Finding out the cost of switching from landlines to VoIP isn’t straightforward.
It requires digging into various pricing plans and understanding the mix of basic and extra features that meet your business needs.
The cost of a business phone system isn’t just a budget item — it’s an investment to scale your business communication.
Here, we dissect the complex topic of VoIP pricing to help give you a clear idea of what a VoIP phone system might actually cost you. We discuss the main factors affecting the cost and provide tips to ensure you make a financially smart choice for your business.
What Are the Basic Costs of VoIP?
Voice over Internet Protocol (VoIP) is much less expensive than traditional, analog-based phone service. However, it comes with its own set of expenses from a VoIP provider as well as indirect costs like a high-speed internet connection.
On average, a VoIP phone system costs between $25 and $35 per line monthly. Additional features like call recording, toll-free numbers, and equipment rentals cost extra.
Several cost elements come into play when transitioning from a legacy system to a VoIP phone service. These costs can be generally categorized into “recurring” and “one-time” expenses.
The recurring expenses mainly include subscription fees and per-user or per-line costs, while one-time expenses cover setup and equipment costs. Cloud telephony usage is expected to grow by 35% until 2036, suggesting the benefits justify the cost of VoIP.
Let’s take a closer look at each of these expenses.
Monthly or Annual Subscription Fees
The bulk of VoIP phone service costs lie in subscription fees, which will be charged on a monthly or annual basis.
These fees cover the basic VoIP service, which will allow your business to make and receive phone calls over an internet connection. Subscription plans can range from basic packages with standard features to premium plans offering more advanced functionality.
- Monthly Plans: A monthly plan offers flexibility and doesn’t lock you into long-term commitments, making it a good option for small businesses. However, they tend to be more expensive in the long run than annual plans.
- Annual Plans: An annual plan will reduce your monthly cost significantly when calculated on a per-month basis, making it a good option for established businesses with predictable call volumes — but remember that you’ll have contractual obligations (discussed later).
Many business VoIP providers provide unlimited calling nationwide. However, be sure to confirm the international calling rates. International calls cost up to 90% less than traditional telephone companies but will be added to your invoice if your team dials outside the U.S. or Canada.
Per-User or Per-Line Costs
VoIP providers will structure their pricing based on the number of users or lines needed.
This means the more employees or phone lines you have, the higher the cost. It’s important to accurately assess the number of users or lines your business requires to avoid overpaying.
- Per-User Costs: Charges are based on the number of employees using the system. This is a common pricing model for VoIP services and is particularly suited to businesses with a clear headcount.
- Per-Line Costs: Alternatively, some providers charge based on the number of phone lines. This model works better for businesses with a higher call volume and a need for multiple lines. Additional costs here also includes extra phone numbers (often called direct-inward-dial numbers).
Specific Features and Functionalities According to Business Requirements
The cost of a VoIP system also varies greatly based on the specific features and functionalities your business requires. Advanced features like virtual meeting capabilities and conference calls, international calling, and auto attendants, among others, can drive up the cost.
- Standard Features: Typical VoIP features like call forwarding, voicemail, and domestic calling usually come bundled with the base subscription fee. It’s common to get unlimited outgoing and incoming calls nationwide.
- Advanced Features: Powerful features like Customer Relationship Management (CRM) integration, advanced analytics, unlimited calling, international calls, and premium customer support will incur additional costs. It’s crucial to identify the essential features for your business operations and budget accordingly.
How Much Does VoIP Cost?
Taking monthly or annual subscriptions, number of users, and variations between specific features per plan into account, Nextiva offers the following pricing for prepaid multi-year plans:
|Lighter duty, simple calling.
|Best choice for small businesses.
|Great for larger organizations.
Hidden or Unexpected Costs of VoIP
Switching to a VoIP phone system will save money in the long run, but it will only do so if you’re aware of all hidden or unexpected expenses.
There’s nothing nefarious here — these are just the VoIP costs that depend on your location or your specific business needs.
