Microsoft Teams Phone licensing: what you buy to replace a phone system

Businesses replacing an aging phone system keep hitting the same wall: they already pay for Microsoft 365, Teams is already installed, and it is not obvious what else has to be purchased before the phone on the desk rings. The answer involves more line items than most quotes show.

This is a walkthrough of how Teams Phone is licensed, in order, with the traps marked. Every claim links to Microsoft's documentation. We quote no prices, because they vary by country and change; the current figures are on Microsoft's Teams Phone plans page.

The single most important idea

A phone license and phone service are two separate purchases.

Microsoft states this directly: "A PSTN solution is separate from a Teams Phone license," on the Teams Phone features page. PSTN stands for public switched telephone network, which is the ordinary phone network everyone else is on.

The license turns Teams into a business phone system. It does not include a single minute of calling to the outside world. Almost every unpleasant surprise in a Teams Phone project comes from someone assuming it did.

Step one: Teams Phone Standard

Teams Phone Standard is the per-user add-on that provides the phone system itself. It is required for anyone who needs their own phone number, or who needs to dial an outside number at all.

What it turns on, per Microsoft's feature list: dialing by number rather than only by name, call forwarding and simultaneous ring, call groups, call delegation (a shared line, so an assistant can answer for an executive), call park and retrieve, external caller ID, call blocking, dial plans, auto attendants, call queues, and emergency calling.

Available without it: internal Teams calling, voicemail, music on hold, and answering a call for a colleague.

Teams Phone Standard requires a qualifying base license. Microsoft's Teams Phone licensing page lists them, including Microsoft 365 Business Basic, Business Standard, Business Premium, F1, F3, E3, and Microsoft Teams Enterprise. If your people are on Microsoft 365 E5, the phone system is already included and you do not buy Teams Phone Standard separately.

Buy it on an annual term, paid annually. Teams Phone licenses are seats like any other Microsoft 365 seat, and they carry the same two independent settings: the term you commit to, and how often you are invoiced. The annual term costs less per seat than month-to-month, and paying once up front means one invoice a year instead of 12. Phone seats are also among the most predictable lines on a Microsoft bill, because the number of people who need to dial outside numbers tracks your headcount rather than any project, so there is little reason to pay the month-to-month premium on them.

Step two: getting dial tone

There are four ways to connect Teams to the phone network. Microsoft compares them on its connectivity options page. The trade-off is who you buy from, who you call when it breaks, and how much equipment you own.

Microsoft Calling Plans

Microsoft becomes your carrier. There are three flavors, described on the Calling Plans page:

• Domestic Calling Plan. A monthly bundle of outbound minutes for calls inside your own country. Incoming calls are unlimited.
• International Calling Plan. Domestic minutes plus international minutes to 196 countries.
• Pay-As-You-Go Calling Plan. Unlimited incoming, zero included outbound minutes, and every outbound call billed by the minute.

Minutes pool at the company level. If 100 people in the United States each have a Domestic Calling Plan allocating 3,000 minutes, they share a pool of 300,000 minutes, and anything past it is billed per minute. Pooling only happens across identical plans, so a mix of Domestic and International licenses gives you two separate pools rather than one large one.

Microsoft also sells Teams Phone with Calling Plan as a single bundled license: the phone system and the minutes in one line item. If Calling Plans are available where you operate and you are not on E5, this is usually the simplest thing to buy.

Operator Connect

Your existing carrier, if it participates in Microsoft's program, brings the phone service into your tenant. Per Microsoft's Operator Connect page, the operator manages the infrastructure and the session border controllers, numbers are assigned from the Teams admin console, and the operator provides support with an escalation path into Microsoft. You still need Teams Phone licenses for every user. What you avoid is buying and running hardware.

Direct Routing

You connect your own carrier through a session border controller, a device (physical or virtual) that sits between your carrier's phone line and Microsoft's cloud and translates between them. Microsoft's Direct Routing planning page lists what you take on: a certified session border controller, a public network address for it, a purchased security certificate, firewall rules, and specific routing configuration in Teams. Microsoft supports only certified devices, and if something breaks you contact the device vendor first, not Microsoft.

