What Does VoIP Mean?

VoIP (Voice over Internet Protocol) can be intimidating, especially if you choose to educate yourself about the technology instead of blindly relying on a particular vendor.

Even if you have a trustworthy vendor and are sure that it is the best option for your business, knowing the technology and how it works will help when it’s time to optimize the network, improve voice quality, troubleshoot bugs or upgrade to better featured plans.

So, what does VoIP mean and how does it relate to phone service? Here’s an explanation.

VoIP Meaning – What Does VoIP Stand For?

Wrapping your head around VoIP’s meaning can seem foreign at first, but the concept can be simple when you break it down. VoIP is an acronym for Voice over Internet Protocol. It is a means communicating with others using voice transmission over an Internet connection.

Instead of using traditional phone lines, VoIP technology works with connected online networks and digitalizes analog voice calls and messages to send communications to and from different parties. Using VoIP means that a person or business opts into using a VoIP phone service that relies on Internet connection, VoIP-enabled phones and applications. A VoIP phone or software app, either on a computer or a mobile device, can receive calls made on this network.

What Is the PSTN?

To better understand how VoIP works, it is essential to know the technology on which voice communications depended on for decades. It is nothing but the Plain Old Telephone Service, commonly known as POTS.

Before the introduction of mobile and wireless technology, every phone call had to travel over the PSTN (Public Switched Telephone Network) – whether it was local or long-distance.

It was called the PSTN because it relied on circuit switches to connect callers at both ends. It was ubiquitous, easy-to-use and required nothing more than a telephone and a copper line into any building.

For a long time, it sufficed for the needs of consumers and businesses alike. But over the last couple of decades, the Internet has revolutionized many processes and workflows for enterprises. Thus, VoIP’s meaning was born.

The Internet Changed Everything

By now, most businesses have a well-developed data network that allows their employees to get more work done quicker than was ever possible.

Unfortunately, there was not much innovation when it came to POTS which meant that organizations had to maintain two separate networks – each with their own protocols, standards and implementations. Since the phone network is not based on IP (Internet Protocol) technology, it was also not interoperable with modern applications, software and systems.

But then, the Internet happened.

Why VoIP?

The fundamental difference between VoIP and the previous technology of phone communication is that the former is based on Internet protocols – the same set of standards that powers the Internet all over the world.

Since VoIP has its roots in the IP world, it is interoperable, portable and requires less maintenance. The moment a business switches to VoIP, they begin to realize cost savings. Even if the financial benefits are not readily apparent, the merging of two different networks into one means less work for the company overall. This makes VoIP mean so much more to business owners focused on their bottom line.

What Is VoIP Phone Service?

For businesses that use traditional POTS, service is provided by a telephone operator or carrier. When an organization uses VoIP, it means service is provided by a third-party vendor – either through the cloud or through dedicated SIP trunks. These vendors may be referred to as ITSPs (Internet Telephony Service Providers).

When phone service is delivered to the cloud via equipment that is located at the provider’s office, it is called hosted VoIP. This is the most commonly preferred and implemented type of VoIP phone service, for both consumers and businesses.

However, larger organizations may prefer to customize and control their own equipment via on premise solutions as well. This option provides a lower Total Cost of Ownership (TCO) and cost per call but requires higher initial investment and expertise.

Phone service using VoIP means that all calls made to and by the business are routed through the Internet instead of the circuit-switched PSTN. Voice data is transformed into voice packets – similar to the way in which email, files and other media is handled. This packet technology provides multiple benefits:

1. Voice packets do not require separate protocols, standards or infrastructure. So, there is no need to invest in and maintain two networks.
2. Each individual packet has the source and destination data in it. Think of it as an electronic envelope. It means that individual packets do not have to follow the same route during a phone call. If one line is down, an alternate route can be utilized.
3. Packet-based technology allows more information to be carried over the network when compared to PSTN

How VoIP Is Better Than PSTN

Having VoIP means you get distinct advantages, better and more advanced features as well as substantial cost savings for organizations than compared to the old PSTN system. However, there are two unique aspects of VoIP that underpin all the various features – interoperability and portability.

Since VoIP is based on the same standards used by other enterprise software, it can be easily integrated with those solutions. For example, the company website can include a phone number which can be used by customers to directly contact customer support via the browser without any need to use their phone.

Portability in VoIP works in two ways – phone calls can be made through the same device from any location and multiple devices can share the same phone number to make/receive calls. Portability is central to the way employees and businesses work in a connected world.

Business processes and workflows need not be restricted to a particular time zone or location. Because of these two unique aspects, VoIP is suited to the needs of businesses now and better poised to take advantage of further innovation over the long-term.

To learn more about what VoIP means for business or how it works in general, check out the What is VoIP section of the VoIPstudio FAQs page.