XO's new VoIP pricing model may save small companies money

In a move that could help small and medium-size businesses save money, telecom carrier XO Communications has rolled out a new pricing model for VoIP (voice over Internet Protocol) services based on the bandwidth a business uses, instead of the number of lines.
The pricing model, announced Wednesday along with expansion of XO's VoIP offerings, allows U.S. business customers to set a price based on an IP port speed ranging from 1.5M bps (bits per second) to 45M bps, instead of the number of lines used. There are additional costs for long-distance calling plans and additional features.

"With IP, voice is just another application over the IP backbone," said Nic Jackson, XO's director of voice and converged services. "When we put a T1 [connection] out to the customer premise, it really doesn't matter to us, or to the customer really, how they use that T1, as long as they have enough bandwidth to manage their voice and data needs. Why would we price differently for a voice channel vs. a data channel? It just doesn't make sense in this new IP world."

Pricing starts at about $400 to $550 a month for 1.5M-bps service, depending on location and based on a three-year contract, Jackson said. A basic long-distance calling plan would cost an additional $60 a month. XO also offers one-year and five-year contracts.

The new pricing model could cut costs for companies, particularly small and medium-size businesses, said Lisa Pierce, an analyst with Forrester Research. For a T1 line, a business with volume of about 54 calls per hour would be necessary for the XO pricing to make sense, she said.

"It looks like a pretty good deal," Pierce said.

However, businesses interested in the plan should inquire whether the service is being provided over XO's own backbone or whether the carrier is buying access from others, Pierce said. In some cases, the rented network access can cause outages, she said.

In addition, businesses should have a good idea about their current and future voice use before signing a contract based on bandwidth, Pierce recommended. "They need to really have a handle on their traffic to do that," she said. "And a lot of companies don't."

XO will help customers determine their bandwidth needs, Jackson said. The bandwidth pricing can help simplify customer decisions about what kind of calling services they need, she said.

In addition, XO, in Herndon, Virginia, announced it has expanded two of its VoIP offerings.

The company has launched its XO IP Flex service, which allows customers to use traditional PBXes or multiline, key telephone systems to connect to XO's VoIP services. The new service, which replaces XO's XOptions Flex offering, includes unlimited site-to-site calling, voicemail and dynamic bandwidth allocation, allowing full use of the IP circuit for data when voice lines are idle. IP Flex also offers bandwidth of up to 10M bps, compared to 3M bps under the old service, Jackson said.

XO also announced the nationwide availability of its IP SIP VoIP service, which delivers voice and data services to businesses with IP PBX systems over a single connection. XO launched IP SIP in October in six U.S. markets.

"What this means is a much broader portfolio than we had, say 18 months ago," Jackson said.