Direct Routing is the most capable option and the most work. It fits when you have analog devices to keep alive, a carrier contract you cannot exit, or a country where Microsoft does not sell service. It fits poorly when chosen purely to shave the monthly cost, because the certificate renewals, the device, and the person who understands it are all real costs.

Pay-as-you-go, Communication Credits, and the toll-free rule

Some calls are billed per minute no matter which plan you hold: minutes past your pool, calls to countries not in your plan, and every call on a pay-as-you-go plan. You fund those in one of two ways, per Microsoft's Communication Credits page: Communication Credits, a prepaid balance you top up with an auto-recharge setting, or post-usage billing, where you pay for last month's minutes in arrears under a Microsoft Customer Agreement.

Two things to know. Credits cannot be purchased by customers on a Microsoft Customer Agreement, and if you bought your calling plan through a partner, the partner funds them on your behalf. And if you set a one-time balance and it reaches zero, most calling scenarios stop working.

The toll-free gotcha. All toll-free usage is billed per minute and requires a funded balance, whether the number is on your main line, your auto attendant, or your dial-in conferencing bridge. Microsoft is explicit that toll-free numbers cannot even be reserved without pay-as-you-go billing in place, on its number acquisition page. A toll-free number is not a flat monthly fee. It costs you money every minute a customer sits on hold.

The free license everyone forgets

This is the single most common thing that stalls a Teams Phone go-live.

Every auto attendant ("press 1 for sales") and every call queue (a ring group that hunts for an available person) needs a resource account, a non-human account that holds the phone number. Each one must be assigned a Microsoft Teams Phone Resource Account license.

That license costs nothing. Microsoft states there is no longer any cost to acquire them. But you still have to place an order for them in the admin console, even at zero cost, and then assign them. They do not appear automatically.

The rules that catch people:

• Every resource account needs one, whether or not it gets a phone number.
• Do not assign a Teams Phone Standard license to a resource account instead. Microsoft warns that if you swap the licenses in two separate saves rather than one, the resource account can break and your auto attendants and call queues stop working.
• Nested menus that hand calls to another menu do not each need their own account. License the first one that receives the call, per the prerequisites reference.
• The rule that changed: as of November 1, 2025, if your auto attendant or call queue makes outbound calls (transferring a caller to an outside number, or offering a callback), the resource account needs a funded pay-as-you-go license or Communication Credits. A calling plan license on the resource account is no longer sufficient. Without it, those outbound calls fail. This is documented in the same prerequisites reference.

A call queue with callback enabled and no funded balance looks configured, tests fine on inbound, and fails the first time a customer requests a callback.

Lobby phones, warehouse phones, and shared calling

Common area phones. A handset in a lobby, breakroom, or warehouse is not a person and should not consume a user license. It signs in with a device account holding a Microsoft Teams Shared Space license, which Microsoft renamed from Teams Shared Devices in April 2026. The phone system capability is included, so you do not add Teams Phone Standard on top. You still need a way to reach the outside world: a calling plan on that account, or your Direct Routing or Operator Connect service. Setup steps are on the common area phones page.

Shared Calling. For staff who make the occasional outside call but do not need their own published number, Shared Calling lets a group place outbound calls using a single number belonging to a resource account. Outbound calls show the main company number as caller ID, and inbound calls route through the auto attendant. Users still need a Teams Phone license, but not a number and not a calling plan of their own, per the Shared Calling page. Where 40 people occasionally dial out and 12 need desk lines, this changes the shape of the bill.

Audio Conferencing is not phone service

Audio Conferencing gives your meetings a dial-in number so someone with no internet can join by phone. It is a different product, and Microsoft notes that it does not require a Teams Phone license.

• Only people who schedule or host meetings need it. Attendees who dial in need nothing.
• It is included in Microsoft 365 and Office 365 E5, and is an add-on for Business Standard, E1, and E3.
• Microsoft offers a free tier covering dial-in plus outbound dialing to the United States and Canada, and a paid tier adding 60 outbound minutes per user per month to a broader set of countries, pooled across your company. Both are on the Teams add-on licensing page.
• Toll-free conference numbers and dial-out beyond the included countries require funded credits.

