Why Teams Calling Costs More Than Most Organisations Expect
Teams PSTN calling is the most architecturally complex — and commercially least understood — component of most Microsoft 365 deployments. The licensing is a multi-layer stack: Phone System (the core PBX feature), a PSTN connectivity method (Calling Plans, Operator Connect, or Direct Routing), and Communication Credits (the unpredictable variable cost that most budgets underestimate). Getting any one of these wrong creates costs that show up mid-term rather than at renewal — and by then, the negotiating window has closed.
The fundamental calling question is not "which Calling Plan do we buy" but "which PSTN architecture is cheapest over three years for our specific calling pattern." For organisations with more than 300 PSTN users, the answer is almost never Microsoft Domestic Calling Plans. For organisations with international calling requirements, the answer is almost never International Calling Plans. Both are Microsoft-margin products that exist primarily because most enterprises fail to model the alternatives.
This guide covers the full Teams PSTN licensing architecture, the four PSTN connectivity options, the Phone System add-on requirements, Communication Credits mechanics, and the EA negotiation positions that create real savings for enterprise telephony deployments.
Key benchmark: In our client engagements, enterprises switching from Microsoft Calling Plans to Operator Connect or Direct Routing save 35–55% on their per-user PSTN costs. For a 1,000-user telephony deployment, this difference typically exceeds £200,000 over three years. The architectural decision at renewal locks in costs for the full term — making this one of the highest-value decisions in an EA negotiation.
The Phone System Add-On: The Prerequisite Most Miss
Before any PSTN calling can occur through Teams, every calling user requires Microsoft Teams Phone (previously Phone System) — the cloud PBX capability that provides call control, voicemail, call queues, auto-attendants, and hold/transfer features. This is a separate licence from the calling method itself.
Phone System Plan Inclusion
Phone System is included in Microsoft 365 E5 and Office 365 E5 at no additional cost. It is not included in E3, E1, Business Premium, or any F-series plan. For non-E5 users who need PSTN calling, Phone System must be purchased as a standalone add-on — currently £7.20–£8.30 per user per month at EA pricing, depending on volume tier.
Common planning error: Organisations frequently budget only for the Calling Plan or Operator Connect charges and fail to account for Phone System add-on costs for their E3 user population. In a 1,000-user calling deployment where 800 users are on E3, the Phone System add-on alone adds £72,000–£80,000 per year before any PSTN charges — a cost that should be visible in renewal modelling, not discovered post-signature.
Teams Phone Mobile
Teams Phone Mobile is a newer option that integrates a user's mobile SIM with Teams, enabling their mobile number to function as their Teams number. This requires an operator-provided SIM (the service is currently available in limited markets through select operators) and replaces the traditional desktop-based calling architecture. For organisations with a mobile-first workforce, Teams Phone Mobile eliminates the landline concept entirely. However, operator availability, pricing variability, and the requirement for operator-specific SIM contracts make this an advanced architecture with limited broad applicability at scale in 2026.
PSTN Connectivity Option 1: Microsoft Calling Plans
Microsoft Calling Plans are the all-Microsoft PSTN solution — Microsoft provides the carrier service directly, bundling a set number of minutes per user per month. There are three variants:
| Plan Type | Included Minutes (per user/month) | Approx. EA Price (per user/month) | Best For |
|---|---|---|---|
| Domestic Calling Plan (120 min) | 120 domestic outbound | £4.20–£5.00 | Low-volume callers only |
| Domestic Calling Plan (1200 min) | 1,200 domestic outbound | £9.50–£11.00 | Standard office calling |
| International Calling Plan | 1,200 domestic + 600 international | £21.00–£24.00 | Frequent international callers |
| Pay-As-You-Go Calling Plan | 0 included (all charged via Communication Credits) | £0 (minutes billed separately) | Very low-volume callers |
The Geographic Limitation Problem
Microsoft Calling Plans are only available in a subset of countries. As of 2026, coverage includes most Western European markets, the US, Canada, and Australia — but excludes large markets including India, Brazil, many Asian markets, and most of the Middle East and Africa. For organisations with multinational workforces, Microsoft Calling Plans cannot serve the full user population, forcing a hybrid architecture or full migration to an alternative.
