Why is the cost so low?

The VoIP provider does not have many of the fixed expenses that your local Telco (telephone company) does. Thus, their costs are lower. For example:

Telco	VoIP
Maintains a network of poles, wires, and distribution equipment. Some Telcos are investing billions of dollars in fiber networks.	Customers are connected via an Internet connection, often provided by the Telco.
Has a large investment in real estate for local switching centers spread throughout cities, as well as in rural areas.	There are no local switching centers. Their server farm and other equipment may be located anywhere in the world.
Maintains a business office to handle service changes and billing inquiries. Some of this can now be done on line.	Most services are set up and altered on line. Pre-sales support is available by phone or through on-line chat.
Maintains a large billing center to receive and process many thousands of payments per day.	Receives payment through a monthly credit card charge.
Maintains a large repair center for trouble calls. Must troubleshoot problems from the switching center to the customer's premises.	Maintains a small call center to handle the more complex repairs. Most issues can be resolved on line.
Has tolling arrangements to allow other companies to connect to their lines and their customers.	May have to pay the Telco to connect to their customers.

VoIP providers must pay to connect to the Telco's lines and they do have a substantial investment in servers, routers, and other related equipment. But their fixed costs are generally lower than those of a Telco and thus they can charge less for comparable service.

The Telcos are adapting to the Internet age, though. Many of them offer on-line systems for changing services or ordering new services. Perhaps it is telling that the some Telcos offer VoIP.

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