It’s essential to have a solid understanding of the additional costs involved with VoIP calls that can occur. Here’s a breakdown of some hidden or unexpected costs you might encounter:
VoIP systems rely on internet bandwidth to deliver clear, high-quality calls. If your existing bandwidth is insufficient, you’ll need to upgrade your internet package to meet the demands of VoIP technology.
Assess your current bandwidth and make sure it can handle the additional load the VoIP system will bring. Try our free VoIP network test to get a realistic figure of how many phone calls your network can handle.
If an upgrade is necessary, take into account the additional costs, as they will vary depending on your internet service provider and the package you select.
Taxes and Fees
Just like traditional phone services (and everything else in life), VoIP services are subject to various taxes and fees. These can include federal, state, and local taxes and regulatory fees.
The tax rates and fees vary between geographical locations, making it imperative to understand the applicable taxes in your area. Phone system consultants say paying between 20% and 30% in taxes isn’t unheard of.
Remember that VoIP tax rates vary by location and largely depend on the business location and phone numbers used.
Additional Features or Add-Ons
Many VoIP providers offer a basic package with the option to add extra features or add-ons, such as advanced call analytics, call center functionality, additional lines, or hands-on customer support, for an additional cost.
Before committing to a package, evaluate the features included in the base package and identify any additional features your business requires. Understanding the cost implication of these additional features will help you avoid any unexpected expenses down the line.
Tip: Some of these add-ons can be negotiated with your sales representative, so be sure to mention them if you find them valuable, in addition to your business VoIP package.
Integrating with existing business tools like CRM systems or leveraging advanced functions like AI can sometimes necessitate upgrading to a more expensive pricing package.
Assess the costs of integrating your existing business tools with the VoIP system. If your business requires advanced functionalities, be prepared for additional expenses associated with these features and include them in your VoIP phone system cost.
How Long-Term Commitments Affect VoIP Costs
Before signing any VoIP agreement, it’s crucial to understand the VoIP contract terms. This ensures you know exactly what’s expected of you during the contract and also what you can expect from your VoIP provider.
For an independent explainer of common lingo found in a VoIP contract, Prince Rich has you covered.
Important VoIP contract agreement considerations include:
Length of Contract: Month-to-Month vs. Long-Term Commitments
The length of the contract significantly impacts the cost of VoIP services.
Month-to-month contracts provide flexibility and are ideal for businesses not ready for a long-term commitment. However, remember that they come at a higher monthly cost.
Long-term contracts come with discounted rates but can also include penalties for early termination. Consider this based on your business’s long-term outlook before committing to any contract.
Termination fees are charges for exiting the contract before its agreed-upon end date. These fees can be substantial and must be outlined in the contract agreement.
For example, you could be liable for the balance due if you cancel at month six on a 12-month term.
Service-level agreements are your quality control assurances in a VoIP contract.
They define the expected service quality, including uptime guarantees. High reliability is essential for business operations, and compensation clauses for service outages provide a financial cushion should your VoIP service drop out for any reason.
Tip: “Five nines” is a common phrase, which refers to 99.999% uptime. This uptime percentage means that five minutes of downtime is anticipated annually.
Limitations or Restrictions on Usage
Some contract agreements might have clauses that limit or restrict certain types of usage constituted as abuse. Examples include automated or predictive dialing — a questionable practice employed by telemarketers.
These restrictions aim to prevent the misuse of the VoIP service and ensure fair usage.
It’s important you’re aware of any limitations of this type to ensure your business operations comply with the contractual agreement.
Contract auto-renewal clauses mean the contract will automatically renew for a similar term and price unless terminated by either party before the renewal date. This also ensures your company’s communications are always working and never interrupted.
Be aware of your VoIP contract’s renewal policy, and it’s also good practice to review the contract terms and explore other options in the market at least three months before your contract renewal date. This allows for negotiating better terms or switching to a more cost-effective provider if necessary.
The High Cost of Multiple Communication Apps
Most modern businesses use many different applications and software to run their company, also known as their tech stack. Using many potentially outdated and standalone apps generally leads to increased expenses.
