Microsoft Teams is already the hub for your team’s chat, video calls, and file sharing. But what about using it as your actual phone system? To make and receive external calls, you need to connect Teams to the Public Switched Telephone Network (PSTN). This presents a critical choice between three main options: Microsoft Teams Direct Routing, Operator Connect, and Microsoft Calling Plans. Each path offers different benefits, and picking the right one is key to creating a seamless communication experience for your entire organization.
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This guide breaks down what each option involves, what hardware and licenses you need, and how to decide which path works for your organization. If you are an IT leader evaluating Teams as a full phone system replacement, this comparison will save you hours of research.
What Is Microsoft Teams Direct Routing?
Microsoft Teams Direct Routing is a method of connecting Teams to the PSTN through a third-party carrier using a Session Border Controller (SBC). The SBC sits between your carrier’s voice network and Microsoft 365, translating SIP signaling so Teams users can make and receive external calls.
Direct Routing gives organizations control over carrier selection, call routing rules, and voice infrastructure. Businesses that run complex multi-site phone systems, need to keep existing carrier contracts, or require advanced PBX features often choose this option. According to Microsoft’s documentation, Direct Routing supports nearly any telephony carrier worldwide, as long as the SBC is certified for Teams.
The trade-off is complexity. Your IT team (or a managed service partner) handles SBC deployment, certificate management, SIP trunk configuration, and ongoing maintenance. For organizations with in-house telecom expertise, that control is a benefit. For teams without those skills, it can become a burden.
Microsoft Teams in the Broader Microsoft Ecosystem
To really understand the options for Teams voice, it helps to see where Teams fits into Microsoft’s grand vision. It’s not just a standalone application; it’s the connective tissue for the entire Microsoft 365 suite and a central part of the company’s strategy. For decades, Microsoft has been building the foundational blocks in operating systems, productivity software, and cloud infrastructure. Teams is the platform that brings all those pieces together into a single interface for communication and collaboration, making it a powerful hub for modern business operations.
This integration is what makes Teams so compelling, but it also adds layers of complexity, especially when it comes to integrating essential services like enterprise-grade telephony. Understanding the history and the ecosystem helps clarify why options like Direct Routing exist and how they provide the flexibility needed for specialized industries like hospitality and healthcare. It’s about leveraging a massive, powerful platform while tailoring it to fit your specific operational and compliance needs, which is where a knowledgeable partner can make all the difference.
The Evolution from Skype to Teams
Many of us remember Skype for Business, and its transition to Teams marked a significant shift in Microsoft’s approach to workplace communication. While Skype focused primarily on real-time chat and calls, Teams was designed from the ground up to be a comprehensive collaboration hub. Microsoft officially retired Skype for Business Online in 2021, pushing its massive user base toward the more integrated and feature-rich Teams platform. This move consolidated efforts and accelerated adoption, creating a single, powerful tool for modern work.
The strategy clearly worked. Today, “Microsoft Teams already handles chat, video calls, and file sharing for over 320 million daily active users.” This explosive growth turned Teams into the default workspace for countless organizations. As businesses began to live inside Teams, the demand for deeper integrations grew. It was no longer enough to just chat and meet; users wanted to connect all their workflows, including the most critical one: external phone calls. This created the perfect environment for robust voice solutions to transform Teams into a complete Unified Communications as a Service (UCaaS) platform.
The Powerhouse Behind Teams: A Brief History
The success of Microsoft Teams didn’t happen in a vacuum. It’s the result of a long-term strategy built on decades of dominance in both enterprise and consumer technology. Think about it: Microsoft created the operating systems that run most of the world’s computers and the productivity suite (Office) that is the standard for business documents. This deep-rooted presence gave them an unparalleled advantage when building a collaboration platform. They weren’t just creating an app; they were creating a central nervous system for a digital ecosystem that businesses were already a part of.
This history provides essential context for IT leaders. When you adopt Teams, you’re not just getting a communication tool; you’re tapping into a vast network of interconnected services, from Azure cloud infrastructure to Active Directory for identity management. This integration is a double-edged sword: it offers incredible power and efficiency but also requires careful planning to manage. Understanding this background is key to making informed decisions about how you connect critical services, like your phone system, into this powerful but complex environment.
From Windows to the Cloud
Microsoft’s journey from a software company focused on the desktop (Windows) to a cloud-first powerhouse is the engine behind Teams’ success. The development of Azure, its global cloud computing platform, provided the scalable, secure, and resilient infrastructure necessary to support a service like Teams. Without Azure, handling millions of concurrent video meetings, chats, and file transfers simply wouldn’t be possible. This cloud foundation ensures that whether your employees are in a central office, a hotel property, or a remote clinic, their connection to Teams remains stable and reliable.
