Hosted IP PBX Systems: The Fine Print Behind “Unlimited”

By Rob Wolpov, President, Junction Networks

robwolpov.jpgMany small-to-medium sized companies have looked at their business phone service options and chosen the hosted IP PBX route. There’s a compelling argument for this updated, functionally richer, VoIP take on Centrex, and it starts with no capital expenditure, no maintenance, and lower telco costs. (Before the “cloud”, Centrex was the original “pbx in the network” offering of the local phone company, using the switch in their central office, just as if it were a PBX on the premises.) With an IP-based desk phone or softphone, employees in one location or many can answer the same main number, be reached by extension dialing, call one another for free, have an auto attendant, use an employee directory, and transfer calls among extensions, just as if their phones were physically attached to the same switch in the same physical office.
But as with all things, the customer needs to understand the details.

The great majority of such services offer what they call “unlimited” extensions, for any price from $29.95 to $49.95 per month. What buyers should realize, however, is that it’s not the “extensions” that are unlimited; it’s the minutes of calling. Every additional extension costs another $39.95 per month on average. And at a typical domestic VoIP rate of 2.9 cents a minute, it takes an extension 1,378 minutes of phone time, or 23 hours a month, to rack up a $39.95 bill.
Unless they’re call center agents or help desk technicians, few employees actually spend over an hour a business day on the phone. In fact, most hosted PBX service providers take pains to make sure that their customers are not call centers, precisely because they know they’ll get the short end of that “unlimited” deal.
For the same reason, the great majority of SMBs are better served by choosing a host that charges per minute of usage. At least one such provider charges a base fee starting at $39.95 per month that buys the complete package of PBX calling features, and actually does offer an unlimited number of extensions at no additional cost.
To understand all of the factors that SMBs should consider, look at, an e-commerce business based near Dallas that sells naturalistic, artificial Christmas trees. Bill Quinn, the company’s president, saw his annual phone bills go from $4,370 to $1,758 when he switched in June 2008 to Junction Networks’ OnSIP hosted PBX SoHo plan for $39.95 a month plus usage. His previous provider, Centric Voice — which went out of business in May 2009 — offered an “unlimited” plan in the typical all-you-can-talk sense.
The flat-rate provider’s bet; the spreadsheet’s proof
“Whenever I talked to that service [Centric Voice], they’d say, ‘You’re not going be a call center, are you?’” Quinn says. “When you buy an unlimited package, the service providers bet that you won’t use more minutes than their wholesale costs buy for that flat amount.” As it is, the old provider charged him for “overage” in his busy months of November and December. “Really irritating,” says Quinn, “Since we’d been significantly under for January through October.”
Quinn’s experience shows how savvy business owners can avoid a raw deal.
“When I told Mike [Oeth, Junction Networks CEO] that I didn’t like the idea of paying per minute, he said, “Bill, why don’t you whip yourself up a quick spreadsheet and compare?” Quinn says. “People are averse to paying by the minute until they sit down and do the math. But for us to have merely broken even on a traditional flat-rate plan compared with pay-per-usage, we would have had to have been a year-round call center.”
As it is, Quinn says, the monthly costs with OnSIP are lower even in his busiest months, compared with the prior provider’s per-seat charges.
It also makes more sense to pay by usage in this weak economy, when the volume of business (and hence, calling) is likely to ebb and flow. Ditto seasonal businesses, such as Also, businesses should avoid contracts that require them to keep extensions. Instead, they should be easily dropped or added without fuss or cost, and even without provider assistance.
Buy your own standard SIP phones; they’ll work with any provider
Businesses also should avoid getting their phones from their service provider, which hide that cost in their pricing or require two-year contracts to justify the subsidy, as wireless carriers do. Businesses can easily buy SIP phones that work on any SIP-compatible service for $75 to $150 and simply attach them to the router with Ethernet cable available anywhere. Employees who frequently telecommute or spend their workday in the field can use softphones running on laptops, along with inexpensive headsets. These softphones ring and handle functions such as call transfer just like hardware IP phones.
No PBX host can offer additional DID (direct-inward-dial) numbers without charging something extra; those are costs they have to pass on and typically mark up. But under a pay-per-usage plan, the customer should be free to add conference room phones, lobby phones, and add or drop new extensions for summer interns/busy-season help ’til the cows come home. It won’t affect the bill until those phones rack up minutes of use, and if they call only other extensions, it won’t affect the bill at all because all on-net calls should be free.
Finally, paying per usage is an incentive to bring more far-flung, telecommuting and remote-office employees into the PBX fold, particularly if a good chunk of the calling traffic will be internal and therefore free. Conversely, a flat-rate, per-seat model discourages businesses from adding extensions that won’t be used much or whose usage will spike only for short, seasonal periods.
To sum up, there are SMB scenarios that call for flat-rate, all-you-can-dial hosted PBX plans, but they’re rare. If you suspect that your employees spend enough time on the phone to take advantage of that pricing model, do a spreadsheet comparison with your average monthly call minutes per user and a 2.9-cent-a-minute rate to check. But it’s fair to say that if a provider wants to stay in business, it will find ways to charge such talkative customers a good deal more than $39.95 per seat per month. For the rest of SMB hosted PBX customers, paying only for the minutes they use makes more sense.
Rob Wolpov is president of Junction Networks, provider of the OnSIP business VoIP service.