Porting your numbers

Nobody changes their phone number to change phone systems, so porting is on the critical path of every project. Microsoft's port planning guide is clear about how this goes.

You submit a port order with a letter of authorization, and Microsoft takes it to your current carrier. That carrier decides whether to approve it and on what date. Microsoft states plainly that it "has no say in the port approval decision."

The realities:

• Timing. Seven to 14 days end to end, and up to 30 days depending on the carrier. A minimum five-day lead time applies in the United States, and 10 days in Canada. Microsoft recommends targeting a date at least 15 business days out, choosing predictability over speed.
• Batching. One order covers numbers sharing the same carrier, account number, billing telephone number, number type, and service address. Multiple sites or carriers means multiple orders, processed one at a time.
• The most common failure. Account details that do not exactly match the carrier's records: wrong authorized contact, wrong address, wrong account number. Ask your carrier for their official record of your account before you submit anything.
• Two things that will get you rejected. An account freeze (removing one can take one to three weeks) and advanced call features such as hunt groups left enabled on the numbers.
• Do not cancel your old service first. Disconnected numbers cannot be ported.
• Fax will not survive. Fax numbers can move, but faxing will not work afterward. Teams has no fax service. If a fax line matters, plan separately for it.

Emergency calling is a legal obligation

This is the section people skim, and it is the one with legal exposure attached.

In the United States, Kari's Law and the RAY BAUM'S Act apply to multi-line telephone systems, which is what you are installing. Together they require direct 911 dialing with no prefix, notification to a designated person on site when someone dials 911, and delivery of a "dispatchable location" precise enough for responders to find the caller. Microsoft cites both on its emergency addresses page, and the requirements are published by the Federal Communications Commission.

What this means in practice:

• Every user with a phone number needs a registered emergency address. With Microsoft Calling Plans in the United States and Canada, this is required at the moment a number is assigned, per the Calling Plan considerations page.
• Dynamic emergency calling handles a workforce that moves. Teams can detect which network a person is connected to and route their 911 call to the answering point for that location, rather than the address on file for their number. Getting there means an administrator mapping your networks to validated addresses.
• People working from home are covered too. Microsoft supports letting users set their own emergency address for wherever they are, but an administrator turns that on with a policy.
• Support varies by connectivity option. Microsoft Calling Plans include emergency screening and registered addresses. With Operator Connect, your carrier handles it. With Direct Routing, registered addresses are not supported the same way and call routing requires configuration you own, per the connectivity comparison.
• Microsoft's own terms note the limits: with the internet or power out, emergency calls through Teams are not expected to work.

Ask any quote you receive to name who configures emergency locations and who is accountable for them. If the answer is vague, the answer is you.

Handsets

You do not have to give everyone a desk phone. Many deployments are a headset and the Teams app, with physical handsets only in lobbies, warehouses, and for people who want one.

Handsets need to be certified for Teams. Microsoft maintains a list of certified models with a certification end date for each, and commits to supporting a device for two years after that date. Check it before you buy, because a phone certified through 2028 and one certified through 2030 can sit on the same shelf at similar prices.

Handsets from your old phone system almost certainly will not work, because they were built for that system. Budget for new devices or headsets, and treat any promise that your existing phones will carry over as something to verify in writing.

What happens to a number when someone leaves

The number belongs to your company, not to the person. An administrator unassigns it in the Teams admin console, per Microsoft's phone number management page, and it returns to your inventory for the replacement.

Two things to handle deliberately. Their Teams Phone license is a paid seat, so unassign it rather than leaving it idle. And if customers still call that number, route it to the replacement, a call queue, or the main auto attendant. Routing calls to unassigned numbers is a built-in Teams Phone feature, so a departure does not have to mean a dead line.

Where to start

Three questions shape the whole quote. How many people need to dial outside numbers, and how many only talk internally? Do you have to keep your current carrier or any analog equipment? And how many auto attendants and call queues does your business run today, counting the ones nobody documented?

If you are evaluating a phone system change, bring Wired CIO your current carrier bill and a sketch of how calls flow through your business today, including who answers the main line and what happens after hours. We will map it to what has to be licensed and which of the four connectivity options fits.