How VOIP Service Providers Determine Their Billing Rates

By: Chuck Parrish

Billing systems used by internet telephone providers fall into two main categories.

The first category is very similar to that of wireless phone providers, with a monthly fee based on the amount of usage. The second category is similar to prepaid wireless providers, with credits or minutes of calling time purchased in advanced.

This article will briefly discuss how these billing systems work, and also discuss how billing is handled for optional features such as videophone capability and fax lines. For the purposes of this article, we will refer to the two categories as monthly and prepaid.

One important aspect of VOIP billing is the calling area covered by the plan or prepaid minutes purchased. All of the major providers have plans that allow calling to anywhere in the US or Canada. Most of the providers now offer the ability to choose an area code in another country, with that country then becoming the basic calling area.

Calls outside the plan calling area will be billed at set rates for different countries. All of the providers post lists of available countries on their websites with the per-minute cost listed for each country.

Most of the major providers that offer a complete VOIP solution conduct their billing using the monthly method. Vonage and Sun Rocket are examples of providers that use this type of billing. These providers offer a range of monthly plans.

Usually the lower cost plans have a limited number of calling minutes per month, while the costlier plans will include unlimited calling. Most providers offer features such as call ID capability, voice mail, call waiting and call forwarding even in their most basic plans.

This is one area where internet telephones have a major cost advantage over the traditional phone carriers that charge a premium for these services.

Pricing for basic plans with 500 minutes of calling time from most providers is in the range of $15 per month. Plans with unlimited calling fall in the range of $20 to $25 per month.

VOIP providers, like traditional carriers, make a distinction between personal and business accounts. Business accounts are charged a higher rate based on the assumption that business usage will be higher than personal usage.

The rich feature set of internet telephones allows providers to offer many advanced, optional services at a much lower rate than the traditional carriers. Most of the major providers furnish their customers a free PC softphone as part of their basic package. A second line with choice of area code (virtual phone number) is available from most providers for approximately $5 per month.

Dedicated fax lines can be added for $5-$10 per month, usually with a limited number of minutes per month. A 1-800 number with 100 inbound minutes is available from most providers for approximately $5 per month.

Most VOIP providers do not require a contract, but may offer a low-rate for a period of 1 or 2 years with a relatively low ($20-$30) early cancellation fee. Most VOIP billing plans are also offered on a 30-day free trial with no penalty for cancellation within the 30-day period. Also, most providers charge a setup fee, ranging from $20-$40.

The second category of providers, those that offer prepaid calling time, fall in the general range of .03 to .05 per minute for calls made to locations inside the plan calling area. These minutes can be purchased in quantity on a prepaid basis, with the per minute rate decreasing as the number of minutes purchased increases.

This type of provider will usually offer a free PC softphone as a lead-in to paid services. Usually, with this type of provider, PC to PC calling is free, with the per minute cost coming in to play for calls to and from landline and mobile users. Skype and Firefly are two examples of this type of provider.

VOIP
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