As time goes on, more and more businesses are moving away from traditional landline phone systems. Landline systems are very reliable but they are inflexible and cost a lot to install.

VOIP systems have emerged as an alternative to traditional landline phone systems for businesses. A VOIP phone system can save your business time and increase productivity. 

There are a lot of factors to consider when purchasing a VOIP phone system. So we put together this comprehensive guide on VOIP phone system costs. We will talk about the costs to install a basic VOIP system and pricing for additional features. 

What Is a VOIP Phone System?

A Voice-Over-Internet-Protocol (VOIP) phone system is a type of phone system that operates through the internet rather than traditional landlines. VOIP phone systems can connect to WiFi and give you all the benefits of a traditional landline system and tons of extra features. A VOIP phone system not only lets you make regular phone calls but also

• Video chat
• Conference calling
• Voicemail
• Call-back
• Call forwarding
• Call holding
• And more

Many VOIP phone systems come as part of a comprehensive office infrastructure package that also includes email, office management tools, and more. 

VOIP phone systems have a lot of benefits over traditional phone systems. You don’t need to install a separate landline and they allow for much more flexible configurations. You often don’t even need to buy a separate connection service as you can just piggyback off your existing office internet connection. 

How Much Does a VOIP Phone System Cost?

There are a few separate costs for a VOIP system. Generally speaking, there is a fee for the total amount of extensions you need, an installation/set-up fee, and a monthly recurring fee for each extension. 

Let’s start with basic installation costs. The exact costs differ depending on the provider, but you can expect to pay between $100 to $200 for each VOIP phone.

Generally, companies also charge an initial set-up/labor charge, which normally amounts to $20-$40 per phone. Your VOIP provider may also charge between $10 to $20 to migrate existing numbers, though some providers will offer migration services for free.  

So, for a hypothetical business that has 10 employees who need phones, you can expect to pay anywhere between $1,500 to $2,000 for hardware, migration, and labor costs. 

Additionally, there is a recurring monthly charge for each extension. VOIP plans can start at as little as $10 per month per extension for cloud-hosted solutions.

But most plans will run you between $20 to $50 a month per extension. For our hypothetical business of 10 people, that comes out to anywhere between $200 to $500 a month for recurring costs. 

So, adding those costs together, the average small business with 10 employees can expect to pay about $2,000 for initial set-up and another $350 per month for recurring fees. 

Here is a table showing the breakdown of various costs for popular VOIP providers.

As you can see, the average monthly costs for VOIP services hovers between $20 to $40. Generally speaking, when you buy plans with more extensions, you get a lower monthly fee per extension. For example, you’ll pay less per extension if you get 50 than if you only get 10 lines. 

VOIP Phone Costs

Additionally, most companies provide the option to buy VOIP-enabled phones from them, but this is not always necessary. You can often buy the hardware on your own from third-party companies.

Some companies do not offer the option to buy hardware. For example, Grasshopper is a VOIP system designed to work entirely through existing mobile networks. 

Here is a table showing the average price of popular third-party VOIP-enabled phones. Keep in mind that these prices are averages and your actual costs may differ. 

You can often get a better deal from the manufacturer if you buy multiple phones at once. Costs for VOIP-enabled phones range from $50 for basic models to $250+ for advanced models with integrated features.

Strictly speaking, for an absolutely basic VOIP system, you don’t even need a VOIP-enabled phone peripheral.

All you need is a computer with a soundcard and some kind of microphone. So for example, if you run a single proprietorship, you can run your phone system through your computer instead of buying extra hardware

. This option will not be feasible for larger businesses that need more call lines. 

VOIP Phone Cost Example

Here is a hypothetical example of a business buying VOIP to illustrate the costs. Say our business has 20 employees and they choose GoTo Connect.

GoToConnect charges $19.95 per month per extension, so that comes out to just under $400 a month in monthly fees. 

Next, say the business decides to buy a Cisco 8841 VOIP phone for each employee. Assuming an average price of $80, that comes out to around $1600 for hardware.

Lastly, let’s assume that GoToConnect charges a $30 labor fee for each extension. That comes out to an additional $600 for labor fees. 

Add all those numbers together, and the cost of a VOIP phone system for our hypothetical business is about $2,600, give or take a few hundred dollars.

IN the real world, you will probably not have to buy an individual phone for each employee, so these costs are on the higher end of the scale. 

Also, you can save even more if you decide to rent VOIP phones or buy adaptors for your existing phones. Also, the larger a plan you buy, the costs scale so you are paying less per unit. 

Additional VOIP Phone System Costs

Here are some other costs related to buying a VOIP phone system. 

Adaptors

If you do not want to buy completely new phones, then you can buy an adaptor for existing phones, VOIP adaptors connect to traditional analog phones to convert the acoustic signal into something that can be transmitted over the internet. Adaptors usually cost anywhere between $60 to $80 per phone. VOIP adaptors can help you save money if you do not want to completely replace your existing hardware. 

