Microsoft Teams Telephony Licensing Assessment
We model all three PSTN connectivity paths against your calling patterns, geography, and existing carrier relationships — then negotiate the optimal licensing structure at EA renewal.
1. The Foundation: Teams Phone Standard and What It Includes
Before choosing a PSTN connectivity path, every organisation needs the Teams Phone Standard licence (formerly "Phone System") — the platform layer that transforms Teams from a collaboration tool into a cloud PBX. Teams Phone Standard provides the internal calling infrastructure: call routing, auto attendants, call queues, voicemail (with transcription), call park, call transfer, music on hold, and presence-based routing. What it does not provide is external calling — the ability to make and receive calls to/from regular phone numbers (PSTN). That requires one of the three connectivity options. For the broader M365 licensing context, see our M365 E3 vs E5 vs F3 comparison.
Where Teams Phone Standard Is Included
Included at no additional cost: Microsoft 365 E5, Office 365 E5, Microsoft 365 Business Voice (legacy). Available as an add-on (~$8/user/month): Microsoft 365 E3, Office 365 E1/E3, Microsoft 365 Business Basic/Standard/Premium, Microsoft 365 F1/F3. The most critical licensing fact in Teams telephony: M365 E5 includes Teams Phone Standard but does not include PSTN calling. An E5 user has the cloud PBX features — auto attendants, call queues, voicemail — but cannot dial an external phone number without a Calling Plan, Direct Routing, or Operator Connect configuration. This catches procurement teams every time: "We bought E5, so we have Teams Phone" is true, but "We bought E5, so we can make phone calls" is false without an additional PSTN connectivity decision. See our M365 add-on licensing guide.
For organisations on M365 E3, the Teams Phone Standard add-on at $8/user/month is a significant line item — $96/user/year, or $480,000 annually for a 5,000-user deployment — before adding PSTN calling costs. The E3-to-E5 upgrade ($21/user/month) includes Teams Phone Standard plus Defender for Endpoint P2, Entra ID P2, Defender for Office 365 P2, Audio Conferencing, and the full compliance suite. For organisations that need both Teams Phone and one or more E5 security features, the E5 upgrade is frequently cheaper than buying add-ons individually. See our E5 security add-ons playbook for the calculation.
2. Microsoft Calling Plans: Everything From Microsoft
Microsoft Calling Plans are the simplest PSTN connectivity option: Microsoft acts as your telephone carrier. You purchase a Calling Plan licence for each user, Microsoft assigns phone numbers, Microsoft provides the PSTN trunk, and calling minutes are included in the plan. No SBCs, no SIP providers, no telephony infrastructure to manage.
Calling Plan Options and Pricing
| Plan | Included Minutes | Approximate Cost | Best For |
|---|---|---|---|
| Domestic Calling Plan | 3,000 minutes/user/month (US) | $12/user/month | Users who primarily call within their country |
| International Calling Plan | Domestic + 600 international minutes/user/month | $24/user/month | Users who regularly call international numbers |
| Pay-As-You-Go Calling Plan | No included minutes — per-minute rates | $0/user/month + per-minute charges | Low-volume callers (under 100 minutes/month) |
What Calling Plans include: PSTN connectivity (Microsoft is the carrier), phone number assignment (Microsoft provides DID numbers from their number pool — existing numbers can be ported), domestic and/or international minutes as per the plan tier, caller ID, E911 compliance (US), voicemail to email. What Calling Plans don't include: Teams Phone Standard (must be licensed separately or included via E5), toll-free numbers (purchased separately as Communication Credits), international calling beyond plan allocation (charged at per-minute overage rates), compliance recording (requires third-party integration or Microsoft Teams Premium add-on).
Geographic Limitations
Microsoft Calling Plans are available in approximately 30 countries — covering the US, Canada, UK, most of Western Europe, Australia, and Japan. They are not available in large portions of Asia, Africa, South America, the Middle East, or Eastern Europe. For multinational organisations, this geographic limitation is often the disqualifying factor: if you have offices in 40 countries and Calling Plans cover 25, you need a second PSTN connectivity solution for the remaining 15 — creating a hybrid telephony environment that's more complex than either Calling Plans or Direct Routing alone. Learn more about independent Microsoft advisory services.