This shift to the cloud is mirrored in how businesses now consume technology. Instead of buying and maintaining on-premise servers for email (Exchange) or telephony, organizations can subscribe to these services through Microsoft 365. This model offers greater flexibility and reduces the hardware management burden on IT teams. However, it also requires a new set of skills for managing cloud services, security, and integrations. For telephony, this is where solutions like Direct Routing become vital, acting as a bridge between the cloud-native world of Teams and existing carrier relationships or on-premise equipment.
Strategic Acquisitions and Growth
Microsoft has a long history of accelerating its growth and expanding its capabilities through strategic acquisitions. The purchase of Skype in 2011 for $8.5 billion is perhaps the most famous example related to communications, giving Microsoft a massive user base and valuable voice-over-IP technology. Later, the acquisition of LinkedIn provided a deep well of professional network data and identity. These and other purchases weren’t just about buying competitors; they were about integrating new technologies and user bases into the ever-expanding Microsoft ecosystem, making the whole platform more valuable.
This growth strategy has made the Microsoft 365 suite incredibly powerful, but it also means navigating a complex web of licenses, features, and integrations. For specialized industries, the standard, out-of-the-box solutions may not be enough. That’s why Microsoft built Teams to be an extensible platform, allowing partners to create tailored solutions. Whether it’s integrating with property management systems in hospitality or ensuring HIPAA compliance in healthcare, the ability to browse all integrations and connect specialized tools is what makes Teams truly adaptable for any enterprise.
The Future of Teams: AI and Copilot Integration
If the last decade was about moving to the cloud, the next is all about artificial intelligence. AI is poised to fundamentally change how we work, and Microsoft is placing a massive bet on it with the integration of AI-powered “Copilots” across its entire product line, especially within Teams. This isn’t just about adding a few new features; it’s about transforming Teams from a place where work happens into a partner that actively helps you get work done. The goal is to automate mundane tasks, surface critical information, and make every employee more productive.
For business leaders, this represents a significant opportunity. Imagine AI summarizing a meeting you couldn’t attend, complete with action items, or an intelligent assistant handling routine customer inquiries so your staff can focus on high-value interactions. This is the future that Microsoft is building with Teams at its core. As this technology matures, it will become an essential tool for any organization looking to improve efficiency and deliver better experiences for both employees and customers. The key will be learning how to harness these new capabilities effectively.
What is Microsoft Copilot?
Think of Microsoft Copilot as an intelligent assistant embedded directly into the Microsoft 365 applications you use every day. It combines the power of large language models (the same technology behind ChatGPT) with your organization’s own data—your emails, documents, chats, and meetings—to provide real-time, intelligent assistance. In Teams, for example, Copilot can join a meeting and provide a live transcript, summarize the discussion, and even identify who said what and what action items were agreed upon. It’s designed to be a true work companion.
The real power of Copilot is its context. Because it’s integrated with your data, it can do more than just answer general questions. You can ask it to “summarize the emails I missed from my boss this morning” or “create a presentation based on this Word document.” It understands your work relationships, your projects, and your company’s information. This deep integration aims to reduce the time spent on “digital debt”—the constant switching between apps and searching for information—freeing you up to focus on more strategic, creative tasks.
How AI is Changing Business Communications
While Microsoft Copilot is grabbing headlines, the impact of AI on business communications extends far beyond just meeting summaries. AI is revolutionizing how companies interact with customers and manage internal workflows. For industries like hospitality and healthcare, this is a game-changer. Instead of relying solely on human agents for every interaction, businesses can deploy AI-powered virtual assistants to handle common requests, from booking a hotel room to scheduling a doctor’s appointment, 24/7. This frees up staff to handle more complex and sensitive issues, improving both efficiency and customer satisfaction.
These advanced applications are where specialized AI solutions come into play. For example, an AI Virtual Assistant (AIVA®) can be trained on a hotel’s specific services to answer guest questions about pool hours or restaurant reservations directly through the phone system. In a healthcare setting, it can securely automate patient appointment reminders and follow-ups. By integrating AI directly into the voice channel, businesses can create seamless, intelligent experiences that go far beyond the capabilities of a standard phone system, turning every call into an opportunity to provide exceptional service.
Direct Routing vs. Operator Connect: Which Should You Choose?
