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Business Case for VoIP

excerpted from VoIP for Dummies, Avaya Limited Edition 

Saving Money with VoIP

One of the big “aha’s” with VoIP is that companies can enjoy an immediate cost-benefit with their regional toll and long-distance voice and videoconferencing charges. Prior to VoIP telephony, everyone was critically dependent on POTS running over the PSTN with no other options for their telephone needs. That is why the majority of companies today have POTS-related systems in place.  

No more leasing POTS lines 

But VoIP is changing this because there are several disadvantages to companies that use POTS-PSTN when compared to VoIP telephony. POTS-related lines are leased from the local exchange carrier, which can incur added expenses. 
For example:   
  • Each line usually has a nominal startup charge
  • Each line has a monthly recurring charge known as the access cost
  • For every POTS line, the company must pay monthly recurring usage charges for local, regional toll (includes intralata and intrastate), and long-distance (interstate) services 
All recurring service charges are based on a rate per minute per line basis. For example, a company on the average may pay $0.10 to $0.64 per minute for its intralata carrier services. (Intrameans within the same LATA but outside of the local calling area. LATA means Local Access Transport Area.) It may sound like it is a trifling kind of cost factor. When you add up all the minutes from every line in operation, however, the cost each month can frequently get into multiple 6 and 7 figures. This is more so the case when your company has multiple locations that cross intralata boundaries within the same state.  

Some say that VoIP does not really save a company much on toll charges. Nothing could be further from the truth. Usually they do not consider the hidden recurring cost factor. This secretive cost factor is the intralata, regional toll (also known as local toll) cumulative charges that their company suffers from on a monthly basis. Some may lump all toll costs into the category of long-distance, which is another mistake. 

If your company has significant intralata toll minute volume in the aggregate (all minutes multiplied by all POTS-PSTN lines), you can reduce or eliminate these charges by converting to VoIP.  

No more extra regulatory fees 

There are other POTS-PSTN related monthly regulatory fees. These are charges that go to various government entities versus to the Local Exchange Carrier (LEC).  These fees are based on a percentage of each line's monthly access cost.  They include: 
  • The Federal Line Surcharge 
  • 911 fee 
  • Other charges depending on the location of the POTS line 
These charges are based on a percentage of the monthly per line access cost, but before you draw any conclusions about these costs being nominal, add up the number of lines and the total cost. Depending on where all of your locations are located (that is, which LATAs), these regulated fees vary somewhat. But if you add up the total line access costs and take about 4 to 7 percent of your total monthly access costs, you can get a close estimate. 
With VoIP, you pay regulatory fees for your dedicated network transports, but you already pay these in support of your computer data network. VoIP runs over your packetized computer network, so you have no more added regulatory costs for VoIP telephony or videoconferencing. 

No more charges for calling features

With VoIP your company gains many more features, several that run over the network, and your call feature costs go to absolute zero. 
With a POTS line, the Local Exchange Carrier (LEC) charges for calling features are added uses of the POTS line beyond simply making telephone calls. These features include options such as voicemail, call transfer, and call forwarding. Sometimes these features are priced out individually (a la carte), and sometimes the LEC will bundle features for a discounted price. 
Most companies use an internal telephone system, so call features are a moot point; their system can usually provide most if not all POTS-related call features. However, with pure POTS and CENTREX line models, call feature costs are highly relevant to the company’s monthly telephony bill. Remember that features are priced out based on the individual line. If your company has hundreds or thousands of lines, the overall cost for all features for all lines can be astronomical.