The Calling Plan Cost Model
For a 5,000-user US organisation on M365 E5 (Teams Phone Standard included) with Domestic Calling Plans: 5,000 × $12/month = $60,000/month = $720,000/year. This is pure PSTN connectivity cost — the cloud PBX (Teams Phone Standard) is covered by E5. For the same organisation on M365 E3: Teams Phone Standard ($8/user) + Domestic Calling Plan ($12/user) = $20/user/month = $100,000/month = $1,200,000/year. The Calling Plan cost model is simple, predictable, and scalable — but it's the most expensive per-user option, and the minute pools are use-it-or-lose-it (unused minutes don't roll over). Organisations with highly variable calling patterns (seasonal businesses, project-based firms) overpay during low-usage periods.
3. Direct Routing: Everything Under Your Control
Direct Routing connects Teams Phone to the PSTN through your own infrastructure: Session Border Controllers (SBCs) deployed on-premises or in the cloud, connected to SIP trunking services from the telephony carrier of your choice. Microsoft provides the cloud PBX; you provide everything between Teams and the phone network.
Architecture Components
Session Border Controllers (SBCs): Hardware or virtual appliances that bridge the Teams Phone environment and the SIP trunk. Certified SBC vendors include AudioCodes, Ribbon (formerly Sonus), Oracle, and Cisco. SBCs can be deployed on-premises (physical appliance in your data centre), in Azure (virtual SBC as IaaS), or through a managed SBC-as-a-Service provider. SIP trunking: PSTN connectivity from a telephony carrier — Lumen, AT&T, Verizon, Telia, BT, or regional/specialised SIP providers. SIP trunks are priced per channel (concurrent call capacity) and per minute of PSTN usage — typically 30–60% cheaper per minute than Microsoft Calling Plans. Phone numbers: Provided by the SIP trunking carrier. Existing phone numbers can be ported from legacy PBX providers to the SIP trunk provider — number portability is typically easier and faster with Direct Routing than with Calling Plans (where Microsoft handles the port).
The Direct Routing Cost Model
Direct Routing costs are composed of four layers: the Teams Phone Standard licence ($8/user/month or included in E5), SBC infrastructure ($5,000–$50,000 for hardware/virtual appliances depending on scale, plus ongoing maintenance), SIP trunking ($0.005–$0.02 per minute for domestic US calling, with monthly channel fees of $15–$50 per concurrent call channel), and operational management (internal staff or managed service to maintain SBCs, monitor call quality, manage number assignments, handle carrier relationships).
For the same 5,000-user US organisation on M365 E5: SBC infrastructure (amortised over 3 years) ≈ $1,000–$3,000/month. SIP trunking (assuming 200 concurrent channels, average 500 minutes/user/month at $0.01/minute) ≈ $25,000/month. Operational management (0.5–1.0 FTE or managed service) ≈ $5,000–$10,000/month. Total Direct Routing PSTN cost: approximately $31,000–$38,000/month = $372,000–$456,000/year. Compared to Calling Plans at $720,000/year for the same organisation, Direct Routing delivers a 37–48% cost reduction — but requires infrastructure investment, telephony expertise, and ongoing operational responsibility.
4. Operator Connect: The Managed Middle Ground
Operator Connect is Microsoft's answer to the Calling Plans-too-expensive / Direct Routing-too-complex dilemma. Certified telecom operators deliver PSTN connectivity directly into the Teams admin centre — you select an operator, configure the connection through the Teams admin portal, and the operator manages the PSTN infrastructure. No SBCs to deploy, no SIP trunks to configure, but full carrier choice and competitive per-minute pricing.
How Operator Connect Works
Microsoft certifies telecom operators (AT&T, Verizon, BT, Deutsche Telekom, Telia, Lumen, and dozens of regional carriers) to connect their PSTN infrastructure directly to Microsoft's Teams Phone backend. The connection is managed by the operator — Microsoft provides the integration API, the operator provides the PSTN trunk, phone numbers, and calling plans. Provisioning happens through the Teams admin centre: select the operator, assign numbers to users, activate. No on-premises infrastructure required. Learn more about Microsoft Teams licensing guide 2026.
