Microsoft Teams Phone vs Hosted VOIP: Which Is Right for Your Business?

This guide compares Microsoft Teams Phone and dedicated hosted VOIP for Australian businesses, using real AU licensing costs and deployment realities. It is written for businesses that already use Microsoft 365 and are deciding whether to add Teams Phone calling or run a separate VOIP system alongside Teams. By the end, you will know which option suits your team size, budget, and IT setup, and exactly when each one wins.

Quick Verdict

Why This Decision Matters for Australian SMBs

Microsoft 365 is the default productivity stack for most Australian businesses with 5 or more staff. Teams is baked into that subscription. So when a business needs a phone system, the obvious question is: "Can't we just use Teams?"

The answer is: sometimes yes, often no, and the line between the two comes down to team size, IT capability, and how central calling is to your business.

Teams Phone (Microsoft's calling add-on) requires additional licences on top of your existing Microsoft 365 plan, a chosen calling architecture (Calling Plans, Direct Routing, or Operator Connect), and a competent IT person to set it up correctly. For businesses with a managed IT provider that already handles Microsoft licensing, this can work smoothly. For a 5-person business where the owner does their own IT, it is frequently a frustrating and expensive path.

Dedicated hosted VOIP providers, by contrast, sell a complete phone system as a single product. One monthly cost per seat, one point of support, and a setup process that takes hours rather than days. The trade-off is a second app for calls, separate from Teams.

This comparison covers both options in full so you can make the right call for your actual business, not just the one that looks tidiest on paper.

Cost Comparison: Teams Phone vs Hosted VOIP at 10 Seats

Here is a realistic cost breakdown for a 10-person Australian business already on Microsoft 365 Business Basic.

Teams Phone (10 seats)

Option A: Microsoft Calling Plan (simplest, most limited)

• Microsoft 365 Business Basic: ~$8.40/user/month = $84/month for 10 users
• Teams Phone Standard add-on: ~$12/user/month = $120/month for 10 users
• Microsoft Domestic Calling Plan (AU): ~$15-18/user/month = $150-180/month for 10 users
• Total: approximately $354-384/month AUD plus GST

Option B: Direct Routing (more flexible, more complex)

• Microsoft 365 Business Basic: ~$84/month for 10 users
• Teams Phone Standard: ~$120/month for 10 users
• SIP trunk from an AU SIP provider: ~$20-60/month depending on call volume
• SBC (Session Border Controller): hosted SBC service ~$20-80/month, or on-premise hardware ~$500-2,000 upfront
• IT setup cost: $500-3,000+ one-off to configure the SBC and Direct Routing
• Ongoing: approximately $224-264/month AUD, but with significant setup cost and ongoing IT dependency

Option C: Operator Connect via Telstra or Optus

• Microsoft 365 Business Basic + Teams Phone Standard: ~$204/month for 10 users
• Operator Connect calling plan (Telstra Business Voice for Teams, Optus Calling for Teams): pricing varies, typically $25-45/user/month
• Total: approximately $454-654/month AUD for 10 users

The Operator Connect pricing from Telstra and Optus reflects enterprise-grade products designed for larger organisations. For a 10-person SMB, they are expensive and often overkill.

Hosted VOIP (10 seats)

An Australian hosted VOIP provider such as Maxotel, Crazytel, or VoIPline Telecom charges a flat per-seat rate for a complete phone system including the PBX, call routing, voicemail, and a local Australian number.

• Typical per-seat cost for an SMB plan: $15-27/month per seat
• 10 seats: approximately $150-270/month AUD
• Calls (local, national, mobile): often included in plan, or low per-minute rates (~$0.03-0.08/min)
• 1300 numbers: available as an add-on, typically $5-20/month plus call answering costs
• Setup: often free or low-cost ($0-250) as providers handle configuration
• Total: approximately $150-270/month AUD all-in for 10 seats, no setup fees in most cases

At 10 seats, hosted VOIP costs roughly half of Teams Phone on Calling Plans and a third of Operator Connect. The gap narrows at higher seat counts, but for most AU SMBs under 20 staff, hosted VOIP is materially cheaper. For a detailed cost breakdown of Teams Phone alone, see our Teams Phone pricing guide for Australia.