Internet Connection

VOIP phone systems piggyback off your existing internet connection, so you only have to pay for your existing internet costs. Generally speaking, a single VOIP extension only takes up about 0.1 Mbps of bandwidth while in operation. The higher-quality your internet connection, the higher quality your calls will be. You can get high-speed broadband and fiber optic internet business plans starting as low as $50 a month. 

Long Distance Calls

Most of the time, VOIP plans give you unlimited local and domestic calls. However, you will probably have to pay for long-distance international calls. Unlike long-distance calls with traditional phone systems, VOIP long-distance calling costs do not usually depend on the origin of the call or the time the call is made.

Additional Features

Most VOIP providers have subscription bundles that give a certain number of features. You can often pay extra for additional features, like conference calling or call forwarding.

Usually, these extra services start at as little as $5 per month. Check to see if your provider offers customizable plans where you can pick and choose the services you want. 

Ethernet Ports

Most VOIP phone systems use either WiFi or ethernet cables for internet connection. If you choose a hardwired phone and do not already have them, then you will need to install ethernet ports. The average cost of ethernet installation is about $150 per port. 

Additional Phone Numbers

Most VOIP providers have an option for adding extra phone numbers. Typically, extra numbers cost around $5 per listing. Depending on your total phone call volume, having more phone numbers can be beneficial for organizing calls. 

Softphones

Softphones are VOIP phone apps that can be run on just a computer. Softphones are a good way to consolidate your hardware if you don’t want separate computer and phone systems. A softphone normally costs about $50 a month per unit, but some companies will give you a discount on softphones when you buy a VOIP package. 

Factors that Affect VOIP Phone System Costs

• A number of extensions. One of the major cost factors is the total number of extensions that you will need. Typically, additional extensions cost anywhere between $20 to $40 extra per month. A 20-employee business would probably pay about $400 for additional extensions. 

• Additional features. Basic VOIP packages include voice calling and things like call forwarding or video chat. Advanced features such as call holding, virtual numbers, conference calling, and voicemail can cost between $10 to $30 extra per month. 

• Hardware. Generally, businesses rent their hardware from the VOIP provider. Hardware costs are between $60 to $90 a month per device. You can also buy VOIP-dedicated phones starting at $200 to $300 per device. Buying VOIP-enabled hardware is cheaper than renting in the long term. You can also buy adaptors for existing landline phones to give them VOIP compatibility.
• Switches – This includes the cost of IP PBXs or the cost to IP-enable an existing PBX.
• Gateways – Often, companies require gateways for TDM-to-IP traffic, unless they’re using SIP trunking throughout the organization (which is rare still).
• Handsets/End-Unit Devices or Applications– This includes IP headphones or softphonesPB

• Hosted vs self-hosted. Most businesses buy hosted VOIP plans where they rent the hardware and service from a larger company that handles maintenance and troubleshooting. Businesses can buy a self-hosted VOIP solution, but this option is much more expensive and you have to do troubleshooting on your own. 

• Contract length. Like most contracted services, VOIP phone systems are cheaper overall when you have a longer contract length. For example, a 36-month contract will likely cost less per month than a 24-month contract.

VoIP Cost Analysis – Main Cost Determinants

In order to accurately understand the cost of a VoIP system, there are a number of variables you will need to put into consideration. Here is a basic summary of the things that will affect VoIP pricing in your business:

• Implementation – basically, companies spend about 20% more in the first two years of their VOIP deployments on the actual implementation than they would have spent in TDM. After they gain expertise, implementation costs are equivalent to TDM rollouts.
• Upgrades – VOIP requires Power-Over-Ethernet switches, and most companies provide Uninterrupted Power Supplies to provide for backup. In most organizations, upgrading LANs account for 32 to 47 percent of the total VoIP implementation cost.
• Training – Many vendors are including training with the sale of equipment. But when they don’t, companies spend between $1,000 and $5,000 per IT staff member for training, and they find the most success by training their end-users with internal IT staff.
• Management Tools – Many companies don’t budget for management and monitoring tools, which is a mistake. Acquisition costs range from free (with open-source tools) to several million dollars. On average, small and midsize businesses spend about $20,000 for each third-party monitoring tool, and large companies spend about $200,000 per tool.
• Equipment licensing and Maintenance – Vendors are shifting more to a software model in which the initial acquisition cost is lower, but maintenance and licensing are higher. Whereas vendors once charged about 10 to 14 percent for maintenance, those fees now are 16 to 22 percent.
• Operational Costs – This mainly includes the cost to manage and maintain the network from a staff perspective. In this case, you need to factor in the compensation of internal staff members devoted to VOIP, and the cost of any third-party MSPs managing the VOIP system. Also included are power and cooling costs

VOIP vs PBX Phone System

The main competitor to VOIP systems is PBX phone systems. PBX systems are not connected to a data network and instead rely on traditional landlines.

Generally speaking, PBX systems are much more expensive to use than VOIP systems, mostly because installation costs for landlines are expensive. 

The average cost for a PBX system is between $800 to $1,000 per extension. For comparison, the average cost per extension for a VOIP system is between $20 to $200, depending on whether you buy or rent hardware. 

