Google reduces its Nexus One termination fee

Google has quietly chopped US$200 off its early termination fee on the Nexus One, meaning it will now cost users less to cancel service on the smartphone.

Customers who cancel the service had been paying $550, including a $350 Google cancellation charge. That fee has been reduced to $150, but users are still subject to an additional $200 early termination fee from T-Mobile.

That means that, in total, they’ll have to pay a total of $350 for cancelling service within 120 days. Users have a 14-day grace period during which they do not have to pay either charge, although they may be hit with a restocking fee.

The $350 total fee matches one of the highest in the industry, charged by Verizon.

Google did not announce the change but simply altered its online terms-of-service document. It also added a line to the terms of service saying that customers who upgraded an existing line of service from T-Mobile will only be required to pay $50 to Google for cancelling or downgrading service within 120 days. Previously those users did not have a reduced early termination fee.

The search giant said that it's not making any profit from the cancellation fees. "Google’s overall financial philosophy with regard to operator service plans remains unchanged: We make no profit from commissions from operators or from equipment recovery fees, and our recovery fees are based on operator charges to Google for early termination of service," it said in a statement.

The change comes just under two weeks after the U.S. Federal Communications Commission sent letters to all of the operators and Google with questions about their termination fee policies. The FCC had already questioned Verizon for hiking its fee to $350 before Google had revealed the hefty fees associated with cancelling the Nexus One.

The FCC letters asked the operators and Google to explain their rationale for the fees and describe how they make sure customers are aware of it. They were asked to reply by Feb. 23.