Google Cuts Nexus One Termination Fee

It has probably occurred to Google (GOOG) management that customer service for its Nexus One handset has been poor and that has hurt the handset’s reputation. Google also has to compete with other phones powered by its Android mobile OS, so features and services are even more critical.

One of the most damaging parts of the Google Nexus marketing program is that the company has charged a $350 “equipment recovery fee” to people who return their Nexus handsets. The product is sold by N0.4 US cellular service T-Mobile, which gives Google a relatively small number of potential customers, certainly compared to the universe of consumers that Apple (AAPL) has access to because of its relationship with AT&T (T) which has a much largest customer base.

Google dropped its termination fee to $150 and should take it to zero. Google can afford to charge nothing. The search firm had operating income of $6.6 billion last year and has $16 billion in cash and equivalents.

Google can fumble its way into the consumer markets with the Nexus One, its Apps products for PCs, its plans to run marketing messages on YouTube, and its system to turn it GMail service into a social network to compete with Facebook and MySpace. Or, it can offer potential customers products that work, have excellent service, and prices set well below competing products.

The decision about Nexus One fees is a move in the right direction, but it does not go far enough.

Douglas A. McIntyre