Microsoft Teams Phone vs Traditional VoIP: Which Should Melbourne Businesses Choose?

If you’re running a small business in Melbourne and your phone system is due for an upgrade, you’ve probably come across two options that keep coming up: Microsoft Teams Phone and traditional VoIP. Both run on internet-based voice calling, but they are built for different kinds of businesses and serve different needs.

This guide breaks down the key differences so you can make the right choice for your business without wading through technical jargon.

What Is Microsoft Teams Phone? (Quick Definition)

Microsoft Teams Phone is the calling feature built into Microsoft Teams. It lets you make and receive business calls through the Teams app, on desktop, mobile, or via desk phones, without needing a separate phone system.

Think of it as adding a full phone system to the collaboration tool your team is probably already using. Teams Phone replaces traditional PBXs and provides a near-full suite of calling features, including hold, transfer, reporting, and voicemail. 

Key facts:

• Microsoft Teams reached 320 million monthly active users in early 2024, with the platform seeing significant growth across diverse sectors. 
• Australia has 269,000 companies currently using Microsoft Teams DigiExe, making it one of the top five countries globally for Teams adoption.
• Roughly 150,000 Australian companies use Microsoft 365 OneCloud, meaning a large portion of local businesses already have access to Teams Phone as part of their existing subscription.

How Teams Phone Differs from Traditional VoIP

Traditional VoIP (Voice over Internet Protocol) is a cloud-based phone system that replaces your traditional phone lines. It gives you calling features like IVR, call recording, and voicemail, but sits separately from your other business tools.

Microsoft Teams Phone uses VoIP technology under the hood, but it lives inside the Microsoft 365 ecosystem. So instead of toggling between a VoIP app and Teams for chat and video conferencing, everything sits in one place.

The short version: traditional VoIP is a standalone phone solution. Teams Phone is a unified communication platform that includes voice calling.

What You Need to Run Teams Phone in Australia

To get Teams Phone up and running in Melbourne, you’ll need:

• A Microsoft 365 subscription that includes Teams Phone (available on select Business and Enterprise plans)
• A calling plan or Direct Routing setup via a local Australian provider to connect to the public phone network (PSTN)
• A reliable NBN or fibre internet connection (more on speeds below)
• Optionally, certified desk phones or a headset

Teams Direct Routing is the most popular path for Australian businesses. It lets you connect Teams to an Australian carrier of your choice, giving you local number support and competitive call rates.

Head-to-Head Comparison: Teams Phone vs Traditional VoIP

• Call Quality and Reliability

VoIP call quality in 2026 has improved dramatically across both platforms. When paired with a solid NBN connection, calls on both Teams Phone and a standalone VoIP system are largely indistinguishable from a traditional landline.

That said, Teams Phone routes signalling through Microsoft’s Australian data centres, which keeps latency low for local calls. Traditional VoIP providers also typically operate on Australian infrastructure, so geography alone isn’t a major differentiator.

What actually affects call quality:

• Upload and download speeds on your NBN connection
• Network congestion during peak hours
• Quality of your router and internal network setup

For most Melbourne businesses on an NBN 100 or above plan, both options perform reliably. If you have more than 20 concurrent callers, a dedicated fibre connection is worth considering.

Features Comparison (IVR, Call Recording, Mobile App)

Traditional VoIP offers strong calling features and can integrate with CRM systems through third-party connectors. Modern VoIP platforms also support mobile apps, call flows, and hosted PBX functionality. The gap between them on pure phone features is smaller than it used to be.

• AI Features: Where Teams Phone Pulls Ahead

This is where Teams Phone clearly separates itself. AI-powered features, including real-time captions and live translation, are now used in approximately 42% of Teams meetings.

Teams Phone AI features available in 2026 include:

• Live call transcription during conversations
• Automatic call summaries after meetings
• Intelligent noise suppression to filter background noise
• Copilot integration for post-call follow-ups and action items
• Voicemail transcription sent directly to your inbox

Traditional VoIP offers limited AI features, and where they exist, they often require additional licensing or third-party tools. For businesses that want to use Microsoft 365 and have AI built into their communications workflow, Teams Phone is the clear winner here.

• Cost Comparison for a 20-Person Melbourne Business

Rather than quoting specific figures that may shift with plan changes, here’s a practical cost framework:

Teams Phone costs to consider:

• Microsoft 365 subscription (which may already include Teams Phone on certain plans)
• Calling plan or Direct Routing fees from your Australian provider
• Any hardware (certified headsets or Teams-compatible desk phones)

Traditional VoIP costs to consider:

• Monthly per-user licensing from your VoIP provider
• Hardware: IP phones, headsets
• Set up and porting fees for existing numbers

The key cost question is: Do you already use Microsoft 365? If your organisation already runs Microsoft 365 Business or Enterprise, adding Teams Phone is usually far more cost-effective than maintaining a separate VoIP system. You’re paying for one platform instead of two.

If you’re not in the Microsoft ecosystem, a standalone VoIP system may be the more economical path, especially for small business owners with simple communication needs.

