In this guide, we'll break down the full cost of VoIP (Voice Over Internet Protocol) and everything you need to consider along the way. Because VoIP is a modern phone system, it is always capable of saving you money as compared with older, legacy phone systems.
That's because commercial phone services with large-scale efficiencies are able to lower phone service costs for customers. Yet like a lot of information technology services, the costs around VoIP vary. It all depends on the exact choices you make when you buy.
For customers, there are a lot of factors to consider when choosing a VoIP provider:
- The reliability of the company
- The level of customer support you will get
- Ease of use
- Overall features and benefits
Cost remains one of the most important factors. Here's the real cost of VoIP - let's learn how it can save you money.
How Much Does VoIP Cost?
Depending on your VoIP provider, VoIP packages generally have two types of costs: a monthly line rental fee, and costs for your usage. In other words, you will pay a monthly fee to access the services of your provider and may pay additional charges for the outbound calls that you make.
Some providers can also include call packages, giving you a certain number of minutes or even unlimited calls at a monthly fee. At Nextiva, we have three packages for line rental, none of which charges additional monthly fees. Our most basic package includes top essential features, such as:
- Cloud PBX - An easy way to manage your phone system online, setting up new users and redirecting calls at a tap of the mouse.
- Free local and toll-free number - No need to pay extra for number rental, it’s included.
- Voicemail to email - Missed a call? Nextiva will automatically notify you of a voicemail in your email inbox.
- Shared call appearance - Easily display an extension on more than one phone so you can pick up calls on behalf of someone else.
The beauty of VoIP is its many available advanced features. Customers who have more demanding telephony requirements can upgrade their Nextiva packages to include features such as:
- Call me now - Someone browsing your website can click a link to initiate a call via your Nextiva system.
- Conference bridge - Connect multiple callers into the same live call for easy collaboration
- Call recording - Essential in some business VoIP settings, pick the top Nextiva package and you’ll get call recording included.
- Professional greetings - A professionally recorded greeting for incoming calls creates a great impression and is included in the top Nextiva package.
A More In-Depth Look at VoIP Costs:
We’ve given you a basic introduction into the costs of VoIP, but it is worth taking a closer look at what exactly VoIP costs, and at the sources of these costs.
Sometimes it’s possible to keep costs down by managing these individual costs. Regardless of strategy, you will almost always find that VoIP comes out cheaper than traditional telephony. Let’s look at the individual cost factors of VoIP.
Number of Users
Many technology services are billed based on the number of active users, and that is the case for VoIP, too.
Here’s a breakdown of a VoIP user:
- VoIP users are not calculated by the number of employees that use the phone service. Instead, it’s calculated by the number of lines you need open at any given time. So if you have a maximum of 10 customers on the phone at any given time then you’ll need 10 users.
- Sometimes a user can have their line live and online on two physical phones, one at home and one in the office. That is still one user.
- The easiest way to think about VoIP users is to think about individuals: each person needs a phone line, and they count as a user.
Every VoIP provider will provide pricing based on the number of users. You will pay more per user for a lower user count (such as 1-4 users), whereas 100 or more users will be cheaper per user.
For example, here is the pricing breakdown for the Business Communication Basic Suite:
For many companies, the number of VoIP users will be roughly in line with the number of full-time equivalent staff.
VoIP Features You Need
Your VoIP service will determine your pricing. Most providers (including Nextiva) offer a couple of options, depending on which features you require. The following features are musts, and should be included in any VoIP system:
- Call from any device - You need the flexibility to add users to a choice of hard and softphones, including mobile phone apps.
- Top reliability - Look for a partner that has an enterprise-grade platform with several points of presence and carrier-grade data centers with high up-time.
- Easy management - Ideally, you need to be able to manage users, VoIP numbers, and call activity with a single click using an online portal.
- Cost-effective - Your VoIP solution must save you money. A Nextiva VoIP package, for example, will cost you a lot less than buying and running a traditional phone system.
- Customer service - A good VoIP provider will have an in-house team that can help you with customer care requests, including a toll-free line for easy phone support. At Nextiva, we take pride in providing the industry's best customer service. In fact, we've won numerous national awards for the Amazing Service® we provide.
The above features are all essential, but many companies need more from their phone systems, and that’s why VoIP providers usually offer optional extras. It’s worth thinking about these extras and working out how advanced features can contribute to the bottom line of your business. Some of the more popular optional features you should consider include:
- Number management - Customizing the use of numbers is a great feature, including assigning multiple numbers to one user. Hunt groups where an incoming call rings multiple handsets are also valuable in many situations.
- Conferencing - Often, it’s much easier to collaborate over the phone via a conference call compared to email ping-pong. That’s why call conferencing is a popular additional add-on for many VoIP users.
- Voicemail to text - Automatically converts voicemail into a text message or an e-mail so you don’t have to ring a voicemail number to hear a message.
