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How is this not illegal? if they are charging a rental fee for something they are not renting?
They can easily say it's a condition of the rest of the service.

If you don't like it, don't sign up in the first place.

Exactly, they can just call it a "device management fee" "provisioning fee" or some such.
Sonic did the a similar thing to me in Sunnyvale. I could not order the internet without also getting VoIP which required paying $10 a month for a dongle. I asked if I could ship it back or not have it sent in the first place.

I was told I was required to keep it even if I did not want it, and I would have to return it at the end of service.

In this case, just refuse to sign for the delivery package.

Normally, the provider will let the service work anyway, and then at the end of the year, point out that they never delivered the hardware, they'll check the records, and refund you.

Same thing happened to me with Verizon FiOS. Ugh.

And the installation technician even had the temerity to mount their router on a wooden baseboard and affixed it to the wall as to make it harder to return their router