Table: NBN Speed Requirements by User Count

When to Stick With Traditional VoIP

Traditional VoIP is still a strong option for businesses in certain situations. Consider staying with a standalone VoIP system if:

• You’re not using Microsoft 365. If your organisation runs Google Workspace or another platform, integrating Teams Phone adds unnecessary complexity.
• You need deep CRM integration. Modern VoIP platforms integrate with CRM systems more flexibly, especially for businesses on Salesforce, HubSpot, or other non-Microsoft tools.
• You have a legacy system you’re not ready to replace. Hosted PBX and hosted VoIP systems can often be set up alongside existing infrastructure, making the transition more gradual.
• Your team is small, and your communication needs are basic. Phone systems for small businesses with fewer than five staff don’t always need the full Microsoft 365 ecosystem. A cloud-based phone system with basic calling features can be more than enough.
• You already use a VoIP provider you’re happy with. If your VoIP provider delivers solid call quality, reliable support, and a competitive calling plan, switching solely for the sake of it may not make sense.

Many businesses across Melbourne and regional Victoria operate perfectly well on a traditional VoIP setup. The question is whether your future needs will outgrow it.

When Teams Phone Is the Right Answer

Teams Phone is ideal for businesses and organisations already using Microsoft 365 as their primary platform. It makes particular sense when:

• You’re already using Microsoft Teams for chat and meetings. Adding voice calling means your team works from a single platform for all communication, rather than juggling multiple tools.
• You want AI features built into your calling workflow. Live transcription, call summaries, and Copilot integration are valuable for businesses to communicate faster and document conversations automatically.
• You manage a hybrid or remote team. Teams Phone works natively across desktop, mobile phone, and desk phones, keeping distributed teams connected on one system.
• You want to unify communication across your organisation. A single platform for voice calling, video conferencing, messaging, and file sharing reduces tool fatigue and simplifies IT management.
• You’re growing. Microsoft 365 scales easily, so as your team expands, adding new users to Teams Phone is more seamless than managing contracts across multiple vendors.

Teams Phone has around 80 million users globally, of which over 20 million use PSTN-based calling. The platform is best suited for organisations that are already invested in the Microsoft 365 environment and want to extend it into voice.

How to Migrate From Your Current Phone System

Switching to Teams Phone from a traditional phone system or standalone VoIP is more manageable than many businesses expect. Here’s a general process:

1. Audit your current setup. List all active numbers, call flows, IVR configurations, and any hardware in use.
2. Check your Microsoft 365 licensing. Confirm whether your existing plan includes Teams Phone or if an add-on is required.
3. Choose a Direct Routing provider. An Australian Teams Direct Routing provider handles the PSTN connection, number porting, and call management on your behalf.
4. Port your existing numbers. You can keep your current business numbers when switching. Number porting transfers your existing lines to the new system.
5. Configure call flows and auto attendants. Recreate your IVR menus, ring groups, and voicemail settings in the Teams admin centre.
6. Train your team. Most staff adapt quickly since Teams is already familiar. The calling interface is simple and consistent across devices.
7. Run parallel systems briefly. During migration, run both systems simultaneously to catch any issues before full cutover.

A managed IT or telco partner in Melbourne can handle most of this process on your behalf, minimising disruption.

The Bottom Line: Find the Best Fit for Your Business

The right choice for your business comes down to one main question: Are you already using Microsoft 365?

If you’re already running Microsoft 365 and using Microsoft Teams for internal communication, adding Teams Phone is a natural, cost-effective step. It gives you a unified communication platform, strong AI features, and one less vendor to manage.

If you’re not in the Microsoft ecosystem, or if your business relies heavily on non-Microsoft tools, a modern VoIP platform may still be the right fit for your business needs.

Either way, Australian businesses in 2026 don’t need to stick with traditional phone lines. Both options deliver reliable, cloud-based phone systems that are far more flexible than anything a traditional PBX or landline setup can offer.

Want to talk through which phone solution suits your Melbourne business? The team at Telco ICT Group works with businesses across Melbourne to choose, implement, and manage business phone systems that actually fit how you work. Get in touch today.

Frequently Asked Questions

Can I keep my existing phone numbers with Teams Phone?
Yes. Number porting lets you transfer your existing business number across to Teams Phone, so your clients won’t need to update their contact details.

What NBN speed do I need for Teams Phone?
For a small team of up to 10 users, NBN 50 Mbps is generally sufficient. Larger organisations of 20 or more users will benefit from NBN 100 Mbps or a dedicated fibre connection for consistent call quality.

Does Teams Phone replace my desk phones?
Not necessarily. Teams-certified desk phones can still be used alongside the Teams app. Many Melbourne businesses choose to keep some desk phones while allowing remote staff to use the mobile or desktop app.

How much does Teams Phone cost per user in Australia?
Costs vary depending on your Microsoft 365 plan and your chosen Direct Routing provider. Contact Telco ICT Group for a quote tailored to your business size and calling needs.

What’s the difference between Teams Direct Routing and a Calling Plan?
A Microsoft Calling Plan is a Microsoft-managed PSTN service. Direct Routing connects Teams to an Australian carrier of your choice via a Session Border Controller (SBC), typically offering more flexibility and better rates for Australian businesses.