How are VoIP Calls Charged?

One of the primary reasons for upgrading to VoIP from regular landlines is the cost savings. This is true for both consumers and enterprise users, although businesses are going to experience savings of much greater magnitude. The reduction in cost can come about from a number of factors including lower call charges, no monthly contracts, no service fees or hidden charges, no need to purchase expensive hardware etc.

The most immediate impact is had by the lower call charges which represent continuous savings and not just a one time discount. With VoIP, call charges can be as low as free for certain types of calls (domestic calls) and a very low price per minute for others (usually long-distance calls). If you don’t understand how VoIP works, it is easy to dismiss the price difference as being too good to be true. How does it make business sense for VoIP vendors offer free calls?

How VoIP Calls Work

Since traditional calls travel over copper lines – that cannot handle any other type of traffic – phone operators and carriers have to build the infrastructure to each individual house. They then charge for calls at a particular tariff to pay for the infrastructure and the services provided.

VoIP on the other hand travels over the existing data network – in most cases the Internet. The Internet connection is already paid for by the user who makes the payment to the ISP. The VoIP provider does not have to build the individual Internet connection to each customer. This is how most VoIP calls (specifically domestic calls) become free as a provider does not have to pay any termination charges (if the entire call travels over the Internet) or recover infrastructure investments.

However if any portion of the call travels over the PSTN, termination charges will have to be paid by the vendor to other entities in the telecom web. So some calls have a charge but typically these will be lower than the corresponding PSTN rates.

How VoIP Calls are Charged

For Consumers

The service portfolio and business model for consumers and enterprises can differ considerably which can be seen in many other industries as well. Individuals and households generally do not need all the bells and whistles required by organizations so individual call charges form the bulk of the monthly bill. There are multiple approaches utilized by vendors when it comes to charging for VoIP calls.

One popular model is very similar to how phone carriers charge for landlines. The phone bill may consist of a monthly service fee, a limited number of minutes included in the plan and any charges for any additional minutes used. Alongside this, there are also many VoIP plans which include unlimited calls for either domestic or long-distance (for a few selected countries). This type of plan is very useful for families that have relatives abroad as they don’t have to worry about the number of minutes.

Another way that vendors utilize for billing is to sell consumers the hardware for making VoIP calls but there are no charges for the actual calls. It means the consumer pays a set amount up front for the adapter/VoIP box and then all calls made from that number are free. This is a variation of the unlimited calling plan and especially suited for those who regularly make a lot of calls.

For Enterprises

Enterprise grade services can also have different types of call charges and billing plans. Call charges itself can be of two types – pay-as-you-go or unlimited plans. These are pretty similar to consumer plans and which option to select depends entirely on the requirements of the organization. Companies that have consistently low volume may prefer pay-as-you-go plans while others may opt for unlimited because they have a call center or they estimate demand to increase in the near future.

Apart from this, some vendors charge on a per seat basis i.e. the more number of uses you have, the more you pay. Under this business model, it doesn’t matter if you use all the features or none. The total charges depend entirely upon the number of employees/users/seats. Others put no limit on the number of users but instead offer features in multiple tiers. The lowest and most basic tier may even be free or extremely inexpensive but it will not have many of the more advanced features that businesses are looking for.

Additional features may be added on an individual or bundled basis. So for instance, visual voicemail may incur an extra charge but this feature will be available for all users on the network. Feature bundles may also be offered where a number of related features are offered at a particular price together. An organization that wants these features can simply opt for whichever bundle they require.