The Operator Connect Cost Model
Operator Connect pricing is set by each operator independently — Microsoft doesn't control or publish Operator Connect rates. Typical pricing falls between Calling Plans and Direct Routing: $6–$15/user/month for domestic calling (compared to $12 for Microsoft Calling Plans and $5–$8 effective cost for Direct Routing). The key variables: which operator you select (competitive pricing varies significantly), whether you bundle with an existing telecom relationship (existing AT&T or BT customers often negotiate Operator Connect as a bundle), and whether the operator offers per-minute or flat-rate plans.
For the 5,000-user US organisation on M365 E5: Operator Connect at $8/user/month = $40,000/month = $480,000/year. Compared to Calling Plans ($720,000), that's a 33% reduction. Compared to Direct Routing ($372,000–$456,000), it's a 5–29% premium — but without the SBC infrastructure, operational staff, or carrier management responsibility.
5. The Three-Way Comparison: Cost, Complexity, and Control
| Factor | Calling Plans | Direct Routing | Operator Connect |
|---|---|---|---|
| PSTN cost per user/month (US, domestic) | $12 | $5–$8 (effective) | $6–$15 |
| Infrastructure required | None | SBCs + SIP trunks | None |
| Operational responsibility | Microsoft manages everything | You manage SBCs, trunks, quality, numbers | Operator manages PSTN; you manage Teams |
| Carrier choice | Microsoft only | Any SIP provider | Microsoft-certified operators |
| Geographic coverage | ~30 countries | Unlimited (any SIP provider globally) | Growing (50+ operators, varies by region) |
| Number portability | Supported (Microsoft-managed, can be slow) | Full control (carrier-managed) | Supported (operator-managed) |
| Existing PBX integration | No | Yes (SBC can bridge Teams and legacy PBX) | Limited (operator-dependent) |
| E911 / emergency calling | Included (Microsoft-managed) | Your responsibility (SBC/carrier config) | Operator-managed |
| Scalability | Add licences; instant | Add SBC capacity / trunk channels | Add through operator; near-instant |
| Best for | Single-country, low complexity, no IT telephony team | Multi-national, cost-sensitive, existing telephony expertise | Multi-national, moderate complexity, prefers managed service |
6. The Hidden Costs That Change the Calculation
The per-user PSTN cost comparison above is necessary but insufficient. Several hidden costs materially affect the total cost of ownership — and they favour different models depending on your organisation's profile.
Communication Credits (all models): Toll-free numbers, dial-out from Audio Conferencing, and pay-per-minute overage charges across all three models consume Communication Credits — a prepaid balance that Microsoft debits per minute. Organisations that operate toll-free lines (customer service, sales hotlines) or use Audio Conferencing dial-out extensively can accumulate $5,000–$50,000/month in Communication Credit charges that don't appear in the per-user licence cost.
Common area phones (all models): Lobby phones, conference room phones, and kitchen/breakroom phones don't need a full user licence. Microsoft offers the Common Area Phone licence at approximately $8/user/month (includes Teams Phone Standard + limited calling capability). Organisations with 50–200+ common area phones need to budget this separately — it's not included in user-based licensing.
Compliance recording (all models): Financial services, healthcare, and government organisations subject to call recording requirements need compliance recording — the ability to record all inbound and outbound PSTN calls for regulatory retention. Teams does not include native compliance recording. Options: Microsoft Teams Premium add-on ($10/user/month, includes intelligent recap and custom branding in addition to compliance recording for some scenarios), or third-party compliance recording platforms (Verint, NICE, Dubber, ASC) at $5–$15/user/month. For a 1,000-user contact centre, compliance recording adds $60,000–$180,000/year — a cost that doesn't appear in any PSTN comparison.