This is the primary structural reason why large multinational enterprises rarely adopt Microsoft Calling Plans at scale — they cover the HQ population but exclude the markets where PSTN calling is most operationally critical.
When Microsoft Calling Plans Are Justified
Despite the cost premium, Microsoft Calling Plans have genuine justification scenarios: organisations under 300 PSTN users where operational simplicity outweighs cost optimisation; organisations in a pure Microsoft market footprint (all entities in covered countries); and organisations transitioning rapidly from on-premises telephony who need a zero-infrastructure bridge solution while Direct Routing is architected. For these scenarios, the 1,200-minute Domestic plan at £9.50–£11.00/user is commercially defensible.
PSTN Connectivity Option 2: Operator Connect
Operator Connect is Microsoft's managed carrier integration programme — certified telco operators connect their carrier infrastructure directly to Microsoft Teams via a Microsoft-managed API, allowing organisations to bring their existing carrier relationship into Teams without on-premises SBC infrastructure.
The commercial advantage is significant: major operators in the Operator Connect programme (BT, Vodafone, NTT, Deutsche Telekom, and others) typically price PSTN calling at 35–55% below Microsoft's own Calling Plan rates. Per-minute or per-user rates vary by operator and contract, but benchmark EA-equivalent Operator Connect pricing for standard UK domestic calling runs £5.50–£7.50 per user per month for unlimited domestic calling — meaningfully below the 1,200-minute Microsoft plan at comparable usage levels.
The real advantage of Operator Connect: Beyond per-minute cost savings, Operator Connect typically offers geographic coverage that Microsoft Calling Plans cannot match. Most major operators in the programme provide services across 30–50+ countries, including markets that Microsoft does not cover. For multinational organisations, Operator Connect often resolves both the cost and the coverage problems simultaneously — without requiring on-premises infrastructure.
Operator Connect and Number Porting
Existing telephone numbers can be ported to an Operator Connect carrier, preserving business continuity. The porting process is managed by the operator, typically with 4–6 weeks lead time for bulk enterprise ports. Emergency calling (E.999/E.911) is the operator's responsibility to configure correctly — enterprise telephony teams should validate emergency calling configuration before go-live, as Teams routing does not automatically resolve emergency calls to the correct PSAP for every Operator Connect deployment.
PSTN Connectivity Option 3: Direct Routing
Direct Routing is the full bring-your-own-carrier architecture: an organisation deploys a Session Border Controller (SBC) — either on-premises or as a cloud-hosted virtual appliance — that bridges their chosen PSTN carrier to Teams. The SBC connects the organisation's carrier SIP trunk to Microsoft Teams, giving the organisation complete control over carrier selection, pricing, and geographic coverage.
Direct Routing Cost Economics
The infrastructure cost of Direct Routing (SBC licences, hosting, maintenance, and SIP trunk fees) is real. For organisations under 200 PSTN users, the economics often favour Operator Connect over Direct Routing precisely because the infrastructure overhead exceeds the carrier cost savings at smaller scale. The break-even point varies by SBC vendor pricing and SIP trunk rates, but a reasonable benchmark for enterprises considering Direct Routing is 300+ PSTN users for the economics to clearly favour this architecture over Operator Connect.
For organisations above that threshold, the cost advantage of Direct Routing is substantial. Enterprise SIP trunk pricing from major carriers runs £0.005–£0.015 per minute for domestic calling — versus Microsoft's implicit per-minute rate of £0.008–£0.009 in Calling Plans and the operator rates in Operator Connect. At 500 users with 800 minutes per user per month average usage, the three-year difference between Microsoft Calling Plans and a well-negotiated Direct Routing deployment frequently exceeds £350,000.
SBC Vendor Selection
Microsoft certifies specific SBC vendors for Direct Routing. Major certified vendors include AudioCodes, Ribbon Communications (formerly GENBAND and SONUS), Oracle, and Cisco. Cloud-hosted SBC options — including AudioCodes Live and Ribbon Connect — eliminate the on-premises hardware commitment and are priced per-user-per-month on a consumption model, reducing the upfront infrastructure cost and making Direct Routing accessible at lower user counts than traditional on-premises deployments.
