Saving Pennies or Dollars? VoIP Options Versus a Landline

saving pennies or dollarsSaving Pennies or Dollars is a new semi-regular series on The Simple Dollar, inspired by a great discussion on The Simple Dollar’s Facebook page concerning frugal tactics that might not really save that much money. I’m going to take some of the scenarios described by the readers there and try to break down the numbers to see if the savings is really worth the time invested.

Al writes in: I’ve been trying to figure out whether it’s worth it to switch my home phone service to Skype or Vonage or Magic Jack or one of those other services. Do you save pennies or dollars by switching?

Well, let’s look at the three plans you named.

Skype offers unlimited long distance calling for most of North America (including all of the U.S. and Canada) for $7.99 a month. To receive calls, you’ll also need a Skype phone number, which costs $6 per month. You also will have to buy a phone adapter or use your computer for calls. You’ll also need high speed internet, of course.

Vonage offers unlimited long distance calling for the entire U.S. for $24.99 a month, but there a lot of different discounted deals floating around out there that lowers the price a bit. You’ll also need high speed internet.

MagicJack offers unlimited long distance calling for the entire U.S. for $40 for the first year and $20 for each additional year. You’ll also need high speed internet, of course.

MagicJack has the lowest prices, but also has the worst customer service and quality of service reputation. I’ve had very little problem with and heard very little complaint about Skype or Vonage, though I found Vonage’s setup to be a bit easier and Skype’s prices are lower.

What about ordinary phone service? You’re going to find a huge variety in available plans depending on who your local provider is. The local provider in our area provides unlimited free calling to anywhere in the U.S. for $46 a month. There’s also a more basic package for around $22 a month that offers free local calls, free incoming calls, and nationwide long distance for $0.10 a minute.

So, if you have high speed internet anyway, you’ll save money using any of the VoIP providers. How much money you save depends on what phone offers are available in your area, but this is definitely in the “save dollars, not cents” area.

Now, if you’re only going to get high speed internet because you intend to use it in part for the phone service, it depends on how much the internet service actually is and how much you intend to utilize it for other things. Increasing your internet speed beyond a typical low-end DSL or cable connection won’t make a whole lot of impact on how you surf the web. It mostly only shows up with things like streaming video or online games like World of Warcraft and it will certainly improve your call quality with VoIP services like these.

Will you get additional value out of high-speed internet beyond just Skype or Vonage or MagicJack? If the answer to that question is yes, then switching to VoIP will probably save you some money. If you’re unsure, then the switch probably isn’t worth it because of the extra internet costs.

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