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Jennifer Chen

January 25, 2019

VoIP Pricing: Why You Shouldn't Pay Per User

In the market of business VoIP systems, there are two pricing models - 1) pay per user and 2) pay for usage. Which model is more cost effective for your business?

There are two models in business VoIP pricing - 1) pay per user and 2) pay for minutes. The two VoIP pricing structures can result in two drastically different price points for an organization depending on their user count and usage. That’s why it’s important to evaluate whether a pay-per-user or pay-for-minutes model is better for your business. For the vast majority of businesses, paying for minutes is more cost effective. But why?

Not all users need “unlimited minutes”, so you end up paying for more usage than you need.

The typical business has a number of different units, from the devs to the sales team, and they all have different phone needs. It’s safe to say that a software developer is going to spend significantly less time calling outside of the organization than say, a sales rep.

A sales person might use around 1,000 minutes per month, whereas someone from accounting might not spend even 100 minutes on the phone each month.

In a typical business, the time each employee talks on the phone averages out to 400 minutes per month.

Combine everyone’s usage into one pool of minutes, and it’s easy to see how much you might save. When you do the math, it becomes clear which VoIP pricing model would be more cost effective.

This is why it’s so hard to find usage on your phone bill. Telcos don’t want you to know what your minutes actually looks like, because that would reveal how much unused capacity you’re paying for. Ultimately, this is how phone companies drive their revenue.

WithTelzio , you don’t have to pay for users that rarely use the phone. At the same time, you can still give everyone a phone line to use.

There’s no such thing as an unlimited plan.

“Unlimited” is a ploy to get consumers to believe they can save money and call freely. We’ve all heard of wireless companies throttling customer data that’s supposed to be unlimited. Business VoIP providers have similar strategies to ensure they’re optimizing profitability.

Unlimited calling may sound enticing, but there are caveats that come with it. For one, there’s no such thing as “unlimited” usage because of what’s called a “fair use policy”, which you may be able to find hidden somewhere in the terms and conditions. Rarely will a provider give a hard number as to the limit where usage is no longer considered “fair”. Fair use is at the provider’s discretion. If they find your calling activity to be over and above what a typical customer uses, then they can suspend your service or charge you overages without notice.

The best thing you can do for your company is to compare pricing from different providers. Just be sure that the estimate that’s been provided to you is transparent and upfront with all costs. All too frequently, sales estimates don’t disclose the true cost. Once the sale is closed and the contract has been signed, your account has moved on from the sales rep onto an outsourced supporter.

Telzio’s mission is to change the industry through transparency. With Telzio, you get the same account manager from the time you are a prospect to the time you are a long term customer, and all of our supporters are in-house.

You limit your flexibility to manage your system.

One of the biggest restraints of old phone systems is the inability to make changes yourself. Everytime you would need to make a change, you’d have to call your service provider. And when the customer service isn’t always up to par, that can be a burden. Hosted VoIP systems offer more flexibility in that regard, but not when you need a new license every time you want to add a user. You want your IT administrator to have easy, remote access to manage your services, including the ability to add users.

With Telzio, adding users to your system is effortless and instant, and doesn’t cost a thing. Not only do you save on VoIP user fees, but you also save time on managing your system.

You’re paying high end retail prices, when you could be getting wholesale prices.

As you shop around for business phone systems today, you’ll see that all out-of-the-box VoIP solutions, with the exception of Telzio, charge per user. As you move farther back in the supply chain to programmable VoIP services, the pricing model changes from paying per user, to paying per minute.

Programmable voice solutions are mostly used by larger enterprises with very specific feature needs. Enterprises that have the resources to build and host their own telephony infrastructure may find it plausible to source their own minutes in some cases. They build their own PBX features and phone extensions as needed. Accordingly, programmable solutions offer more wholesale level pricing to these types of customers.

Typical out-of-the-box solutions on the other hand, bundle business VoIP features together and sell it as a packaged product to an organization, by charging a per user “license fee”. This is the most profitable pricing method, given the economies of scale for additional users on a software platform.

Related: Hosted PBX vs SIP Trunking: What's the Difference?

You don’t pay for utilities like water and electricity per user, so why would you with your phone service?

Telephone service is a utility, like water and electricity. You don’t pay per person for water and electricity at your home or office - you pay for the amount actually used.

Think of it this way - it wouldn’t make sense for a not-for-profit entity to charge a flat fee per person. It would be inefficient. Their goal isn’t to make money. Their goal is to deliver the utility responsibly. On the other hand, charging a flat fee per person would be very profitable for a for-profit entity.

To be profitable, the per-user fee that phone companies charge would have to be well over what the average person would actually consume - enough to cover their calling costs and make a healthy profit margin. The result is that you end up paying for more than you need when you pay per user. That’s the only way it would make sense for the service provider, and exactly why VoIP providers love charging per user.

You’re not taking advantage of VoIP.

Paying per seat is an old pricing model that has stuck around after the cloud became a thing. The VoIP industry players have all adopted the same antiquated model, even though VoIP technology has drastically changed the game. Paying per line used to make sense when technicians had to go out and lay down physical lines or go on-site to configure an extension. Today, you can do all that remotely and the technical cost requirements for the provider are nominal given the scalability of hosted data centers.

The founders of Telzio were adamant about breaking old industry habits from day one. While all VoIP players were still charging per user and every telecom consultant advised against a usage-based pricing model, Telzio's goal is to pass on the true benefits of cloud technology onto customers.

Here's a video explaining more about usage-based VoIP pricing from Telzio. Related: Cost Benefits of Switching to VoIP (with infographic)