Microsoft offers three main paths to PSTN calling in Teams. Each one handles the same core job, connecting Teams to external phone lines, but they differ in how much infrastructure you manage, which carriers you can use, and how much flexibility you get.
| Feature | Direct Routing | Operator Connect | Microsoft Calling Plans |
|---|---|---|---|
| Carrier choice | Any carrier with SIP trunking | Microsoft-verified operators (like BluIP) | Microsoft is the carrier |
| Infrastructure you manage | SBC (on-premises or virtual), SIP trunks, certificates | None; operator manages connectivity | None; fully managed by Microsoft |
| Setup complexity | High; requires SBC expertise | Low; activate in Teams Admin Center | Low; activate from Microsoft 365 admin |
| Number management | Third-party portal or SBC tools | Teams Admin Center | Teams Admin Center |
| SLA responsibility | Split between carrier and SBC vendor | Microsoft SLA with operator backing | Microsoft SLA |
| Legacy PBX support | Yes, via SBC integration | No | No |
| Hybrid deployments | Supported | Not supported | Not supported |
| Custom call routing | Full control via SBC policies | Standard routing | Standard routing |
| Geographic coverage | Depends on carrier | Depends on operator; global with Tier 1 providers | Limited to ~30 countries |
| Best for | Complex environments, existing carrier contracts | Businesses wanting carrier-grade voice without SBC overhead | Small teams with basic calling needs |
Bottom line: Direct Routing gives you the most control but demands the most work. Calling Plans are the simplest but the least flexible. Operator Connect hits a middle ground, offering carrier-grade reliability and global coverage with minimal IT effort.
See how BluIP Operator Connect simplifies Teams voice with carrier-grade reliability.
Your Microsoft Teams Direct Routing Setup Checklist
If you decide Direct Routing is the right fit, here is what you will need before configuration begins:
- Microsoft 365 licenses with Teams Phone: Every user making external calls needs a Teams Phone license (previously called Phone System). This is included in Microsoft 365 E5 or available as an add-on for E1 and E3 plans.
- A certified Session Border Controller: Microsoft maintains a list of certified SBCs from vendors like AudioCodes, Ribbon Communications, and Oracle. The SBC can be physical hardware in your data center or a virtual appliance in Azure or AWS.
- SIP trunking from a carrier: You need a carrier that provides SIP trunk connectivity. This is where your phone numbers and PSTN minutes come from. You can keep your existing carrier or choose a new one.
- Public IP address and SSL certificate: The SBC needs a public-facing IP and a TLS certificate from a trusted certificate authority. Microsoft’s documentation specifies which CAs are accepted.
- DNS records: Your SBC’s fully qualified domain name (FQDN) must resolve to the public IP. You will also need to configure media bypass settings if you want to reduce latency.
- Firewall rules: Ports 5061 (SIP signaling over TLS) and a range of UDP ports (typically 49152-53247) for media traffic must be open between the SBC and Microsoft 365 endpoints.
The setup process typically takes two to four weeks, depending on your existing infrastructure and how many locations you are connecting. Organizations with multiple sites or complex routing requirements should expect a longer timeline.
Is Microsoft Teams Direct Routing a Good Fit for You?
Direct Routing is not for everyone, but it is the strongest choice in specific situations:
- You have existing carrier contracts: If you are locked into multi-year agreements with a telecom provider, Direct Routing lets you keep those contracts and add Teams calling on top.
- You need advanced call routing: Organizations with complex IVR menus, call queuing rules, or least-cost routing across multiple carriers benefit from the SBC’s policy engine.
- You run a hybrid phone system: If some locations still use traditional PBX hardware and you are migrating to Teams in phases, Direct Routing supports that hybrid architecture.
- You operate in regions Operator Connect does not cover: While Operator Connect’s carrier network is growing, some countries and regions still lack verified operators. Direct Routing works with any carrier anywhere.
- Compliance requires on-premises call recording: Certain industries (finance, healthcare, government) need call recording infrastructure they control. An SBC can route calls through on-premises recording systems before they reach Teams.
If none of these apply to your business, Direct Routing may add complexity without a clear payoff. That is where Operator Connect becomes a better fit.
Why Some Businesses Prefer Operator Connect
Operator Connect removes the SBC from the equation entirely. Instead, a Microsoft-verified telecom operator (like BluIP) establishes a direct peering connection between its network and Microsoft’s cloud. You activate the service from the Teams Admin Center in minutes, not weeks.
Here is what that looks like in practice:
- Select your operator: Open the Teams Admin Center, go to Voice > Operators, and choose BluIP (or another verified provider).
- Provision phone numbers: Your operator assigns numbers directly through the Teams interface. No separate portal, no SBC configuration.
- Start calling: Users with Teams Phone licenses can make and receive external calls immediately.
BluIP is a Tier 1 global service provider and certified Microsoft Operator Connect partner. That means BluIP owns and operates its telecom infrastructure directly, rather than reselling another carrier’s network. For Teams voice, this translates to geo-redundant connectivity, carrier-grade reliability, and 24/7 support from engineers who manage the actual network, not just a help desk layer.
BluIP also offers a 30-day free trial for Teams Calling, so you can test the voice quality and management experience before committing. Dynamic E911 compliance (including RAY BAUM’s Act and Kari’s Law) is built in, which matters for organizations with distributed offices.
