And your point is? We have already known about this. This is a non-issue. They are doing this to stop people from signing up with T-Mobile and paying $180 for the phone, cancelling and paying the $175 ETF, and getting away with a phone for less than retail. The original subsidy is from Google, NOT T-Mobile. $180 + $350 = $530; the retail price of the Nexus One. The other $175 ETF is the normal T-Mobile ETF for nullifying your contract.
@Martin C One has signed an agreement with T-Mobile to have service for two years. If you want to nullify your contract, there is a fee attached to it. This is standard practice as I am sure everyone knows. There are always stipulations attached to prematurely cancelling a contract.
@staulkor That's normal, because the carrier is normally subsidizing the phone. There shouldn't be an ETF with T-Mobile if they're not subsidizing the phone.
Not necessarily. If you enter into a contract with another party (whether it's a wireless carrier, any other company, or a person), both sides agree to hold up to certain terms. If you decide to effectively say, "I know I signed an agreement that allowed you to count on 2 years' worth of revenue from me, but you know what I don't think I want to pay it," then it shouldn't be a surprise that there might be a penalty for that. The ETF in this case isn't to recoup the cost of a subsidized phone, it's simply a penalty for a breach of contract.
That's not the point. You don't cause T-mobile any sort of financial distress by backing out of this contract because they "were counting on this revenue." ETFs are allowed (legally, by the FCC) because a company is making some upfront concessions for a long term revenue stream. This concession is usually through subsidized equipment or a reduced monthly fee for service. Neither is occurring in this case. In fact - not only is T-mobile not subsidizing the N1, they're also charging MORE for a contract than they are for a month-by-month plan. Ridiculous.
You seem to think that it's ok for T-mobile to include this ETF "just because." Contractual obligations aren't always legal and simply including a statement in a contract doesn't make it appropriate, nor does it make it binding. Signing a contract that says "you can kill me" doesn't give someone the right to actually commit murder. I'm amazed by this common misconception among the population.
I'm willing to bet that T-mobile's ETF can be overturned. Maybe Nilay can chime in on this, considering he's always boasting about his legal qualifications. :P
Seriously, who do you think is subsidizing the phone? One would assume that T-Mobile is paying Google just like AT&T pays Apple subsidies (and ex-US carriers likewise) for those iPhones that Apple sells through their stores with contracts. My guess would be that Google would be the only one levying the ETF in this case, funneling a substantial percentage of it back to T-Mobile. I'd hazard to guess that T-Mobile won't be charging a separate ETF directly.
It's hard for me to imagine that Google would put such a heavy subsidy on the phone if they weren't getting most of that money back from the carrier.
I believe you're right; I think the ETF is only allowable because it's essentially a liquidated damages clause. I don't think it's legal if it's a penalty.
This whole setup just stinks, and clearly was VERY poorly thought out by G and Tmob.
Does not a contract generally include a statement of restitution in the event the contract is broken?
Isn't that what T-Mo is including in this 2 year agreement? The user getting a subsidized phone is agreeing to remain a customer of T-Mo. In the event one chooses not to fulfill the contract, an End of Term Fee is charged.
So, what's that got to do with equipment?
If you lease a home and move out before the term of the lease, you will tend to notice a nifty little charge for early lease termination *in addition* to percentage charge for each of the remaining months left on the original lease contract.
I'm no fan of all the fees, but this is what happens when consumers respond to the word "free", and producers need a way to make it look as such.
Perhaps this is Google's/T-Mo's way of gently encouraging us to pay the actual cost of our toys?
(shrug)
or maybe it's just a plot they've set up with the credit industry.
"Hey, I know! I'll just pay for it up front with my Chase Visa and save money AND still get to make payments! Yeah! I'm a savvy consumer!"
Does anybody know if there's some round-about way of getting it via Flexpay?
