I am a small business receiving between 3000 to 5000 faxes a month. For various reasons, hosted faxing is it for me, since I work from multiple locations. My current hosted faxing (myfax) is killing me in cost. I want to try out some cheaper ones, but am not sure about their reliability. I would like to use the virtual number to forward to whatever is my current fax number. Most virtual numbers layer another 1.5 to 10 cents per minute. My forwarding will be in the same area code, so I see no reason not to get a flat fee service. Do folks like vonage forward from the switch (ie pstn to pstn) or does it get come to my voip box before bouncing back? Thanks in advance for any help.

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I personally have not seen any VoIP services that provide for "unlimited forwarding" of incoming calls to a VoIP DID (Direct Inbound Dialing) phone number.
Most unlimited packages, that I've seen, pretain to "Unlimited Incoming" calls, or "Unlimited Outgoing" calls, or both. But, when it comes to "Forwarding" of incoming calls, that is usually billed at the carriers "pay-per-call" rate. Why, I'm not completely sure, but I believe it is because the "forwarded" portion of the incoming call has to be handled as a separate outbound termination call and incurs extra costs that the carrier doesn't want to absorb, so it's passed on to you, the user making the call-forward connections.
To answer your question as to how a call is forwarded:
The incoming call has to be handled by your VoIP carrier as an incoming call. Then, according to your account settings, that incoming call initiates a new outbound termination call directed to the forwarding phone number you want your calls redirected to.
So, there really are two separate charges incurred.
The first charge is for receiving the Inbound call (from the PSTN telephone network).
The second charge is for the termination charges to redirect that inbound call as an outbound call to the forwarded destination on the PSTN telephone network.
When carriers sell you an "Unlimited" package, they have to pad the charges to average out what the "average" per-minute use is predicted to be. If you exceed those predicted per-minute charges, they start to lose money. Be assured that once they start losing money, you will be hearing from them asking you to upgrade to a higher rate business account. This is also why carriers have "Residential" vs. "Business" accounts. It is expected that Residential accounts will have much less calling volume than a Business account, and thus, the rates follow anticipated call volumes.