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Monday, July 23, 2007

VoIP: Counting Up the Cost Benefits

By using VoIP (voice over Internet protocol), companies immediately save money on toll charges. Also, you don't pay any additional per-line feature charges because VoIP runs on your computer network. Regulatory fees, surcharges, and taxes are applied on a per-line basis. As you reduce the number of lines, the line-cost and recurring charges go with them.

Reducing or eliminating phone lines

If you can eliminate one or more of the lines that you lease from the carrier, the call feature charges, the regulatory fees, and the taxes are also eliminated. Reducing the total number of lines really makes a cost difference. In the plain old telephone service/public switched telephone network (POTS/PSTN) way of doing telephony, you get additional lines as you need to increase your capacity. In the VoIP way, you can upgrade your bandwidth on your dedicated line to increase capacity.

There are several disadvantages for companies that use POTS/PSTN rather than VoIP telephony. POTS-related lines are leased from a carrier. Just leasing a single line incurs added expenses. For example:

  • Each line usually has a nominal startup charge.
  • Each line has a monthly recurring access charge.
  • For each POTS line, the company must pay monthly recurring usage charges.

All recurring charges are based on a rate per minute per line. When you add up all the minutes from every line in operation at each of your company's locations, the monthly costs can soar.

Taking off your add-on charges

Traditional phone service normally includes costs that apply to every single line you lease. Just like any other service, traditional telephony lines and services are taxed. Depending on your location, you could have one or more taxes in addition to all the other monthly charges. Taxes are based on the total cost of your line access and other services. For instance, for each line's total service cost, you can add the following taxes to the bill:

  • Federal tax (about 4 percent)
  • State tax (varies by state but the average range is 5 to 7 percent)
  • 911 emergency surcharge fund (flat rate of $1 per line)

Taxes obviously affect your bottom line. VoIP, however, doesn't come with any taxes or surcharges. VoIP is unregulated and operates over your existing computer network. Therefore, taxes don't apply to your monthly bill.

Deregulating your telephone costs

POTS/PSTN lines and services also involve other monthly regulatory fees. These are charges that go to various government entities. These fees are based on a percentage of each line's monthly access cost:

  • Universal service fund (3.5 percent)
  • Interstate access surcharge (20.9 percent)
  • Telecommunications relay surcharge (0.1 percent)

These charges are based on a percentage of the monthly per-line access cost, but before you draw any conclusions about these costs being nominal, add up the number of lines and the total cost. Depending on your location (especially if you're a multi-site business), these regulated fees will vary. For a corporate customer, if you take about 4 to 7 percent of your total monthly access costs, you can get a close estimate. If you're a consumer, these add-on fees can be as high as 20 percent of your total monthly telephone bill.

With VoIP, you pay regulatory fees for your dedicated network transports, but you already pay these in support of your computer data network. VoIP runs over your packetized computer network, so you have no more taxes, add-on costs, or other regulatory costs for VoIP telephony.

Using free call features

Calling features include items such as voice mail, call forwarding, call transfer, return call, and three-way calling. Traditional telephony requires you to pay a monthly charge for call features. These add-on charges may not apply equally to all the lines you lease because the features are optional.

Some call features are so popular, many people think they're a part of the telephone service and are expected to come with the access line. Voice mail, for instance, is considered an essential with any telephone, but you still have to pay the carrier $7 to $9 per month per line. If you use the popular call-return feature (*69), you can pay $1.00 to $1.50 for each use.

You can reduce the total cost of call features by setting up a bundled plan with the carrier. However, you don't have to add any call features to any line; they're truly options like a moon roof or climate control in a car.

VoIP comes with the usual call features that you have to either bundle with your traditional lines or pay à la carte per line as you use these features. But with VoIP, you don't need to worry about the cost of call features; they're all included at no extra cost.

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