- Call queuing - You don’t want to lose incoming sales calls to voicemail, and call queuing lets your keep customers on hold, including estimated waiting time.
- Virtual extensions - You can set up a forwarding number so that inbound calls to your VoIP system is redirected to a fixed line or a mobile phone.
- Call recording - Saving recordings of calls can be very helpful from a customer service viewpoint, including for training. Some businesses are also required to record incoming and outgoing calls for regulatory purposes.
- Web integration - Want to make it easy for your customers to get in touch? Add a call-me function to your website which automatically generates an outbound call from your VoIP system.
A huge benefit of VoIP is that is the ease of upgrading and changing plans. You are not tied to equipment stuck in a rack that is expensive to upgrade. Instead, VoIP customers can simply request a feature upgrade from their provider and quickly enjoy the more advanced feature set they need.
Length of Agreement
Contract length is one of the cost factors for VoIP. You are likely to be offered a lower price if you can commit to a contract period (12 to 36 months, for example). The longer your contract, the lower the price.
Yet many companies would prefer the flexibility of a month-to-month contract, and most VoIP providers will offer a monthly contract but at a slightly higher price. If your company is new to VoIP, you might want to just dip in with a month-to-month contract, but longer contracts are almost always more cost-effective.
Prince Rich of Rich Technology group explains contract length and all the ins-and-outs of VoIP contracts in his video below:
For larger companies, you might want to specify must-have features and budget within a VoIP RFP and see if the VoIP provider can meet them.
If your company is switching from a traditional phone system you will need to budget for the costs involved in switching. Internet phones work differently than standard phones; instead of converting speech to analog audio and sending it along a wire, VoIP uses the internet. A VoIP phone converts audio to digital data and sends it over the internet.
You can either buy new, SIP-enabled VoIP phones or add an adapter to your analog handset. This is called an ATA adapter/VoIP adapter.
Keep in mind that VoIP phones are more advanced and can give you a lot of features over and above what an analog phone can provide, including:
- Fast and easy linking to a VoIP provider
- Ability to handle as many as 16 lines simultaneously
- Full-color LCD screens for easy call management
- High definition voice capability
- Built-in web applications
- Video conference capability
Your business may not need all of the advanced features, but don’t choose the most basic handset just to save money. Evaluate which features would be most useful for your business and invest in capable equipment even if it means your VoIP phone price is a little higher.
Finally, if you are switching from another VoIP provider to Nextiva you could probably keep your current SIP-enabled handsets. Nextiva can unlock 90% of handsets used by other providers, so you don’t have to buy new phones just because you switch to a cheaper and better VoIP provider.
How Much Does a Softphone Cost?
One of the great things about VoIP is that it no longer ties you to physical handsets connected to a physical line. This dramatically reduces your VoIP phone system costs. With VoIP, you can use a “softphone,” which is just an app that runs on a PC, Mac or mobile phone running iOS or Android.
|Straight-forward device built with 100% focus on delivering quality calls. Excellent echo cancellation.||Based on the audio quality of the device being used (PC, mobile device, etc). To ensure optimal performance on any device, we recommend using a headset.|
|Always on and always available, not affected by power cuts.||PC or mobile device needs to be switched on. Power cuts and battery loss can be a problem.|
|Physical phones never turn off, they are always live.||
A PC can go into sleep mode, in which case inbound calls won’t be noticed.
Ease of Use
|Everyone knows how to use a phone, no learning curve. Easy configuration.||
Functionality can be difficult to find if the user is not familiar with the softphone. Configuration can be tricky.
|Supports emergency calls.||
Needs specific configuration and setup.
|Meets regulatory safety requirements.||
Does not meet regulatory safety requirements.
VoIP vs Conventional Phone Costs
VoIP systems cost is typically less than conventional telephone systems for a wide range of reasons. Costs savings step in due to a mix of the improved efficiency and the technological advantages that VoIP brings.
Choose the wrong VoIP provider and your VoIP experience may be costly. But for most businesses partnering with a good VoIP provider will lead to savings. Let’s look at the areas in which you can expect to save.
VoIP can help you save from a staffing cost perspective for two reasons:
- PBX experts - With VoIP, you eliminate the need to employ technicians that can manage a traditional PBX. These specialized workers can be expensive. VoIP systems have much in common with internet technologies in a broad sense and can be more easily managed by your existing IT team compared to a proprietary PBX system from a telecoms supplier.
- Secretaries - Your receptionist may be commanding a salary as high as $45K per year. Your business can replace much of a receptionists’ daily duties by using the auto-attendant features built into VoIP services. Your receptionist can be repurposed to a different team such as sales or marketing instead.
VoIP simplifies your telecom hardware arrangements; there’s no need for extensive on-premise hardware such as a IP PBX kit when you use VoIP. In fact, with VoIP in the cloud, all you need are handsets. VoIP brings a number of equipment-related cost savings:
- Ditch the PBX - A classic PBX is an expensive piece of equipment that is proprietary to the telecoms systems that you use. You can’t repurpose a PBX for another purpose, it is simply an expensive piece of kit that is unique to your business phone system.