Audio Conferencing (E3 organisations): Audio Conferencing (the ability for external participants to dial in to Teams meetings via a phone number) is included in M365 E5 but requires an add-on (~$4/user/month) for M365 E3. This isn't a Teams Phone cost per se, but organisations deploying Teams Phone typically deploy Audio Conferencing simultaneously — and for E3 customers, it's another line item. See our enterprise plan selection playbook. Learn more about Microsoft 365 license optimization.
SBC and infrastructure costs (Direct Routing only): Physical SBCs (AudioCodes Mediant, Ribbon SBC Edge) cost $5,000–$30,000 per appliance depending on capacity. High-availability deployments require paired SBCs at each location. Virtual SBCs in Azure reduce hardware costs but add Azure VM consumption ($500–$2,000/month per SBC instance). Managed SBC-as-a-Service (provided by carriers or UCaaS vendors) costs $2–$5/user/month but eliminates the infrastructure and operational burden. For small Direct Routing deployments (under 500 users), SBC-as-a-Service is typically more cost-effective than deploying dedicated infrastructure.
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Explore Microsoft Advisory Services →Migration costs (one-time, all models): Number porting from legacy PBX (2–8 weeks per number block, potential for porting failures and temporary service disruption), user training and change management (switching from a desk phone to Teams softphone or Teams-certified IP phone), legacy PBX decommissioning (contract termination fees, hardware disposal), and IT staff retraining (from PBX/Avaya/Cisco voice expertise to Teams Phone administration). Migration costs typically range from $50–$200/user as a one-time investment, regardless of the PSTN model chosen.
7. Three Enterprise Scenarios: Which Path Wins Where
Scenario 1: US-Headquartered Professional Services Firm (2,000 Users, Single Country)
A consulting firm with 2,000 knowledge workers across 5 US offices, on M365 E5, replacing an aging Cisco UCM deployment. Moderate calling volume (average 300 minutes/user/month), no international calling requirement, no existing telephony team, and a desire to simplify IT operations.
Calling Plans: 2,000 × $12/month = $24,000/month = $288,000/year. Zero infrastructure. Zero operational burden. Number porting handled by Microsoft. E911 included. Direct Routing: SBC pair ($15,000 one-time), SIP trunking from Lumen ($8,000/month), 0.5 FTE operational ($4,000/month) = approximately $12,000/month + amortised SBC = $156,000/year. Operator Connect: AT&T Operator Connect at $9/user/month = $18,000/month = $216,000/year.
Recommended: Calling Plans. The $132,000 annual premium over Direct Routing is offset by zero infrastructure investment, zero operational staff, and zero telephony management complexity. For a professional services firm without a telephony team, Direct Routing's savings don't justify the operational responsibility. If the firm has an existing AT&T or Verizon relationship, Operator Connect at $216,000/year splits the difference with less complexity than Direct Routing.
Scenario 2: European Manufacturer (8,000 Users, 12 Countries)
A manufacturing company with 8,000 users across Germany (HQ, 3,000 users), France, UK, Poland, Czech Republic, Romania, Turkey, and 5 additional countries. On M365 E3. Significant international calling between offices. Existing Telia SIP trunking contract. In-house telecom team (3 FTEs) managing current Avaya PBX.
Calling Plans: Available in 8 of 12 countries. 4 countries (Turkey, Romania, and 2 others) require a different solution. Split deployment creates management complexity. 8,000 × ($8 Phone Standard + $12 Calling Plan) = $160,000/month for covered countries, plus separate solution for uncovered countries. Direct Routing: Extend existing Telia SIP trunking to Teams via SBC deployment in Azure (2 SBC VMs for HA) = $3,000/month Azure + existing Telia contract (estimated $15,000/month across all countries) + existing telecom team (sunk cost). Total PSTN cost: approximately $18,000/month + Phone Standard add-on ($8 × 8,000 = $64,000/month) = $82,000/month = $984,000/year. Operator Connect: Telia is a certified Operator Connect provider — existing relationship extends directly to Teams. Estimated $7/user/month across all 12 countries = $56,000/month + Phone Standard ($64,000/month) = $120,000/month = $1,440,000/year. Learn more about Microsoft EA negotiation guide.
