5 minute read |

How does VoIP technology work?

VoIP phone service background

VoIP is quickly becoming a household name but not many people understand how the technology works. To the average person, talking about VoIP means wading through acronyms and mysterious terms like SIP and UC. No wonder everyone gets confused!

If your business is considering an upgrade to VoIP but you don’t know much about it, you are at the right place. Keep reading for an in-depth look at how VoIP technology works.

What is VoIP?

VoIP refers to a set of standards that make it possible for people to make voice calls over the internet instead of using the telephone company. VoIP is also commonly known as Internet telephony. Service providers can Implement VoIP in multiple ways. There are many standards although SIP is the most common protocol.

People started switching to VoIP because it was less expensive than traditional phone systems. It also allows users to make calls even if they do not have telephone service. All you need is an internet connection and a device that can make VoIP calls.

How does VoIP work?

Now that you know what VoIP is, it’s time to understand the basics of the underlying technology.
VoIP works by converting voice signals into digital data packets. After this conversion, these data packets are indistinguishable from any other data like email, pictures, or video. That means they can be transmitted over computer networks without needing additional infrastructure like copper wires. Once the data packets reach the destination, they are reassembled and converted back into voice signals for the other user.

A typical VoIP system will have many components but the end-user rarely sees any moving parts. The user experience with VoIP is no different from using a typical landline. Even the desk phones look remarkably similar. However, VoIP offers additional benefits in that you don’t need phones to make calls. Users can make and receive VoIP calls through computers, smartphones, tablets, and many other internet-connected devices.

Types of VoIP systems

Before the VoIP industry read maturity, there were a lot of competing standards and alternatives for internet voice calls. Nowadays, the Session Initiation Protocol (SIP) is the industry standard and most commonly used by providers. There are two options for business organizations considering VoIP. The first option is to use a hosted VoIP third-party service provider. The second option is to purchase and use SIP trunks with IP-PBX hardware.

SIP Trunking
A traditional business phone system consists of a Private Branch Exchange (PBX) and individual phone lines. The entire system is connected to the local phone company with physical infrastructure and it is called a trunk. The PBX hardware allows an organization to share a set of phone lines between employees. This way, the company does not need to purchase separate lines for every single employee.

SIP trunking is similar except there is no physical connection between the business and the service provider. The trunk is a virtual connection over a data network. The PBX is capable of handling internet calls and so is referred to as an IP-PBX. The rest of the system consists of an array of desk phones, mobile devices, computers, and tablets.

SIP trunking offers a significant advantage over the traditional PBX system. With landlines, businesses have to purchase trunks in specific quantities. One trunk can handle 23 voice channels. So companies have to buy them in multiples of 23, even if they only need 35 channels. SIP trunks have no such limitations. An organization can purchase exactly as many lines as they need.

Hosted VoIP
Hosted VoIP is quite different from using SIP trunks. For one thing, the business does not have to purchase any hardware or software licenses. There is no equipment on the premises at all. The service provider delivered phone services over the internet to the business client. They handle setting up the infrastructure, maintaining it as well as periodic upgrades.

Hosted VoIP is also called cloud VoIP because the services are delivered over the internet. Administrators within the organization can make changes to the features available to users through an online dashboard. New features and phone lines can be added in an instant. There is no need to wait for a technician to install physical equipment or wiring.

Hosted VoIP has quickly become popular, especially among small and medium businesses. Any organization that does not have the in-house expertise to set up and manage their system can opt for hosted VoIP. Even bigger organizations are choosing this alternative as it allows their employees to focus on more productive tasks.

Is VoIP expensive?

Generally speaking, VoIP is much less expensive than using traditional phone lines. But there are cost differences between hosted VoIP and SIP trunks. The latter is typically more expensive and needs more time to set up. A business can start using hosted VoIP services in an hour without even a credit card on a trial basis!

Naturally, there are cost considerations for businesses. A hosted VoIP system can cost anywhere between $10 – $50 per line, depending on the plan and selected features. It can be quite hard to compare prices between different vendors. Some services charge a flat rate per user, while others add fees for specific premium features. Companies can also choose between unlimited calling plans and bundles of minutes to specific destinations. There are also pay as you go options.

SIP trunks can cost much more at the outset. It requires a significant investment, especially if the company wants to replace the entire business phone system in one go. It requires hardware (IP-PBX, routers, firewalls, switches, etc.) and VoIP servers. Since the business controls the system, you also need experts who can fix problems and maintain optimum functionality.

What does a business need to use VoIP?

From the perspective of a single user, you don’t need anything more than a high-speed internet connection and a device capable of making VoIP calls. But from a business perspective, there are specific requirements to implement VoIP phone systems.

Network infrastructure
Most businesses already have a robust and high-speed internet connection for essential enterprise tools. However, your existing network may not have the bandwidth to support additional voice traffic. In some cases, organizations have to upgrade or even add a second line to support VoIP.

Additionally, older network infrastructure such as routers and switches may be unable to support VoIP. Sometimes all you need is a firmware update. But at other times, organizations need to replace ageing hardware.

IP Phones
You also need devices to make calls. This is where VoIP shines. Most organizations use a combination of desk phones, computers, and mobile devices for calling.

It means you don’t have to purchase IP phones for every single employee. Workers who need to travel often or work from home may opt to use their smartphones with a VoIP app for calls. Executives may need top of the line desk phones with the best features. Employees who are always at their desks may use their laptops with a headset.

It is also possible for users to have a combination of devices connected to the same number. They can make or receive calls from any of these devices depending on their location or need. Employees can also configure their accounts so that incoming calls ring all devices at once or ring each device one after the other until the call is answered.

VoIP systems are more flexible than traditional enterprise phone systems. They can also scale up or down depending on your business requirements. You can add new numbers, lines, and users without having to wait for a technician. It allows businesses to add capacity to cope with sudden spikes in demand. It works the other way around as well. You can always remove lines if you don’t need them.

VoIP vendors also do not lock customers into contracts. You can always switch service providers if you find a better alternative. You don’t have to wait until your contract expires or even until the end of the month.

What is the best VoIP system for businesses?

A common question for business owners and managers is about the best option for their office. Unfortunately, there is no single right or wrong answers. The best option for any business depends upon their requirements and even the circumstances. What works for your company may not be right for someone else. At the same time, you may find that a service that has worked well for years no longer fits because your business needs have changed.

In general, small and medium businesses have historically opted for hosted VoIP due to its low cost and maintenance-free structure. Larger organizations that prefer to control their phone systems have long relied on SIP trunks. However, things are changing within the industry. Cloud VoIP is becoming more popular as providers ramp up operations.

Now that you know how VoIP technology works, how about giving it a try for your business? Sign up for a free 30-day trial today, no credit card needed!

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Thousands of businesses across the world trust VoIPstudio for all of their most vital business communications. Why not be the next?

Thousands of businesses across the world trust VoIPstudio for all of their most vital business communications. Why not be the next?

Start a free 30 day trial now, no credit card details are needed!