However, cloud-based VoIP services come with many features that can replace or integrate with other communication apps. This alone can lead to cost savings, enhanced productivity, and a simplified communication infrastructure. Consider the following when weighing the benefits of switching from a diverse tech stack to a centralized VoIP system.
Video Conferencing Programs
Subscription costs for video conferencing platforms like Zoom can constitute a substantial part of communication expenses. For instance, Zoom, which costs $14.99/month/user, would cost a company with a 50-person team $9,000 annually for video conferencing, something a VoIP provider likely includes as a free or more affordable extra feature.
Additionally, hardware requirements, such as headsets for optimal performance, will incur extra upfront costs.
Since many VoIP systems now come with built-in video conferencing and video calling features, separate subscriptions to Zoom and other video conferencing tools are no longer necessary.
Team Collaboration Tools
Collaboration tools like Microsoft Teams or Slack are integral for team coordination. However, the associated costs could overlap with the features provided by a VoIP system — Slack, for example, costs around $12.50/user/month.
For a 50-person team, that’s $7,500 a year.
Many VoIP services offer integrated text messaging, file sharing, and collaboration tools that can serve as alternatives to these standalone platforms. Assessing the functionalities and comparing the costs can help make an informed decision on whether a VoIP system can replace or complement existing collaboration tools.
Company Cell Phones
Some companies reimburse or subsidize mobile phones and handsets for their staff — a considerable financial burden often exceeding $50/month per user. However, such reimbursements are more of a perk than the norm — it adds up, especially if someone consumes a lot of data.
Alternatively, business VoIP systems, which provide softphone mobile apps that employees can download to their personal mobile devices at no extra cost, are estimated to be just 8% of an IT department’s budget — a significant reduction for a company that previously provided cell phones and desk phones to their employees.
Operational security is paramount, especially when immediate action is required to lock down communications — something personal SMS and messaging apps aren’t designed for.
Furthermore, if employees use non-standard communications or personal messaging apps for work purposes, this can create an increased risk for HR and legal teams.
VoIP systems provide a unified communications solution with robust security features that allow for quick action in case of security threats. Evaluating the security protocols and features of a VoIP system compared to standalone personal communication apps offers insight into the level of control and security afforded by integrating communications onto a single platform.
VoIP vs. Conventional Phone Systems
With each system bringing its own set of financial implications, weighing VoIP vs. conventional phone systems extends beyond mere functionality.
Knowing how each system will impact your business is important, as this also contributes to the expenses you must consider before committing to one system or the other.
- Staffing: Traditional phone systems, such as private branch exchanges (PBX), call for dedicated staff for management and maintenance, which adds to operational costs. VoIP systems are far more straightforward and need less technical oversight, which reduces their complexity and staffing costs.
- Equipment: The costs of traditional on-premise phone systems are hefty, especially when compared to VoIP hardware. VoIP systems have far lower upfront hardware costs, leading to a more cost-effective setup.
- Infrastructure: Conventional analog phone systems rely on copper wiring, which is notoriously expensive to install and maintain. Virtual phone systems, such as VoIP, however, use internet connections.
- Switching Providers: Migrating from a traditional phone system to VoIP does come with certain costs, which include phone number porting, purchasing new equipment, and staff training. However, the transition leads to short- and long-term savings while also increasing efficiency.
- Number of Phone Lines: VoIP systems offer better scalability, allowing for easy addition or reduction of phone lines without needing hardware changes. This directly leads to cost savings, as businesses only pay for the lines they need.
- High-Speed Internet Costs: High-speed internet is a prerequisite for VoIP but not conventional phone systems. However, most modern businesses already have high-speed internet, meaning this requirement isn’t a burden when installing a VoIP system.
- Long-Distance Calling: Long-distance calling is also cheaper with VoIP due to its real-time, internet-based nature, eliminating the need for telephony networks that drive up the cost of long-distance voice calls.
- Setup Fees: VoIP setup costs are also lower than conventional phone systems. Legacy phone systems have higher setup fees due to the need for physical hardware and wiring installations, whereas VoIP systems have lower setup costs as they leverage existing internet infrastructure.