Request a demo to see how BluIP connects Teams to the PSTN without the SBC overhead.
A Step-by-Step Guide to Setting Up External Calling
Regardless of which PSTN option you choose, the general process follows these steps:
- Confirm your licensing: Verify that users have Teams Phone licenses assigned in the Microsoft 365 admin center. Check your current plan: E5 includes it, E1 and E3 need the add-on.
- Choose your PSTN method: Based on the comparison above, pick Direct Routing, Operator Connect, or Calling Plans. Most mid-size and enterprise organizations choose Operator Connect or Direct Routing for better carrier flexibility.
- Set up voice routing: For Direct Routing, this means configuring the SBC, creating voice routing policies, and assigning PSTN usage records. For Operator Connect, the operator handles routing; you just assign numbers to users.
- Port or provision phone numbers: Transfer existing numbers from your old phone system or get new ones. Number porting typically takes 7 to 14 business days. BluIP’s SIP trunking services can help bridge the gap during migration.
- Configure emergency calling: Set up emergency addresses for every user and location. This is a legal requirement in the US, not an optional step. Your carrier or operator should provide dynamic E911 support.
- Test and roll out: Start with a pilot group. Verify call quality, check number display, test transfers and voicemail. Then expand to the full organization.
For organizations using BluIP’s cloud PBX platform, the Teams integration works alongside other communication tools. That means you can run Teams voice for office staff while using BluIP’s AIVA Connect platform for AI-powered customer interactions at the same time.
Breaking Down the Costs: Direct Routing vs. Operator Connect
The total cost of Teams voice goes beyond the per-user license fee. Here is what to account for with each option:
Direct Routing costs include:
- Teams Phone license ($8/user/month with E1 or E3, included in E5)
- SBC hardware or virtual appliance ($2,000 to $15,000+ depending on capacity)
- SBC maintenance and software updates (annual support contracts)
- SIP trunk service from your carrier (per-channel or per-minute pricing)
- SSL certificates (annual renewal)
- IT staff time for deployment and ongoing management
Operator Connect costs include:
- Teams Phone license ($8/user/month with E1 or E3, included in E5)
- Operator service fee (varies by provider; typically per-user/month)
- No SBC costs, no certificate management, no dedicated IT overhead
For organizations with fewer than 500 users and no legacy PBX requirements, Operator Connect almost always costs less when you factor in the hidden expenses of SBC ownership. For larger enterprises with existing telecom teams and complex routing, Direct Routing’s upfront investment can pay off through carrier negotiation flexibility.
Frequently Asked Questions
Direct Routing vs. Operator Connect: What’s the Difference?
Direct Routing connects Teams to the PSTN through an SBC that your organization manages. Operator Connect uses a Microsoft-verified carrier to provide PSTN connectivity directly through the Teams Admin Center. Direct Routing gives more control over call routing and carrier selection. Operator Connect is faster to deploy and requires no on-premises equipment.
Do I Need a Special License for Teams Direct Routing?
You need a Teams Phone license for every user who makes external calls. This is included in Microsoft 365 E5 plans. For E1 or E3 plans, you can add it as a standalone license at about $8 per user per month. You also need a valid Microsoft 365 subscription with Teams.
Can I switch from Direct Routing to Operator Connect?
Yes. Many organizations start with Direct Routing and migrate to Operator Connect once a verified operator is available in their region. The migration involves removing the SBC configuration, selecting an operator in the Teams Admin Center, and re-assigning phone numbers. Carriers like BluIP offer guided migration support to handle the transition.
How Long Does a Direct Routing Setup Take?
A typical Direct Routing deployment takes two to four weeks. This includes SBC procurement and configuration, SIP trunk setup, certificate installation, DNS configuration, and testing. Operator Connect deployments can be completed in one to three business days because the carrier manages the infrastructure.
Is Direct Routing being discontinued by Microsoft?
No. Microsoft continues to support and update Direct Routing. However, Microsoft has been investing heavily in Operator Connect and Teams Phone Mobile as newer alternatives. Direct Routing remains the best option for organizations that need SBC-level control or operate in regions without Operator Connect coverage.
Key Takeaways
- Decide between control and convenience: Direct Routing offers maximum control over your carriers and routing, which is ideal for complex setups with existing contracts. Operator Connect provides a simpler, faster path to calling by having a verified partner manage the technical infrastructure for you.
- Direct Routing requires technical expertise and resources: This path is not plug-and-play. You are responsible for deploying and maintaining a certified Session Border Controller (SBC), managing carrier SIP trunks, and having the IT skills to handle the configuration.
- Operator Connect simplifies your setup: This option removes the need for an SBC and its associated technical overhead. You work with a certified provider to manage phone numbers directly in the Teams Admin Center, resulting in a faster deployment with carrier-grade reliability.
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