- Service and maintenance - Losing your on-site equipment means you don’t need to maintain it saving you the costs involved in regularly updating and upgrading on-site equipment. It can be especially hard to find parts and services for older systems.
- Small businesses save - Start-up costs are a big issue for many small businesses. VoIP helps small businesses save because a business can set up with a fully functional phone system without the initial, expensive outlay typically associated with phone systems.
Wiring does not always come to mind as a cost concern, but internal copper wiring can be a major cost factor for both traditional POTS and PBX systems. Your traditional phone system will utilize a pair of twisted wires to carry the analog phone signal. This means each desk that requires a landline phone also requires a dedicate wire leading to that desk.
The copper wiring requirements of a traditional PBX can quickly add up to serious costs when you move premises, or if your company goes through a reorganization.
Because VoIP utilizes internet technology, you don’t need to install an additional set of wires or rely on PSTN networks to enable your phone system. VoIP simply uses the internal company network already in place. If your company has PCs connected to the internet, you can connect to VoIP without installing any wires.
It is also worth thinking about the equipment costs involved with switching from VoIP. There is good news here: your business can switch to VoIP with almost no outlay whatsoever. Cloud VoIP systems do not require special equipment on your premises because all of the equipment is hosted by the provider.
You can start using VoIP in your business as long as you have a computer with a soundcard. All you need is a cheap headset. You can also utilize your existing handsets. Just buy a cheap ATA adapter for each handset.
Number of Lines in Use
One key difference between VoIP and traditional PBXs (i.e. traditional system) is elasticity and scalability. A traditional PBX requires you to have a physical circuit for every extension.
If your company buys a system with capacity for 50 circuits it will find it extremely expensive to upgrade to 200 circuits at a later time. VoIP is different: upgrading from 50 lines to 200 lines simply means you need to upgrade your internet connectivity. It is much cheaper and quicker to scale with VoIP than it is with a traditional PBX.
High Speed Internet Connection
As much as VoIP is incredibly easy to switch to there is one important factor that businesses shouldn’t ignore. The quality and reliability of VoIP facilities rely to a high degree on the quality and availability of your business internet connection.
Most businesses already have high-grade internet capabilities, so the connectivity requirements of VoIP rarely pose a problem. Nonetheless, businesses should ensure their internet connectivity is suited to VoIP and make sure they implement solid network management principles.
Long Distance Costs
Call costs are always a major factor with telephony. Fortunately, VoIP offers a few twists on the subject of call costs. VoIP rates actually lead to cost savings.
- Long distance calls - Your telecoms provider may be charging you very high rates for long distance and international calls. In comparison, many VoIP providers either offer very low rates on long distance calls and international calls or simply include these calls in their plans.
- Call origin and time - With VoIP, the origin of a call is of less importance when it comes to pricing. Nor does the time at which a call is made typically affect the price of the call.
Finally, the setup fees for VoIP is generally low. This is because your VoIP service provider does not incur high costs when it sets up a new customer. Setting up a new VoIP customer is just a matter of configuring the software back-end of a VoIP system. It’s done with the click of a mouse.
Because VoIP setup is so simple many providers waive setup fees as part of VoIP prices. If you choose Nextiva as your VoIP partner you won’t be charged any setup fees whatsoever. We also provide you with full access to our support team, user resources, and training videos.
Calculating Total Cost of Ownership
Any technology solution should be viewed from the point of the total cost of ownership, or TCO. This counts for the costs of VoIP phone systems too. TCO is important: though individual cost aspects can appear comparatively low, the overall cost of a solution can be higher than it appears at first - once a TCO calculation is done.
Calculating the TCO of VoIP is, thankfully, easy. You need to include the following factors when you add up the costs of VoIP phone systems:
- Monthly line rental fees for each user
- Any increases in charges for an improved internet connection
- The cost of calls
- The cost of feature-rich handsets
It makes for a simple calculation, much simpler than a traditional phone system where you would need to factor in ongoing maintenance costs, system migration costs, and much more.
Conclusion: How Much Does VoIP Really Cost?
The combined cost of a VoIP system is much simpler than the cost structure of a traditional analog PBX system. Not only is the cost structure of VoIP simple, it is also much lower for most businesses.
That said, achieving a low-cost structure to a large degree depends on your choice of VoIP partner. You need to choose the right partner to enjoy the desired combination of low costs and good service.
Consider signing Nextiva as your VoIP partner. Nextiva is a highly experienced VoIP provider that has been serving the telecoms requirements of businesses for many years. Contact us to find out how we can deliver cost-effective and reliable telecoms solutions to your business.
Cameron Johnson is a market segment leader at Nextiva. Along with his articles on Nextiva's blog, Cameron has written for a variety of publications including Inc. and Business.com. Cameron was recently recognized as Utah's Marketer of the Year.