Feature Comparison

Call Features

Both Teams Phone and hosted VOIP provide the core business calling features: inbound and outbound calls, call transfer, hold, voicemail, auto-attendant, ring groups, and call queues. For most SMBs, the feature gap between the two is not decisive.

Where Teams Phone pulls ahead: if your team lives in Teams all day (messages, meetings, file sharing), having calls in the same interface is genuinely useful. No switching apps. Calls appear in the same conversation thread. Presence status (available, in a meeting, busy) updates automatically.

Where hosted VOIP pulls ahead: advanced call routing, IVR (Interactive Voice Response) with multi-level menus, call recording, wallboards, and call analytics are often included or inexpensively available. Teams Phone can deliver these features, but they frequently require additional licences (Microsoft Teams Phone Standard does not include call recording, for example) or third-party integrations that add cost and complexity.

1300 and 1800 Numbers

This is a significant practical gap. Australian 1300 and 1800 numbers are a standard business requirement, particularly for businesses with a national customer base or a professional image to maintain.

Microsoft Calling Plans in Australia do not natively support 1300 numbers. Getting a 1300 number to ring through to Teams Phone requires a workaround: either an external 1300 provider that redirects calls to a standard number, or a more complex routing arrangement through Direct Routing or Operator Connect. Each option adds cost and configuration overhead.

Australian hosted VOIP providers handle 1300 numbers as a standard feature. You acquire the number through ACMA's Integrated Public Number Database (IPND) via your provider, and it routes directly through your hosted PBX. Setup is routine and support is local. For a full explanation of 1300 number costs and setup, see our hosted PBX pricing guide.

Number Portability in Australia

If you are moving to Teams Phone and want to keep your existing business number, number porting into Microsoft's systems in Australia is a friction-heavy process. The porting process runs through Microsoft's carrier backend, requires an authorisation code from your current provider, and can take 15-30 business days or longer. During that window, you need a temporary number arrangement or risk call disruption.

Hosted VOIP providers operate as licensed carriers in Australia and handle porting directly. The process is governed by ACMA's Local Number Portability rules (typically 5-10 business days for geographic numbers), and your provider manages the paperwork. Support for porting issues is local, in business hours, with a human on the phone. If porting is time-sensitive for your business, this difference matters.

Call Quality on Australian NBN

Both Teams Phone and hosted VOIP run over your internet connection, which means call quality depends on the same variable: your NBN plan speed and reliability.

Teams Phone uses Microsoft's network for call routing once the call is established, which can improve quality on international calls. For domestic calls within Australia, the advantage is modest.

The practical quality considerations for both options are identical: you need a stable NBN connection with at least 1 Mbps upload per simultaneous call, low jitter (under 30ms), and packet loss under 1%. A Fibre to the Premises (FTTP) or Fibre to the Building (FTTB) connection is significantly more reliable for VOIP than FTTN (copper node), regardless of which phone system you choose. NBN 50 or above is recommended for any business with more than 2-3 simultaneous callers. For a detailed look at call quality requirements, see our best VOIP phone system guide.

Setup Complexity and IT Requirements

This is the most important practical difference for Australian SMBs, and the one that most teams underestimate before they start.

Teams Phone setup complexity: Varies significantly by calling architecture.

• Calling Plans: The simplest route. Add licences in Microsoft 365 admin, assign phone numbers from Microsoft's number inventory. But number availability in AU is limited, 1300 numbers are not supported, and porting is slow.
• Direct Routing: Requires configuring a Session Border Controller (SBC), writing PowerShell commands to connect the SBC to Microsoft Phone System, setting up voice routing policies, and testing thoroughly before going live. This is a genuine IT project. Budget 1-2 days of skilled IT time minimum, and have a plan for when something breaks after hours.
• Operator Connect: Simpler than Direct Routing but depends on Telstra or Optus as the carrier. Both are enterprise-focused products with enterprise pricing. Suitable for organisations already in a Telstra or Optus managed services relationship.