Communication Credits: The Unpredictable Variable Cost
Communication Credits are Microsoft's pay-as-you-go top-up mechanism for PSTN calling. They are consumed when users exceed their Calling Plan minute allowances, when using Pay-As-You-Go calling, for calls to toll-free numbers (where the enterprise pays), and for outbound calls from Audio Conferencing dial-out. Communication Credits are billed at Microsoft's published per-minute rates — not at EA pricing — and are entirely separate from the PSTN calling licence.
Budget risk: Communication Credits are frequently the largest source of mid-term budget overruns on Teams telephony deployments. The toll-free calling charge (typically £0.018–£0.025 per minute in the UK) is often discovered only when the first invoice arrives. Organisations with contact centres or customer service teams that publish toll-free numbers must model Communication Credits consumption separately. A 50-agent contact centre receiving 10,000 inbound toll-free minutes per day generates approximately £3,000–£4,500 per month in Communication Credits charges — a cost that belongs in the telephony budget, not the M365 licence budget.
Managing Communication Credits Consumption
Three controls significantly reduce Communication Credits exposure. First, right-size Calling Plan minutes to actual usage — most organisations that have been on Calling Plans for more than six months have usage data to identify the population of users who rarely exceed 120 minutes per month and can be moved to the lower-tier plan. Second, route toll-free numbers through Direct Routing or Operator Connect where the carrier charges are negotiated and predictable. Third, implement outbound calling restrictions for users who do not need PSTN calling — Teams Phone licences without a Calling Plan or Communications Credits access are common sources of inadvertent cost when users discover they can dial out.
The Four-Option Cost Model: Enterprise Benchmark
The following represents a cost benchmark for a 1,000-user standard enterprise PSTN deployment (80% domestic callers, 20% regular international callers, 1,200 minutes/month average usage, UK-based):
| Architecture | Phone System Add-on | PSTN Cost (per user/month) | Infrastructure/Management | 3-Year Total Estimate |
|---|---|---|---|---|
| Microsoft Calling Plans (1,200 min Domestic) | £0 (E5) or £7.50 (E3) | £10.00 | None | £360,000–£630,000 |
| Operator Connect | £0 (E5) or £7.50 (E3) | £6.50 (unlimited domestic) | None | £234,000–£504,000 |
| Direct Routing (hosted SBC) | £0 (E5) or £7.50 (E3) | £4.50 (SBC + SIP trunk) | £25,000–£40,000/year | £237,000–£480,000 |
| Direct Routing (on-premises SBC) | £0 (E5) or £7.50 (E3) | £3.50 (SIP trunk only) | £60,000–£90,000 upfront + £15,000/year | £231,000–£477,000 |
The Phone System add-on column reflects the additional cost for E3-only deployments. Note that the ranges reflect the E5-included vs E3-add-on variance — organisations on E5 significantly improve the relative economics of all calling architectures by eliminating the Phone System line item.
Audio Conferencing and Its Relation to Calling Plans
Audio Conferencing (dial-in meeting numbers) is a separate product from PSTN calling. Users hosting meetings with dial-in PSTN numbers require Audio Conferencing licences — these are included in E5, and available as add-ons for E3/E1 users at approximately £4.80/user/month. Audio Conferencing is only required for the meeting organiser, not for participants who dial in. This scoping point — covered in detail in our Audio Conferencing licensing guide — is the most commonly exploited overspend in this category.
Importantly, Audio Conferencing and Teams Calling Plans are independent products. You can deploy Audio Conferencing without PSTN calling licences, and PSTN calling without Audio Conferencing. Do not allow Microsoft to bundle these in negotiation — each should be evaluated and priced separately.
Teams Phone for Frontline Workers
The frontline worker population (F1/F3 licensed users) introduces a specific calling complexity. Teams Phone (Phone System) is not included in F1. F3 includes Teams calling features for internal use but does not include PSTN capability. Frontline workers who need PSTN calling require either an upgrade to a higher M365 plan (which is frequently the wrong economic choice) or a Teams Phone add-on plus a Calling Plan or Operator Connect service — which can be cost-effective for a small number of frontline supervisors or team leads who genuinely require PSTN access.