ROI of VoIP: Is It Worth It?
Now that we’ve covered what goes into VoIP phone system costs, we need to decide whether or not investing in a VoIP system is the right decision for your company’s communications.
There are many considerations to take into account, such as lower costs, increased productivity, better customer experience, improved business continuity, and operational flexibility.
✅ Measurable Cost Savings
The direct cost of one phone system over another is often the first thing to consider.
For example, a business with 100 employees looking into a robust communications platform will likely consider a cloud-based phone system, or they might wonder if it’s better to use their budget to go with an on-premises PBX. Let’s dive in.
For 100 users, Nextiva Enterprise would cost just under $39,000 in one year.
You’d get every communication feature available today, including unlimited nationwide calling, video conferencing, call recording, a toll-free number, mobile/desktop apps, SMS/MMS, voicemail transcription, and several app integrations. Plus, there’s nothing you have to install — simply adjust a few settings online, and you’re done.
On the other hand, if you go down the traditional PBX route, you’ll need to invest upfront in technology and spend a non-trivial amount of time to set it up.
- PBX one-time costs (per user):
- Desk phones: $100
- Headsets: $25
- PBX server/hosting: TBD
- Installation: TBD
- PBX monthly costs (per user):
- Video conferencing service: $15
- Team messaging: $12.50
- SIP trunking service: $14
- PBX total based on 100 employees:
- One-time costs: $12,500
- Recurring costs: $4,150 ($49,800 annually)
All in all, a PBX will set you back over $62,000 in your first year, not including the IT expertise necessary to set it up and maintain it.
It quickly becomes clear that a complete VoIP solution like Nextiva is far more cost-effective than a traditional phone system. In the example above, Nextiva saves you over 60%, excluding taxes/fees.
Besides the cost savings, there are other areas to see the upside of VoIP.
✅ Enhanced Team Productivity
Integrating your phone system and other business applications streamlines workflow, which enhances team productivity.
Moreover, VoIP supports remote work with advanced features, making it an indispensable tool in today’s modern, flexible work environment (in which more than 4.7 million people are now working remotely).
✅ Better Customer Experience
High-definition call quality and flexible call routing are hallmark features of VoIP, which result in an improved customer experience.
Seamless integration with your CRM software and other key customer data platforms enriches customer interaction, making every communication more insightful and effective.
Likewise, if customers or partners call an employee and they’re not available or it’s after hours, calls can be forwarded to a preferred destination — even your cell phone.
✅ Increased Business Continuity
In the face of unexpected outages, the quick rerouting capabilities of VoIP ensures that business communication remains uninterrupted. High uptime is often part of the service-level agreements with VoIP providers, affirming a reliable communication backbone for businesses.
Nextiva has eight redundant data centers located across North America. This means your team has ultra-high reliability and accessibility, as well as superior call quality. In addition, the network is actively monitored to ensure nothing stands in the way of you talking with your customers.
✅ More Operational Flexibility
VoIP not only supports remote work but also facilitates global expansion by unifying communication across geographical boundaries.
And if you decide to forego the office building, there’s not a massive undertaking you need to do to maintain reliable communication. Desktop, mobile, and web apps keep everyone connected.
The digital call recording, storage, and easy access to call logs provide an operational flexibility for modern businesses need to scale effectively.
See the ‘Out-the-Door’ Cost of VoIP
Switching to a VoIP phone system is a smart step towards updating your business communications to match today’s digital needs. It’s both an investment and a cost.
VoIP pricing doesn’t have to be complicated. Think about your needs today and where your company is going.
How do you envision the best way for your team to communicate?
…It’s probably not using a patchwork of various tools.
Instead, opt for a unified communications solution like Nextiva and focus on serving your customers.
You could follow our theoretical pricing guide, or you can find out the actual costs for yourself.
A VoIP expert will work with you to suggest the right plan and devices that fit the way you want to work. And you’ll know the “out-the-door price,” including taxes, fees, and everything else that applies to your specific needs.