first 120 days, there's no reason Tmo should charge you $200, because all they have done to this point is sell you service. After 120 days, they are out several hundred dollars they paid to Google as a commission and need to get their money back.


Not exactly

T-Mobile or any other carrier for that matter will charge an ETF regardless of hardware subsidy or not, when you sign a 2yr Contract

Not fair at all, but it is what it is. If I'm wrong I stand erected err I mean corrected

I agree! I am sales rep for a wireless service provider and I get this every day. Everyone wants the coolest new stuff for unreasonably low prices. Since when where you ever able to get the newest, best technology for free? Never.

Почему они выбрали "Crappy сеть"? Я думаю, что "Crappy сеть" был единственным, который дал Android шанс день, а "заряд U Out осла AT & T" была до приклада от Apple и "Я всегда Dissing Apple, но на самом деле хотят Apple, но потерял их Verizon" пытаясь найти способ дюйма Там ничего плохого с T-Mobile, плюс у бродят от AT & T, если нет сигнала и намного дешевле. Оно идет Big Red Anyways ТАК WAIT Зур очередь!