The discipline here is to audit the frontline calling requirement precisely. In most warehousing, retail, and manufacturing environments, fewer than 15% of frontline workers need PSTN calling. Upgrading all F1 users to E3 to provide calling to 15% of the population is a common and very expensive mistake.
EA Negotiation Strategy for Teams Calling
PSTN calling is almost always negotiated separately from the M365 and EA core — which is where most organisations lose value. The calling architecture decision is typically made by the telephony team, not the procurement team running the EA negotiation. The commercial implications of that architectural decision feed directly into EA cost, but because they're in different budget lines, they're rarely connected in negotiation.
The five negotiation positions that create real value:
1. Challenge the Calling Plan default before the EA is signed. Microsoft account teams default to Calling Plan recommendations because they're simple and margin-rich. If your organisation is above 300 PSTN users, commission a three-year cost model comparing Calling Plans to Operator Connect before the renewal conversation begins. The data creates leverage that does not exist after the EA is signed.
2. Separate Phone System from the Calling Plan in pricing. Microsoft increasingly bundles Phone System and Calling Plans in renewal proposals. Separating the line items allows you to benchmark each independently and negotiate the Phone System add-on price against the volume of E3 users — which is where most of the Phone System revenue is concentrated.
3. Use Operator Connect as competitive leverage, not just an alternative. Even if you intend to stay on Microsoft Calling Plans, having a documented Operator Connect alternative with cost modelling forces Microsoft to defend their Calling Plan pricing. A well-prepared alternative creates 10–20% discount headroom that does not exist without it.
4. Negotiate Communication Credits as a budget reserve, not a commitment. Communication Credits are a consumption product and should not be committed in advance beyond a modest reserve. Resist any pressure to prepay Communication Credits as part of an EA true-up — credits not consumed have limited recourse.
5. Include count flexibility provisions for the PSTN population. Headcount fluctuation affects PSTN licence requirements more than most M365 products. Including provisions that allow mid-term count reduction for calling licences — particularly if your organisation is going through a hybrid work transformation that reduces PSTN dependency — protects against over-licensing in Years 2 and 3 of the term.
Est. 2016 — 500+ engagements — £2.1B managed — 32% average cost reduction: Teams telephony is consistently among the top five overspend categories we identify in M365 engagement reviews. The combination of the Phone System add-on gap, Calling Plan default architecture, and unmodelled Communication Credits costs creates a perfect storm for mid-term budget surprises. Addressing this at renewal, not after, is where the value is.
FAQ
Do we need Phone System if we already have an on-premises PBX?
If you are using Direct Routing to connect your existing SIP trunk to Teams, yes — every user who makes or receives PSTN calls through Teams requires the Teams Phone (Phone System) add-on regardless of whether the underlying PBX is on-premises or cloud. The Phone System licence enables Teams to act as the call control layer. Without it, Teams can only handle internal (Teams-to-Teams) calls.
Can we mix Calling Plans and Operator Connect in the same tenant?
Yes. You can have some users on Microsoft Calling Plans and others on Operator Connect in the same Teams tenant. This is a common architecture for multinational organisations where Microsoft Calling Plans cover the primary market and Operator Connect (with broader geographic coverage) serves other regions. The routing is managed at the individual user level via voice routing policies.
Is Operator Connect available in our country?
Operator Connect coverage depends on the participating operators in each market. Microsoft maintains a published list of certified operators by country. In 2026, major markets including the UK, Germany, France, the Netherlands, the US, Australia, and several others have multiple competing Operator Connect providers. Coverage has expanded significantly since the programme launched in 2021 and continues to grow.
How do Communication Credits relate to the EA subscription year?
Communication Credits are a pre-paid balance that is consumed as calls are made — they are not tied to the EA subscription year and do not expire at renewal. Unused credits carry forward. However, they are purchased at list price (not EA price) and cannot be negotiated as part of the EA. For this reason, it is preferable to minimise Communication Credits exposure through architectural decisions (routing international calls through Direct Routing rather than through Microsoft's per-minute rates) rather than trying to negotiate the credits themselves.