Hosted VOIP setup complexity: Substantially lower. A good AU hosted VOIP provider provisions your account, assigns your number, pre-configures your extensions, and walks you through the setup process. Most SMBs are live within a day. There is no SBC to configure, no voice routing policies, no PowerShell. If something goes wrong, you call your provider's support line during AU business hours and speak to a person who knows your account.

Who Should Choose Teams Phone

Teams Phone is the right choice when several of these conditions are true:

• Your business has 20 or more staff who already use Teams actively for collaboration (messages, meetings, file sharing)
• You have a managed IT provider or internal IT person who already handles your Microsoft licensing and is comfortable with Teams Phone configuration
• Your team's primary communication tool is Teams, and having calls in a separate app creates real friction
• You are in a Microsoft-heavy sector (professional services, legal, finance) where Teams integration with calendar and contacts is a genuine workflow benefit
• You are running Operator Connect through Telstra or Optus as part of a broader managed services agreement, and the pricing is already locked into a larger deal

Teams Phone becomes harder to justify when your IT setup is self-managed, when 1300 numbers or number porting are required on a specific timeline, or when your team is under 20 people and call volume is moderate. At that scale, the licensing complexity and cost rarely make sense against the alternatives.

For a full breakdown of Teams Phone architecture options in Australia, see our Microsoft Teams Phone system overview.

Who Should Choose Hosted VOIP

Hosted VOIP from an Australian provider wins in most SMB situations. It is the right choice when:

• Your business has 1-20 staff
• You are self-managing your IT or have minimal IT support
• You need a 1300 number, or need to port an existing number quickly and cleanly
• Cost per seat matters and you are comparing all-in monthly spend
• You want Australian-based support during business hours without needing an IT intermediary
• You use Teams for chat and meetings but do not need calling in the same interface
• You are setting up a new business phone system for the first time and want the simplest path to being live

Australian hosted VOIP providers offer the full feature set that most SMBs need: ring groups, IVR menus, call recording, voicemail to email, and after-hours routing. None of these require a separate licence or an IT project. For a comparison of what these features cost in practice, see our hosted PBX pricing guide and VOIP cost guide for Australian businesses.

The Hybrid Option: Teams for Collaboration, VOIP for Calls

Many Australian businesses land on a hybrid model, and it is worth naming explicitly because it is often the most practical outcome.

The hybrid setup: keep Microsoft Teams for chat, video meetings, file sharing, and internal collaboration. Run a separate dedicated hosted VOIP system for your business phone number, external calls, and call routing. The two systems are independent. Staff use Teams on their computers for internal work, and a VOIP softphone app (or desk phone) for external calls.

The advantage of this approach is that you get the best of both: Teams' collaboration features without paying the Teams Phone licensing premium, and a simpler, cheaper, more flexible calling system with better Australian carrier support.

The trade-off is two apps for communication. For most teams, this is a minor inconvenience, not a real workflow problem. The VOIP softphone app sits in the taskbar next to Teams. Staff quickly habituate to using each for its purpose.

If unified calling within Teams is a genuine priority for your team (not just a nice-to-have), that changes the equation. But in practice, most SMBs using this hybrid model report it works well. The cost saving over Teams Phone is real and ongoing.

What Most Businesses Get Wrong

Mistake 1: Assuming Teams Phone is included in Microsoft 365.

Microsoft 365 Business Basic, Standard, and Premium all include Teams for chat and video meetings. They do not include calling to or from phone numbers. That requires the Teams Phone Standard add-on licence ($12/user/month AUD) plus a separate calling plan (Calling Plan, Direct Routing, or Operator Connect). The total per-seat cost surprises most businesses that start down this path.

Mistake 2: Underestimating the setup complexity of Direct Routing.

Direct Routing is the most flexible and often cheapest calling architecture for Teams Phone, but it is not a self-service product. Configuring an SBC, setting up voice routing policies, and connecting your SIP trunk to Microsoft's Phone System requires real expertise. Businesses that try to set this up themselves or hand it to a generalist IT person without Teams Phone experience frequently end up with a misconfigured system, dropped calls, or voicemail that does not work correctly. Budget properly for setup, or choose Calling Plans if you want something simpler even if it costs more per month.

