A Guide to Business VoIP Costs
The hosted business VoIP cost structure can be more complicated than that of other business software.
Yes, hosted VoIP is mainly cloud software, with telephones as endpoints.
An example of simple cloud software pricing is G Suite Business from Google. The service costs $10 per user per month, period. Since data storage is unlimited, there’s no extra charge for heavy use (analogy to come).
Yes, there are usually services required for setup and data migration, but the software itself is a single line item.
Even though business VoIP is served up from a data center in a similar manner to G Suite, VoIP has inherited a regulatory (FCC) and taxation legacy from the days of traditional landline service.
As with car lease rates, some hosted VoIP providers promote a base price on their homepage, but do not display the additional fees.
One VoIP vendor charges 50% more than the advertised price for access to basic features such as email notifications of new voicemail messages and call forwarding to a mobile phone.
Other vendors lead with an all-inclusive or near all-inclusive price.
Unfortunately, some buyers only focus on a low advertised price—only to later get a case of buyer’s remorse after seeing the first invoice. By that time, it’s too late. The commitment and transition have been made.
It is therefore the responsibility of the buyer to understand what’s included and what’s not included in the advertised price.
Let’s look at the various components of hosted business VoIP that can affect the overall cost.
These are the recurring per user monthly or annual charges. Some vendors offer a discounted annual prepayment option.
Most vendors have tiered pricing. For example, the per user cost may drop when there are 20 or more users.
Per User Telephone Service (Base Price)
The base VoIP service itself is variously referred to as “users”, “seats” and “lines.” This charge correlates to the number of people who will have their own VoIP extension.
The published base price generally ranges from about $20 to $35 per user per month. One vendor charges as much as $59.99 for their highest level plan. Keep in mind that the published price may or may not include extras, depending on the vendor.
Direct Inward Dial (DID) Phone Number
Many VoIP providers charge a separate recurring fee for each employee who needs a direct phone number, such as 916-555-1134.
When an employee does not have a DID number, they need to include their extension number on their business card and in their email signature—e.g.: 916-555-1000 x134
The extra charge for a DID number is about $5 per user per month.
Regulatory Compliance Recovery Fees
These are regulatory fees charged to the VoIP provider that they in turn recover from the customer. VoIP vendors variously include the following items in this fee category.
- Fees that the vendor is required to pay to support the TRS fund. This fund supports facilities and services used to provide telecommunications services for individuals with hearing or speech disabilities.
- Annual regulatory fees assessed by the FCC
- Acquiring and protecting intellectual property
- Costs incurred from administering, billing, collecting and making required tax and regulatory filings
- Responding to subpoenas, civil investigation demands, and other official requests
- Regulatory surcharges paid to telecom providers that the VoIP provider in turn uses to provide its services
If it is not included in the base price, this charge appears as a separate line item on the invoice. The amount can range from $2 to $5 per user month.
Universal Service Fund Recovery Fee
This is charged to recover contributions the VoIP provider is required to make to the federal Universal Service Fund.
This fund supports affordable, nationwide telephone service to rural health care providers, certain low-income consumers and eligible schools and libraries.
When not a part of the base price, this amount can range from $2 to $4 per user month.
Enhanced 911 Service Fee
VoIP providers charge this fee to recover costs of providing 911 service to their customers as required by Federal Communications Commission regulations.
The FCC has a number of requirements for VoIP providers, including the need to “automatically provide 911 service to all customers as a standard, mandatory feature.” VoIP providers are not allowed to let customers “opt-out” of 911 service.
If this is not included in the base price, it can be up to an additional $2 per user per month.
State and local taxes, fees and surcharges
These charges are imposed by certain state, local, and municipal governments. Fees help pay for local emergency services such as fire and rescue.
One Time and Variable Charges
There are a number of costs and potential costs associated with hosted VoIP that are outside of the recurring monthly or annual fee.
Business VoIP Telephone Cost
While some business users make and receive all their calls through a desktop computer or a mobile phone, the physical desk phone is still alive and well.
Popular phone vendors include Polycom and Yealink.
The list price for desktop phones ranges from around $80 for basic IP phones to over $500 for phones that support video teleconferencing.
Some hosted VoIP providers charge a one-time installation fee. Most do not.
It’s worth asking a prospective vendor whether there is a separate installation charge.
Some vendors limit the number of monthly minutes for domestic calls, after which additional charges incurred by the customer. This is the “heavy use” charge concept referenced above.
U.S. VoIP providers often charge by the minute for calls to certain countries and even to U.S. territories like Puerto Rico.
If your users will be placing a lot of international calls, it’s best to get an estimate this variable cost up front.
Internet Service Upgrade
A cost that is not directly charged by VoIP providers—but that is sometimes required—is faster internet service.
When a business moves from traditional landline service to hosted VoIP, the existing internet bandwidth may not be sufficient to support the additional data traffic.
When this is the case, the company will need to upgrade their internet service, which translates into an additional recurring monthly fee.
Business VoIP cost is not always straightforward. For buyers, it’s important to ask about all of the potential costs up front in order to avoid surprises down the road.