Truth in Advertising: VoIP Pricing Reality vs. Fiction
I’m revisiting a topic I’ve covered briefly in another post Comparing VoIP Services because I get asked all the time to explain why seemingly similar services have such different prices. Many of the industry players (some of the biggest hosted VoIP providers) make determining the cost of their service confusing on purpose. It’s like when you go buy a mattress, the retailers make it really hard to comparison shop. They offer price match guarantees to fool you but you can’t find the exact model from one retailer to the next so the guarantees are bogus. So, what is a consumer to do? Read on and get your answers.
First, let’s dispense with the idea that the POTS providers and Cable providers offer a product with comparable features; they don’t. POTS (Plain Old Telephone Service) lines offer a handful of features but nowhere near what is available in cloud-based systems like Gabbit’s CBX®. Also, if you want a truly robust phone system, you need to buy and maintain an expensive premise-based system or PBX (that clunky thing that you hang on the wall in your data closet).
Now let’s start to unravel the confusion over hosted VoIP costs. Most providers price their services by the seat or user and sell what they call UCaaS (Unified Communications as a Service). This is the first way that they get you to overpay. In the POTS world, you pay by the line. You should be asking; How many phone calls does my company make at a time? It’s rare that every employee with a phone is on a call at the same time. Most businesses use far fewer lines than the number of phones they have. So, why pay for everybody to have their own phone line? This is how you’ll overpay for VoIP service. Most VoIP providers don’t want you asking that question. You should be paying for what you need, not way more than you will ever use.
Next, providers stratify their offerings into various tiers of service but advertise the lowest possible price. They charge you based on the number of users, the duration of a contract or prepayment discount and the number of features they offer in each plan. Typically, you will find a basic feature set, a mid-level set of features often promoted as the most popular and a high-end fully featured plan. When you see advertised prices on sites such as www.voipreview.com, read the fine print! VoIP companies commonly advertise the price offered for a basic user (a.k.a. stripped-down feature set) when you pay for a year in advance and are buying more than 100 seats. Do a little digging and you’ll find that your true costs are often significantly higher. Look for the feature set that best serves your needs and then compare plan prices between vendors. You may not be able to get a perfect apples to apples comparison but you should be able to come close. Gabbit does not offer tiered pricing, we include all features in our standard price.
Another “gotcha” to be aware of is that most providers don’t include fees and taxes in their advertised prices or price quotes. Taxes in the phone service business can be quite high. Company’s must pay federal and local taxes and fees for the services they provide. This can add on average 18% to your bill. So, if you get a quote for $35 per seat, your bill will likely be closer to $42. Non-profit organizations are not exempt from these fees and taxes. Be sure to get a quote including the taxes.
Below is a table showing how different companies’ plans compare in price. These are all plans with similar feature sets. This example assumes 10 users and 4 phone lines. Most companies with 10 users rarely engage more than 4 phone calls at a time.
Cost per Seat
Cost per Line
Estimated Taxes and Fees 18%
Total Cost per Month (10 Seats, 4 phone lines)
So, when you’re shopping for VoIP phone service, compare plans with similar feature, buy only what you need and ask for a quote that includes all fees and taxes. This way you won’t be surprised when you get your first bill.