What is a Virtual PBX and How Much Does it Cost?

What is a Virtual PBX?

In order to understand what a Virtual PBX is, it might be helpful to understand what PBX stands for and a little bit of its history. PBX stands for Private Branch Exchange, which is a multi-line phone system that is used for business communications.

A brief history of the PBX

Fans of the hit show, Mad Men might remember a couple of scenes that depict switchboard operators inside a closet-like room. That room was the hub of the private telephone system for Sterling Cooper (the ad agency for the show.) After the 1960s, manual switchboards were replaced by automatic ones, and the operators were eliminated in most places. The private branch exchange became was in an equipment closet at a business’s physical location.

In the mid 1990’s, it became possible to make and receive telephone calls over the internet through voice over Internet Protocol, or VoIP.

A Virtual PBX is a private branch exchange that exists in the cloud (a data center)

There are several benefits to a Virtual PBX system:

  • Lower overall cost than traditional phone systems.
  • Easy administration: No need for in-house IT support.
  • Advanced features such as multi-location and remote office support, voicemail to email, etc.
  • Support for mobile workers.
  • Single phone number that can ring on any device (desk phone, mobile phone, laptop,

Now that you understand a bit about what a Virtual PBX is, let’s move on and discuss how much it really costs to install a new Virtual PBX system.

What is the True Cost of a Business VOIP Implementation?

Business VOIP Pricing:

Because most providers publish pricing on their websites, potential buyers are led to believe that calculating the cost of their new phone system is as simple as adding up the number of phones and multiplying that number by the plan price.

However, nothing could be further from the truth.

There are several ‘hidden costs’ that should be considered when estimating the cost of a Virtual PBX. In order to upgrade a traditional phone system to a modern VoIP system, you will need some new equipment:

  • Telephones
  • Phone Power supplies
  • Cabling
  • Router
  • Firewall

To accurately calculate the true cost of a new business VoIP installation, you need to factor in the costs of all the equipment you need, plus the cost of labor to install your new phone system.

So, can you save money by replacing your business phone system with business VOIP service?

The answer is an enthusiastic yes in almost all cases. The savings can be 50% or more. Plus you’ll enjoy new productivity-enhancing new features.

Below, is a brief description of all the equipment needed to install a new business VoIP system, plus price ranges for each arranged from low to high.

Equipment Costs


If you are replacing your old PBX, you cannot reuse your existing business phones. Instead, you must purchase new phones that are compatible with your new phone service. Some providers rent phones on a monthly basis. The rental fee will show as an additional cost per extension or user on your monthly bill.

In most cases, renting is not a good option as you’ll end up paying far more for the phone over the term of your contract, than you would if you purchased the phones. The price range for quality VoiP phones is from $75 to $450 per phone, depending upon size, features and brand name.

Telephone Power

Unlike traditional phones, VoiP phones require their own power source.

There are two options:

  • Each phone can have a local power supply plugged into an electrical outlet
  • You can replace your existing Ethernet switches with power over Ethernet (POE), the switches and the phones can draw power from the computer system.

The cost for a local power supply is about $15 per telephone. POE Ethernet switches are sized by port and each port connects to a telephone. The cost per POE port ranges from $10 to $40.


Your old telephone system used a dedicated cable for voice. VoiP phones use the same cable as the computer. In some cases, organizations have business telephones where they don’t have a computer. Frequently this is the case with warehouses, convenience phones, etc. That situation would require new cabling to those locations. The cost per cable run is between $100 and $250.


Every company who has an internet connection has a router. The router’s job is to connect the businesses local network (LAN) to the Internet (WAN). A router is typically installed once and forgotten. Many routers in use in small businesses are old and were not designed to handle business VoiP. So the router must be replaced before VoiP will work properly. The cost for a router for small business ranges from $150 to $1,000, plus installation.


Every company who has an internet connection has a firewall to keep the network secure. Much like the router, a firewall is typically installed once and forgotten, and most are not business VOIP-ready. The cost for a new firewall ranges from $150 to $1,000, plus installation.

Typical VOIP Implementation:

Setting up a new business phone service takes a considerable amount of labor. Most of the work can be done by the VoiP provider, but since many VoiP providers sell nationwide, they don’t offer local installation but rather leave it to the customer

Installation tasks include setting up phones, designing the automated attendant, setting up call flow, moving your telephone numbers to the new service, and finally, training employees how to use the new phones and features.

Implementation costs can vary widely depending upon the VoiP provider and the amount of work done by the customer.

ItemLow $High $
VoiP Phone$75$500
Phone Power Supply$15$20
POE Ethernet Switch$12 per port$50 per port
Cabling$100 per cable$250 per cable
ImplementationFree$50 per phone

Save Money and Get Peace of Mind by Adding Our Managed Network Services

If you come to TeleDynamic for your new Virtual PBX system, we can monitor and maintain your network for you. We will replace or upgrade equipment as needed for no extra charge. With our managed network service, you’ll have peace of mind knowing that we’ll fix any issue before it interrupts your business. Plus, you’ll have a better handle on your technology buget because you pay a simple monthly charge, no hidden costs or surprises. All the line items in the chart above will disappear with our managed network service.

Learn more about Managed Network Services

In addition to the benefits of a Virtual PBX system, such as mobile phone integration, improved communication features and support for remote workers, the cost of a virtual PBX system is up to 40 percent less per month than a traditional business phone system.


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