@staulkor There should be some sort of relief here - maybe administrative costs associated w/ entering into the agreement (reps/salespeople time and labor). That amount though, should be about 19.95
I would argue that backing out of a contract could cause T-Mobile some financial hardship. Consider a scenario where 1,000 customers sign up all in the same densely populated area, and T-Mobile realizes that they'll need additional infrastructure to adequately support the additional load. If they invest in infrastructure counting on those users to stick around and pay for the cost of the infrastructure by paying their phone bills throughout the length of their contracts, then all of a sudden they all leave, then T-Mobile has lost out on the deal. I realize that a) ETFs are not explicitly designed to deal with this but rather to recoup losses on phone subsidies and that b) the example I gave assumes this happens on a much larger scale, but I don't think it's correct to say that companies never suffer financial hardship by breaking contracts. If they make investment decisions based on revenue projections that turn out to be faulty, then the investment could potentially go bad, hence the reason term contracts exist in the first place even in locations where equipment isn't subsidized, such as cable TV.
Now, that said, I don't know how T-Mobile arrived at the $175 figure and I agree that if they wanted to impose a penalty for breach of contract, it shouldn't be called an ETF and it should apply to all phones, and perhaps the amount of the fee should depend on how expensive the cancelled plan is (or was).
As for the legal and binding thing, I don't have my contract in front of me, but I would imagine that somewhere in there it says that you're entering into a legally binding contract with the carrier. As for the example of signing something that allows you to kill someone, I understand that a contract can't make it ok for either party to break the law, but your example assumes that imposing a penalty for breaching a contract is unlawful, which I don't think it is. As I said, it's probably not right to call it an ETF and it's certainly not right to claim that this particular fee is designed to recoup subsidies, but I think someone who tried to sue a company for imposing this kind of breach-of-contract penalty (on the basis of making it difficult to make investment decisions) after the customer already agreed to it would face a pretty serious uphill battle.
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And your point is? We have already known about this. This is a non-issue. They are doing this to stop people from signing up with T-Mobile and paying $180 for the phone, cancelling and paying the $175 ETF, and getting away with a phone for less than retail. The original subsidy is from Google, NOT T-Mobile. $180 + $350 = $530; the retail price of the Nexus One. The other $175 ETF is the normal T-Mobile ETF for nullifying your contract.
@staulkor
Okay then, why is T-mobile entitled to an ETF when they didn't subsidize the phone? Someone is getting free money here.
@Martin C One has signed an agreement with T-Mobile to have service for two years. If you want to nullify your contract, there is a fee attached to it. This is standard practice as I am sure everyone knows. There are always stipulations attached to prematurely cancelling a contract.
@staulkor That's normal, because the carrier is normally subsidizing the phone. There shouldn't be an ETF with T-Mobile if they're not subsidizing the phone.
@Bootes
Not necessarily. If you enter into a contract with another party (whether it's a wireless carrier, any other company, or a person), both sides agree to hold up to certain terms. If you decide to effectively say, "I know I signed an agreement that allowed you to count on 2 years' worth of revenue from me, but you know what I don't think I want to pay it," then it shouldn't be a surprise that there might be a penalty for that. The ETF in this case isn't to recoup the cost of a subsidized phone, it's simply a penalty for a breach of contract.
@John H
That's not the point. You don't cause T-mobile any sort of financial distress by backing out of this contract because they "were counting on this revenue." ETFs are allowed (legally, by the FCC) because a company is making some upfront concessions for a long term revenue stream. This concession is usually through subsidized equipment or a reduced monthly fee for service. Neither is occurring in this case. In fact - not only is T-mobile not subsidizing the N1, they're also charging MORE for a contract than they are for a month-by-month plan. Ridiculous.
You seem to think that it's ok for T-mobile to include this ETF "just because." Contractual obligations aren't always legal and simply including a statement in a contract doesn't make it appropriate, nor does it make it binding. Signing a contract that says "you can kill me" doesn't give someone the right to actually commit murder. I'm amazed by this common misconception among the population.
