Pay Per User vs Pay Per Minute: VoIP Pricing Explained

There are two common models in business VoIP pricing: 1) pay per user and 2) pay for minutes. These VoIP pricing structures can lead to drastically different costs depending on your number of users and how much your team actually uses the phone. That’s why it’s critical to evaluate whether a pay-per-user or pay-for-minutes model makes more sense for your business. For most organizations, paying for minutes is more cost effective. But why?

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

Most businesses are made up of multiple teams, from developers to sales, and each role has very different phone usage 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 salesperson might use around 1,000 minutes per month, while someone in accounting may not spend even 100 minutes on the phone in the same period.

In a typical business, average phone usage per employee is about 400 minutes per month.

When all usage is combined into a single pool of minutes, it becomes much easier to see where cost savings come from. Once you run the numbers, it becomes clear which VoIP pricing model is actually more cost effective.

This is also why it’s often difficult to find detailed usage information on a traditional 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 who rarely use the phone, while still giving everyone access to a phone line. 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 often used to make customers 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 appealing, but it almost always comes with important caveats. 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 VoIP 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 limitations of traditional phone systems is the lack of self-service control. 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 is instant, self-managed, and doesn’t come with additional user fees. 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.

When evaluating business phone systems today, most out-of-the-box VoIP solutions charge per user, with Telzio being a notable exception. 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 typically used by larger enterprises with highly specific communication and integration 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?

Here's a video explaining more about usage-based VoIP pricing from Telzio.

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

Telephone service functions like a utility, similar to water or 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, with a per-user pricing model, most businesses end up paying for more capacity than they actually use. 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 a legacy pricing model that has persisted even as cloud-based VoIP technology evolved. 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.

From day one, Telzio’s founders set out to break long-standing pricing habits in the VoIP industry. 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.*

Related: Cost Benefits of Switching to VoIP (with infographic)