So overall, VOIP systems are much cheaper to use than PBX systems. The main advantage of PBX systems is that they are not dependent on the internet, so you can still make phone calls when the internet is down. 

Tips for Buying VOIP Phone Systems

Pick Features Carefully

VOIP phone systems have a lot of additional bells and whistles for extra monthly charges. While you may be tempted to get as many features as you can, we would recommend sticking with the essentials, especially if you are a smaller business. For example, if you have a small business then there may be no need for virtual numbers or having multiple extension lines. Don’t pick a bunch of stuff you will never use just because it sounds cool. 

Longer Contracts 

You often get better monthly prices when you sign a longer contract. As a concrete example, NexTiva VOIP costs less when you buy for a 36-month agreement rather than a standard 12-month or monthly agreement. You can also get discounted prices if you buy more phones.

Rent vs Buy 

Most VOIP companies give you the option to rent hardware rather than buy. Renting hardware is more cost-effective in the short term. However, if you plan to have a VOIP system for more than 3 years, buying your phones and other equipment is more cost-effective. 

Consider Mobile Integration

Many VOIP systems offer some kind of mobile phone integration. Mobile phone integration is a great idea if you or your employees frequently have to go onsite for business purposes. Most of the time, you can download an app that gives a standard smartphone your VOIP capabilities. Keep in mind that most providers charge extra for this service. 

Bypassing PSTN, the Cost-Saving Solution

The process of bypassing PSTN and making IP network phone calls is commonly referred to as toll bypass. This occurs when an IP PBX or just a PBX is connected to a VoIP gateway, which is then connected to an IP network. In such a case, call traffic goes from the PBX to the VoIP gateway rather than from the PBX to a PSTN switch.

By so doing, you will end up avoiding the toll of using the PSTN. As a result of the PSTN toll rate structure, companies with numerous sites internationally are likely to see more cost savings from toll bypass than companies that have most of their locations within the United States. However, the savings as a result of toll bypassing may not be immediate or automatic.

Again, it may not be advisable for your business to transit to VoIP entirely, or all at once. The PSTN lines may still be needed for some time during the migration phase. In some cases, you may need PSTN as your main fallback network. All in all, the long-distance costs associated with PSTN usage should decrease following the VoIP implementation.

Frequently Asked Questions 

How much does a VOIP phone system cost?

Cloud-based VOIP phone systems start at as little as $10 per month for a basic plan and average around $20 a month. Costs for hardware range between $100 to $200 per extension.

Additional costs can run you anywhere between $50 to $100 a month for extra features. On-site hosted VOIP systems are considerably more expensive and can cost thousands of dollars to install. 

What features does VOIP have?

The exact features depend on the specific plan that you get. But most VOIP phone systems include the following

• Unlimited calling
• Call forwarding
• Conference calls
• Voicemail
• Virtual numbers
• Call holding
• Video calling
• Texting/chat messaging

Your VOIP provider might have even more extra features. 

Can I call any phone with a VOIP phone system?

Yes, generally speaking, you can call any phone with a VOIP system, including local, mobile, and international numbers. Some providers may limit calls to in-network phones only, so make sure you know the specifics of your plan. 

Are VOIP phone systems cheaper than landlines?

Yes, VOIP phone systems are much cheaper than traditional landlines, all other things being equal. VOIP phone systems can help you save up to 90% on your monthly phone bills. 

Can I keep my old number when I switch to VOIP?

Yes, most providers will let you keep your old business number when you switch phone plans. Your provider might charge extra for this feature. 

Is VOIP calling secure?

No system is 100% foolproof, but most VOIP systems run on the same encryption protocols as your normal wireless network. Some providers will offer additional security protections for an additional charge. 

Can I use VOIP with my existing phone hardware?

Yes, usually you can buy adaptors that allow you to use analog phones on your VOIP network. These adaptors transform the acoustic signal on analog phones into something that can be transmitted over the internet.

Can a VOIP make calls when the internet is out?

No. Since VOIP systems work through internet protocols, you won’t be able to make calls when the internet is down.

That is one major disadvantage of VOIP systems as traditional landlines can still make calls when the internet is out.

Is VOIP cost-effective?

Yes, VOIP is very cost-effective. A VOIP system can save you up to 50% over traditional landline systems. A traditional PBX system can cost up to $800 per phone line to install. Alternatively, a VOIP system will average you around $60 to $150 per extension line. 

Conclusions

VOIP phone systems are a cost-effective and more flexible alternative to traditional landline phone systems. With VOIP, you can rely entirely on your internet connection to make calls.

The best part is that VOIP systems can save you a ton of money compared to traditional landline setups.

Based on statistical findings, implementing VoIP can result in annual productivity gains of $480 per user.

With such cost savings, a business with about 50 employees can save up to $24,000 a year by switching to VoIP.

While the initial cost of implementation may be relatively high for medium-sized to large companies, VoIP offers a great ROI in the long run.

However, if you need a traditional business phone system, check out our buyer’s guide.