I'm willing to bet that T-mobile's ETF can be overturned. Maybe Nilay can chime in on this, considering he's always boasting about his legal qualifications. :P
=|
@Bootes
Seriously, who do you think is subsidizing the phone? One would assume that T-Mobile is paying Google just like AT&T pays Apple subsidies (and ex-US carriers likewise) for those iPhones that Apple sells through their stores with contracts. My guess would be that Google would be the only one levying the ETF in this case, funneling a substantial percentage of it back to T-Mobile. I'd hazard to guess that T-Mobile won't be charging a separate ETF directly.
It's hard for me to imagine that Google would put such a heavy subsidy on the phone if they weren't getting most of that money back from the carrier.
@theNEOone
I believe you're right; I think the ETF is only allowable because it's essentially a liquidated damages clause. I don't think it's legal if it's a penalty.
This whole setup just stinks, and clearly was VERY poorly thought out by G and Tmob.
@staulkor
*confused*
Does not a contract generally include a statement of restitution in the event the contract is broken?
Isn't that what T-Mo is including in this 2 year agreement? The user getting a subsidized phone is agreeing to remain a customer of T-Mo. In the event one chooses not to fulfill the contract, an End of Term Fee is charged.
So, what's that got to do with equipment?
If you lease a home and move out before the term of the lease, you will tend to notice a nifty little charge for early lease termination *in addition* to percentage charge for each of the remaining months left on the original lease contract.
I'm no fan of all the fees, but this is what happens when consumers respond to the word "free", and producers need a way to make it look as such.
Perhaps this is Google's/T-Mo's way of gently encouraging us to pay the actual cost of our toys?
(shrug)
or maybe it's just a plot they've set up with the credit industry.
"Hey, I know! I'll just pay for it up front with my Chase Visa and save money AND still get to make payments! Yeah! I'm a savvy consumer!"
Does anybody know if there's some round-about way of getting it via Flexpay?
@c w j
oops. meant for Mart C, not staulkor.
@staulkor
the carriers have always said that ETF was to make up for the phone subsidy. Why is t-mobile getting free money for? It is free money.
@staulkor
There should be some sort of relief here - maybe administrative costs associated w/ entering into the agreement (reps/salespeople time and labor). That amount though, should be about 19.95
@theNEOone
I would argue that backing out of a contract could cause T-Mobile some financial hardship. Consider a scenario where 1,000 customers sign up all in the same densely populated area, and T-Mobile realizes that they'll need additional infrastructure to adequately support the additional load. If they invest in infrastructure counting on those users to stick around and pay for the cost of the infrastructure by paying their phone bills throughout the length of their contracts, then all of a sudden they all leave, then T-Mobile has lost out on the deal. I realize that a) ETFs are not explicitly designed to deal with this but rather to recoup losses on phone subsidies and that b) the example I gave assumes this happens on a much larger scale, but I don't think it's correct to say that companies never suffer financial hardship by breaking contracts. If they make investment decisions based on revenue projections that turn out to be faulty, then the investment could potentially go bad, hence the reason term contracts exist in the first place even in locations where equipment isn't subsidized, such as cable TV.
Now, that said, I don't know how T-Mobile arrived at the $175 figure and I agree that if they wanted to impose a penalty for breach of contract, it shouldn't be called an ETF and it should apply to all phones, and perhaps the amount of the fee should depend on how expensive the cancelled plan is (or was).
As for the legal and binding thing, I don't have my contract in front of me, but I would imagine that somewhere in there it says that you're entering into a legally binding contract with the carrier. As for the example of signing something that allows you to kill someone, I understand that a contract can't make it ok for either party to break the law, but your example assumes that imposing a penalty for breaching a contract is unlawful, which I don't think it is. As I said, it's probably not right to call it an ETF and it's certainly not right to claim that this particular fee is designed to recoup subsidies, but I think someone who tried to sue a company for imposing this kind of breach-of-contract penalty (on the basis of making it difficult to make investment decisions) after the customer already agreed to it would face a pretty serious uphill battle.
@F C
Or like 0.10. Seriously.. they claim they're trying to change the market. This looks like the same thing everyone else does