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The Federal Communications Commission recently began an inquiry into exorbitant early termination fees in mobile phone carriers’ contracts. The investigation began when Verizon raised its early termination fee to $350 (from $175) for smartphones. Now the FCC is making the inquiry formal and full-blown—they’re asking the four major mobile carriers and Google about their early termination policies.

Yeah, that’s right. Google. I know they’re selling a mobile phone now, but Google isn’t a service provider. Well, we can all rest assured—a little—the FCC’s letter to Google acknowledges that T-Mobile is the service provider. However, T-Mobile received a letter of its own. So why single out Google of all the hardware providers? (Just wait.)

After all, Apple makes the iPhone, and you can buy directly from its website. Google’s webstore offers you the choice of an unlocked phone without a plan or a (cheaper) phone with a T-Mobile plan (Verizon and Vodaphone are still slated for spring). Apple’s iPhone store doesn’t offer any choice but to buy the phone with an AT&T data plan (that I can see, without giving my info).

But there’s something that Google does that Apple doesn’t. The unlocked Nexus One is $529, but when you buy it with a T-Mobile plan, the price drops to $179. However, if you cancel your contract in the first 120 days of service, the Terms of Sale state that in addition to T-Mobile’s early termination fee, you’ll also be subject to an “equipment recovery fee”—the $350 subsidy on the phone price.

To my knowledge, when you buy a discounted phone from other mobile carriers, they don’t charge that subsidy on top of their ETF. In fact, that was part of Verizon’s initial justification of its high early termination fee to the FCC. (A justification the FCC found “unsatisfying, and in some cases, troubling.”)

The FCC’s look at Google may be prompted by consumer complaints (they aren’t saying), but it still shows an impressive level of sophistication in the modern marketplace. (Let’s face it—after looking at the way federal commissions handle the Internet, it doesn’t take much to impress me.)

Google, Verizon, Sprint, T-Mobile and AT&T have until February 23 to respond.

What do you think? Will the FCC knock down early termination fees—and if they do, will phone subsidies from mobile carriers be a thing of the past?

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