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Hosted PBX

Costs

How much a hosted PBX service costs depends on the provider and the quality of the service. Higher-end business systems will cost more but will include higher-end features like ACD queuing instead of hunt groups, integrated conferencing, and real-time monitoring. Some lower-end providers that started out with simple voice-mail capabilities have now entered the market. Don't expect these providers to offer the same features as true hosted PBX systems, but if cost is more important than business functionality, the low-end systems might fit.

There is no capital outlay for PBX hardware, so the up-front cost is very low, usually made up of nothing but service setup fees. Setup fees typically vary between $50 and $250 per system. There may also be a cost for new phones. Many businesses already have cellular and/or desk phones, so sometimes this cost is not applicable.

Ongoing costs include the cost of phone lines, hosted service extension fees, and per-minute charges for incoming calls. There is no ongoing support or maintenance cost for equipment, since these tasks are done by the service provider. The cost for incoming business telephone lines vary widely, but usually fall between $10 and $20 per month, not including taxes and other government-mandated fees. Usually, a company will need one incoming phone line per employee that answers the phone. Other approaches include giving each employee a cellular phone, which they need anyway, and forgo land lines, and having employees telecommute, using their existing home phones instead of buying new phones for the office. Under these approaches, it's possible to eliminate charges for incoming phone lines.

Extension fees are monthly charges from the provider that grant access to the hosted PBX system. Each extension in a full-featured system would usually correspond to one employee. Per-extension fees start at $10 to $15 per month and usually go down as the number of extensions rises. Limited-service extensions, such as mailboxes that only take voice mail, are sometimes offered at lower rates.

Per-minute charges for a hosted service are a little more complex. A completed call to an extension owner in a hosted PBX system is really made up of two telephone calls - one from the caller to the hosted PBX system and one from the system to the extension owner. Each of these "legs" of the call has a cost to the service provider, and that cost is usually passed on to the client business. The term "two-legged billing" is used to say that per-minute charges are billed for each of the two legs of an incoming call. Recently, some providers have started to offer "single-leg billing" plans, for which the client business is only billed for the incoming leg of the call, with the outbound leg (from the system to the extension owner) having no charge. Typical rates for two-leg plans run at about 4 to 10 cents per minute, for each leg. Single leg plans are now offered for about 7 cents a minute, with lower rates sometimes available for high volume commitments. So why would anyone choose a two-leg plan? Even with the lowest rate of 4 cents per minute on each leg of a two-leg plan, a completed call would cost 8 cents in total. Usually clients who choose two leg plans do so because either their provider offers no choice or the client expects to have a lot of callers waiting on hold or going directly to voicemail. Remember that only a completed call is billed for both legs, so calls to voicemail only invoke one leg of billing. Also, while callers are on hold, only one leg is being billed. Usually, companies in which over 80 percent of calls are answered relatively quickly will save money with a one-leg plan. Still, each potential customer should check with their provider to find out what options are available and try to match their projected usage with the right billing plan.

Applying these rates to some client examples gives the following table:

Typical costs for premise-based PBX systems

	5 User System		40 User System
Up-front Costs
Setup	$ 150		$ 150
Monthly Costs	Per month	Per Year	Per month	Per Year
Telephone Lines	$ 75	$ 900	$ 600	$ 7,200
Extension Fees	$ 60	$ 720	$ 520	$ 6,240
Per Minute Charges	Per month	Per Year	Per month	Per Year
250/min/user/month	$ 106	$1,275	$ 710	$ 8,520
Total Annual Costs	Per month	Per Year	Per month	Per Year
First Year	$ 3,045		$ 22,110
Subsequent Years	$ 241	$ 2,895	$ 1,830	$ 21,960

As can be seen by comparing these costs against premise-based PBX equipment, a hosted system will cost much less in the first year of operation due to the lack of capital outlay for hardware and software. Premises equipment will cost less on a monthly basis, mainly because of the higher costs for phone lines in a hosted system. The monthly difference is small enough, however, to take years to pay back the initial cost of a hardware PBX, especially if the client company needs toll-free service.