The hosted business VoIP cost structure can be more complicated than other business software. Let’s take a look at the components.
Hosted VoIP is mainly cloud software, with telephones as endpoint equipment.
An example of simple cloud software pricing is Google Workspace Business Plus. The service costs $12 per user per month, period. Since data storage is unlimited, there’s no extra charge for heavy usage. Yes, services are usually required for setup and data migration, but the software is a single line item.
Even though business VoIP is served up from a data center similar to Google Workspace, 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 get a case of buyer’s remorse later 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 components of hosted business VoIP that can affect the overall cost.
These are the recurring per-user monthly or annual charges. In addition, some vendors offer a discounted yearly 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 is called ‘users,’ ‘seats,’ or ‘lines.’ This base charge correlates to the number of employees with a VoIP extension.
The published base price ranges from about $20 to $35 per user per month. One vendor charges as much as $59.99 for their highest-level plan. Remember 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 recurring fee for each employee needing a direct phone number, such as 916-555-1234.
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 per month.
Universal Service Fund Recovery Fee
This fee is to recover contributions the VoIP provider must make to the federal Universal Service Fund.
This fund supports affordable, nationwide telephone service to rural healthcare providers, particularly 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
Federal Communications Commission regulations require that VoIP providers charge this fee to recover the costs of providing 911 service to their customers.
The FCC has several requirements for VoIP providers, including the need to “automatically provide 911 service to all customers as a standard, mandatory feature.” In addition, VoIP providers cannot 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 specific state, local, and municipal governments. Fees help pay for local emergency services such as fire and rescue.
One Time and Variable Charges
Several costs and potential costs associated with hosted VoIP are outside of the recurring monthly or annual fee.
Business VoIP Telephone Equipment 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 $700 for phones that support Zoom video conferencing.
The price for conference phones ranges from $350 for a Yealink device to over $1,200 for a Poly Trio model.
Some hosted VoIP providers charge a one-time installation fee. However, many do not charge a fee.
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 the customer incurs additional charges. 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 of this variable cost upfront.
Internet Service Upgrade
A cost that VoIP providers do not directly charge — 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 its internet service, which translates into an additional recurring monthly fee.
Business VoIP cost is not always straightforward. For buyers, asking about all potential costs upfront is essential to avoid surprises down the road.