Recommended: Direct Routing. Existing Telia contract, existing telecom team, existing SIP infrastructure, and multi-country presence make Direct Routing the clear winner. The organisation already bears the operational cost (telecom team); adding Teams Direct Routing is incremental, not greenfield. Calling Plans' geographic limitations disqualify it as a single solution. Operator Connect through Telia is viable but costs $456,000/year more than extending Direct Routing with the existing contract.
Scenario 3: US Healthcare System (15,000 Users, Mixed Workforce)
A hospital system with 15,000 users: 3,000 physicians and administrators (knowledge workers, M365 E5), 2,000 clinical support staff (M365 E3), and 10,000 frontline clinical and facilities workers (M365 F3). Compliance recording required for 1,000 revenue cycle and patient access staff. 200 common area phones across facilities.
The licensing layers: Knowledge workers: Teams Phone Standard included in E5 (3,000 users, $0 add-on). Clinical support: Teams Phone Standard add-on ($8/user × 2,000 = $16,000/month). Frontline: Teams Phone Standard add-on ($8/user × 3,000 phone-enabled frontline, not all 10,000) = $24,000/month. Common area phones: 200 × $8 = $1,600/month. Compliance recording: 1,000 × $10/month (third-party) = $10,000/month. Total Teams Phone platform: $51,600/month before PSTN connectivity.
PSTN for 8,200 phone-enabled users: Calling Plans: $98,400/month. Operator Connect (Lumen at $8/user): $65,600/month. Direct Routing (leveraging existing telecom infrastructure): $35,000/month estimated.
Recommended: Operator Connect or Direct Routing hybrid. The healthcare system's size justifies Direct Routing economics, but the operational focus should be on clinical care, not telephony infrastructure. Operator Connect through an existing carrier relationship provides the cost savings of carrier competition ($65,600 vs $98,400 Calling Plans) without the infrastructure management. If the system has an existing telecom team and SIP infrastructure from the legacy PBX, Direct Routing for the main campuses with Operator Connect for satellite clinics provides the optimal hybrid.
8. Negotiation Strategy: Reducing Your Teams Phone Bill
Bundle Teams Phone with EA renewal. Teams Phone Standard add-ons ($8/user/month at list) and Calling Plans ($12/user/month at list) are both negotiable within the EA negotiation. For large deployments (2,000+ users), the Teams Phone add-on can typically be discounted 10–20% when committed alongside the base M365 licence. Calling Plans at volume (5,000+ users) can yield 10–15% below list. The key negotiation point: Teams Phone deployment is incremental Microsoft revenue that the account team can use to demonstrate growth — position it as a commitment conditional on pricing concessions across the broader EA.
Evaluate E5 upgrade vs add-on stacking. For E3 organisations, the per-user cost of Teams Phone Standard ($8) + Audio Conferencing ($4) + Defender for Endpoint P2 ($5.20) = $17.20 in add-ons. The E3-to-E5 upgrade at $21/user/month includes all three plus the full E5 security and compliance suite. If your organisation needs any two of these three add-ons, the E5 upgrade is almost certainly cheaper. See our E3 vs E5 comparison. Learn more about Microsoft Copilot licensing guide 2026.
Negotiate Operator Connect rates independently. Operator Connect pricing is set by the telecom operator, not Microsoft. Your negotiation leverage is with the operator directly — volume commitment, multi-year term, bundling with existing telecom services (WAN, internet, SD-WAN), and competitive quotes from other certified operators. The most effective approach: obtain quotes from 3–4 certified operators before committing, use the competitive quotes as leverage with your preferred operator, and negotiate a 3-year rate lock to prevent annual price increases.
Right-size the user population. Not every employee needs PSTN calling. Knowledge workers who spend their day in Teams meetings and email may never dial an external phone number. Frontline workers in manufacturing or warehouse roles may need internal paging but not PSTN. Audit actual calling patterns before deploying: pull CDR (Call Detail Records) from the legacy PBX to identify which users make/receive external calls and at what volume. In most organisations, 60–80% of users account for 95% of PSTN minutes — the remaining 20–40% can use Teams for internal communication without a Calling Plan, Operator Connect, or Direct Routing licence. A 5,000-user organisation where 3,500 users actually need PSTN saves $18,000/month on Calling Plans alone by not licensing the 1,500 users who don't call externally. See our Microsoft audit compliance playbook.
