Associated  Press | Google Inc. has lowered by $200 the fee it
charges customers who break a standard two-year contract for its new
Nexus One phone on the T-Mobile USA Inc. network.

The Google fee was dropped to $150 from $350, but customers who break a
contract on the phone will still have to pay an early termination fee
of $200 to T-Mobile.

The lower “equipment recovery fee” on the Nexus One, which took effect on Jan. 4, will apply to customers who break their contract after the 14-day trial period but before 120 days. Customers who break the contract after 120 days will not have to pay any fee.

Google also lowered the equipment recovery fee for existing T-Mobile customers who upgrade to the Nexus One from another handset and then break their contract to $50 from $250.

The Nexus One phone costs $179 for customers who sign up for a two-year plan with T-Mobile, or $529 for those who purchase an unlocked phone that can be used with any GSM wireless network, including T-Mobile’s.

Google’s decision to lower the equipment recovery fee comes amid a Federal Communications Commission inquiry into early termination fees across the wireless industry. Last month, the agency sent letters letters to AT&T Inc., Verizon Communications Inc., Sprint Nextel Corp., T-Mobile and Google seeking information about their approaches to early termination fees.

Among other things, the FCC is asking about the size of the fees and the rationale for them. It also wants to know whether carriers prorate such fees if a cancellation comes closer to the end of a contract and whether they offer trial periods that allow new customers to cancel service without being charged a fee.

The agency is also asking why customers who use Google’s Nexus One phone on the T-Mobile network have to pay fees to both companies if they break a contract.

T-Mobile said the decision to lower the equipment-recovery fee is unrelated to the FCC inquiry, however, and is instead part of an ongoing effort that began before the agency launched its investigation.

“We have been looking for ways to improve our customers’ experience, so we were able to work with T-Mobile to find a better solution for our customers,” Google said in a statement.

Late last year, the FCC sent a letter to Verizon Wireless asking why the company recently doubled early termination fees on smart-phone contracts to as much as $350 from $175. Verizon says it pays device manufacturers more for those phones and bakes subsidies for those devices into the monthly service fees. The company says the termination fees help it recoup costs if a contract is broken.