SIP Trunking Cost Savings Updated

In December of 2008 I blogged about the cost savings associated with SIP Trunking. The primary reason was that I had just read a column that questioned whether transitioning to VoIP/SIP Trunking could save a business 70%. It was important to me that I defend the position because it is a claim that Broadvox, bandwidth.com and other ITSPs make. The opposing article focused on the difference between long distance plans offered by TDM carriers and SIP Trunking providers. While this is usually considered the primary source of savings, that would be wrong. Long distance price reductions seldom, if ever will represent a 70% savings. The savings components consist of the following:

· Per line cost

· Usage cost for local inbound/outbound calling

· Domestic long distance calling

· International calling

· Toll-free inbound calling

· Moving from dedicated PRIs to converged T1s

Per line cost can be reduced by 60-70% for small businesses and remote/branch offices and telecommuters. The average per line cost in the TDM world is between $40-60 per month. While the per line price from Broadvox can be as low as $12.75. That can represent a 79% savings alone. When this is combined with a feature we refer to as an Extended Local Number, the remote locations and telecommuting workers have their own DIDs and E911 coverage.

Long distance calling in the United States and Canada is an often-stated major feature but the savings can be exaggerated. The actual amount depends upon the long distance package purchased or negotiated with the service provider. A simple unlimited long distance package can be purchased from an ILEC for a base amount with Canada extra. For example, Verizon and AT&T sell their long distance at 4 and 5 cents per minute respectively. Basic retail TDM pricing is around 7 cents per minutes with negotiated pricing in the 4 cents per minute range. Broadvox's highest per minute retail pricing is 2.3 cents. This offers a cost savings of 42-68% compared to basic LEC long distance pricing and 40-45% savings over a LEC SIP Trunking offering.

International and toll-free inbound calling are hard to categorize for SMBs in particular. The range of savings is dependent on usage, size of business and specific states/countries where the service is offered. Most carriers will examine the actual locations desired and develop a customized package. While we have a basic price for low volume users, enterprise customers require this additional analysis.