Use pay-as-you-go for low-volume callers. Microsoft's Pay-As-You-Go Calling Plan costs $0/user/month with per-minute charges drawn from Communication Credits. For users who make fewer than 50–100 minutes of external calls per month, PAYG is dramatically cheaper than a $12/month Domestic Calling Plan. Segment your user base: heavy callers (300+ minutes) get Domestic or International Calling Plans; moderate callers (100–300 minutes) get Domestic; light callers (under 100 minutes) get PAYG. This segmentation typically reduces total Calling Plan spend by 15–25%.
9. Frequently Asked Questions
Teams Phone Standard (the cloud PBX platform) is included in M365 E5 at no additional cost. However, PSTN connectivity — the ability to make and receive calls to/from external phone numbers — is not included in any M365 plan. E5 gives you the phone system; you must separately arrange external calling through Microsoft Calling Plans, Direct Routing, or Operator Connect. This is the single most common misunderstanding in Teams telephony licensing: E5 includes the platform but not the dial tone.
Yes — Microsoft explicitly supports hybrid PSTN connectivity. You can assign Calling Plans to users in countries where they're available and use Direct Routing or Operator Connect for users in countries where they're not. You can also use Direct Routing for high-volume calling users (where per-minute SIP trunking is cheaper) and Calling Plans for low-volume users (where operational simplicity outweighs cost). The Teams admin centre manages all three connectivity models simultaneously. The hybrid approach is common for multinational organisations and often produces the lowest total cost — but it requires careful planning to ensure every user has exactly one PSTN connectivity path assigned. See our licensing across programmes guide for multi-model management.
M365 F1 and F3 do not include Teams Phone Standard. Frontline workers who need PSTN calling require the Teams Phone Standard add-on ($8/user/month) plus a PSTN connectivity solution (Calling Plan, Direct Routing, or Operator Connect). Not all frontline workers need PSTN — many need only internal Teams communication (chat, meetings, shift management), which is included in F1/F3. The key question: does this frontline worker need to dial or receive calls from external phone numbers? If yes, they need the add-on. If no, they don't. In healthcare, retail, and manufacturing, typically 20–40% of frontline workers need PSTN capability (patient-facing staff, store managers, supervisor roles), while the remainder operate with internal Teams communication only. See our E3/E5/F3 comparison for the frontline licensing analysis.
Generally yes — Operator Connect pricing from competitive carriers typically falls 15–40% below Microsoft Calling Plans for domestic calling, depending on the operator and the volume committed. The savings come from carrier competition: Microsoft Calling Plans are a single provider at a fixed price; Operator Connect opens the market to dozens of certified carriers competing on price. However, the comparison must be total cost: some operators charge separately for phone numbers, E911 compliance, and international calling that Microsoft bundles into the Calling Plan price. Always compare total monthly cost per user (including all fees), not just the headline per-minute rate. Obtain quotes from 3–4 certified operators before committing. Learn more about Microsoft Teams Rooms licensing and costs.
For any deployment exceeding 1,000 phone-enabled users, the Teams Phone licensing decision involves enough variables — base licence tier, PSTN connectivity model, geographic coverage, calling patterns, compliance recording, common area phones, legacy PBX migration — that independent advisory consistently identifies the optimal architecture and negotiates better pricing than internal teams working without cross-client benchmarks. The value is threefold: PSTN model selection based on your specific calling patterns, geography, and operational capacity (not based on which vendor presents first); licence optimisation across user personas ensuring that only phone-enabled users receive phone licences and that Calling Plan tiers match actual usage; and EA negotiation integrating Teams Phone pricing into the broader Microsoft commitment for maximum leverage. At Redress Compliance, Teams telephony licensing is analysed within our EA Optimisation Service, and our Microsoft Advisory Services cover the complete unified communications licensing lifecycle.