Mistake 3: Deciding on Teams Phone before checking number portability timelines.

If you need to port your current business number and have a hard deadline (lease ends, old provider switching off service, business relocation), Teams Phone porting timelines in Australia can cause significant disruption. Porting into Microsoft's systems takes longer than porting to an Australian hosted VOIP provider. If timing matters, understand the realistic porting window before you commit to a platform.

Australian-Specific Considerations

PSTN copper shutdown: Australia completed its PSTN copper network shutdown in 2025. All business telephone calls now run over IP, whether through NBN broadband, fibre, or 4G/5G backup. Both Teams Phone and hosted VOIP are equally positioned for this reality. There is no copper-dependent option left.

000 emergency calling: Teams Phone and hosted VOIP both support 000 calling when configured correctly, but the mechanism differs from traditional landlines. Your registered address must be accurate in the system to ensure emergency services can locate you. Confirm your provider's 000 policy and registered address before going live. This applies to both options equally.

NBN power dependency: Both Teams Phone and hosted VOIP fail during a power outage unless you have battery backup on your NBN equipment (NTD or router) or a mobile data fallback. Traditional landlines had battery backup built into the exchange. Neither of these systems does. Plan accordingly if your business needs to receive calls during a power outage.

Australian Consumer Law: Telco contracts in Australia are covered by the Telecommunications Consumer Protections (TCP) Code and Australian Consumer Law. Both apply whether you are on a Teams-related calling plan or a hosted VOIP plan. Minimum standards for contract terms, fault resolution, and service continuity apply. Check the Critical Information Summary (CIS) for any plan before signing.

Microsoft's AU data residency: Microsoft Teams data residency for Australian M365 tenants is stored in Australia (Sydney/Melbourne datacentres). For regulated industries with data sovereignty requirements, this is worth confirming with your Microsoft partner. Hosted VOIP metadata (call records, voicemail) is stored by your Australian VOIP provider, typically on Australian infrastructure.

Your Next Steps

Use this checklist to move from comparison to decision:

1. Count your seats and check your current M365 licence. If you are already on M365 Business Standard or above, you have Teams included. Note what you are paying per seat now.
2. Get a realistic Teams Phone quote. Add Teams Phone Standard ($12/user/month) and your preferred calling plan. For 10 seats on Calling Plans, budget $30-50/user/month all-in. Compare that to hosted VOIP at $15-27/user/month.
3. Assess your IT capability honestly. If you have a managed IT provider already handling your Microsoft tenant, ask them what they charge for Teams Phone Direct Routing setup and whether they actively support it. If you are self-managing, Direct Routing is not a realistic DIY project.
4. Check your 1300 number situation. If you need a 1300 number now or in the future, factor in the additional workaround cost for Teams Phone. Hosted VOIP providers handle this natively.
5. Confirm your porting timeline. If you need to port an existing number, ask both options what the realistic timeline is in Australia. For hosted VOIP, expect 5-10 business days for geographic numbers. For Teams Phone Calling Plans, allow 2-4 weeks minimum.
6. Talk to an Australian VOIP provider before deciding. A good provider will give you an honest recommendation based on your actual setup, including whether Teams Phone makes more sense for your situation. Use our free recommendation service to get matched with the right option for your business.

If you are still evaluating whether VOIP is the right direction at all -- rather than which VOIP option to choose -- see VOIP vs Traditional Phone Australia for a broader comparison of call technologies.

Can I use my existing Microsoft 365 subscription and add Teams Phone calling without buying anything else?

No. Microsoft 365 Business Basic, Standard, and Premium include Teams for chat and video, but not for calls to external phone numbers. To make and receive standard phone calls through Teams, you need to add the Teams Phone Standard licence ($12/user/month AUD) and a calling plan on top. The total per-seat cost depends on which calling architecture you choose: Microsoft Calling Plans add another $15-18/user/month, Direct Routing is cheaper per month but has setup costs, and Operator Connect via Telstra or Optus is typically the most expensive option for SMBs.

Does Teams Phone support 1300 numbers in Australia?

Not natively through Microsoft Calling Plans. Microsoft's Calling Plans for Australia provide geographic numbers (02, 03, 07, 08 area codes) and mobile numbers but do not include 1300 or 1800 numbers. If you need a 1300 number, you have a few options: use an external 1300 provider that redirects calls to your Teams Phone number (adds cost and a hop), use Direct Routing with an Australian SIP carrier that supports 1300 DID assignment, or switch to a hosted VOIP provider that handles 1300 numbers natively. For most SMBs that need a 1300 number, a dedicated hosted VOIP provider is simpler and cheaper.

What is Direct Routing for Teams Phone and do I need it?

Direct Routing is a Teams Phone calling architecture that lets you connect your own SIP trunk (from any compatible AU carrier) to Microsoft's Phone System instead of buying a Microsoft Calling Plan. It gives you more flexibility on carrier choice and per-minute call rates, and it can be cheaper per month for high-call-volume businesses. The downside is complexity: it requires configuring a Session Border Controller (SBC), setting voice routing policies in Microsoft's admin centre, and testing thoroughly. Most Australian SMBs with under 20 staff should use Microsoft Calling Plans (simpler, more expensive) or avoid Teams Phone altogether in favour of a hosted VOIP provider. Direct Routing makes sense when you already have a managed IT provider experienced with Teams Phone, or when call volume is high enough to justify the setup cost.

How does Teams Phone handle number porting in Australia compared to hosted VOIP?

Number porting into Teams Phone in Australia runs through Microsoft's carrier backend, which is slower and more complex than porting to a standard Australian VOIP provider. Realistic timelines for porting a geographic number into Teams Phone Calling Plans range from 2 to 4 weeks or longer, and the process requires an authorisation code from your current provider plus correct paperwork submitted through Microsoft's admin portal. If anything goes wrong, support is through Microsoft's partner channel, not a local AU carrier. Hosted VOIP providers in Australia are licensed carriers who handle porting directly under ACMA's Local Number Portability rules. Geographic numbers typically port in 5-10 business days, and your provider manages the process with local support available if there are complications. If your business has a porting deadline, this difference is significant.

Is it possible to use Teams for meetings and chat but a separate VOIP system for phone calls?

Yes, and many Australian businesses operate this way. Teams handles internal collaboration (messages, video meetings, file sharing) and external VOIP handles your business phone number and customer-facing calls. The two systems run independently. Staff use Teams on their computers for internal communication and a VOIP softphone app or desk phone for external calls. The practical trade-off is having two communication apps rather than one. Most businesses that have tried both models report the hybrid approach works well in practice, costs significantly less than Teams Phone, and is easier to set up and support. The hybrid approach makes particular sense if you need a 1300 number, have a time-sensitive number port, or have limited IT support.

What happens to Teams Phone calls during a power outage in Australia?

Teams Phone calls stop working during a power outage, just like hosted VOIP. Both systems run over your NBN connection, and your NBN equipment (modem, NTD) loses power when mains electricity cuts out. Unlike traditional landlines, there is no battery backup at the exchange to keep calls running. To maintain call capability during an outage, you need either a UPS (uninterruptible power supply) on your NBN equipment, a mobile data failover router, or a call forwarding rule that sends calls to a mobile number when the system is unreachable. The same planning applies equally to Teams Phone and hosted VOIP.

Which option is better for a small business that is just setting up its first proper phone system?

For most Australian small businesses setting up a phone system for the first time, dedicated hosted VOIP from an Australian provider is the right starting point. The setup is simpler, the per-seat cost is lower, 1300 numbers are natively supported, and you get local Australian support during business hours. Teams Phone adds meaningful value only if you already have an active Teams environment with 20+ users, a managed IT provider handling your Microsoft licensing, and no near-term need for a 1300 number or complex call routing. If you are not sure which option suits your business, use our free recommendation service to get matched with the right provider and plan.