Small Business Phone System: VoIP or Traditional Landline?

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voip2Voice over IP (VoIP) is a relatively new type of small business phone system that works on your internet connection instead of traditional phone lines.  There are many advantages to VoIP over  traditional small business phone systems including:

  • Lower Costs
  • Greater Functionality
  • Less maintenance
  • Similar call quality, provided you have the appropriate internet connection

If you are looking for a high quality VoIP service provider we recommend Nextiva, and you can read our full comparison guide here.

What Is A VoIP Small Business Phone System?

If you have used  Vonage or Skype you have already used VoIP (stands for Voice Over Internet Protocol) to make a phone call.  While Vonage and Skype are generally for personal use, there are many companies, like RingCentral and Nextiva, that specialize in providing VoIP phone systems for businesses.

Both residentially and commercially, Voice over IP use is growing, with the number of traditional telephone users shrinking each year. The market share of landline phones is expected to be 16 percent by 2015, as the combination of VoIP and cell phones push traditional small business phone systems out of homes and offices.

In this guide we give you a full overview of the ins and outs of VoIP so you can make an informed decision as to whether using VoIP is right for your business.

Cost of Service

VoIP Phone Systems

There are two primary costs with VoIP, the ongoing cost of the service itself, and the one-time cost of the handsets.  There are normally no additional hardware or maintenance costs.

Most VoIP providers price their service on a subscription basis, based on the number of lines you use.  Generally the cost is around $20 to $30 per line per month.  With this you get a wide range of features, generally including free local and long distance calling, the ability to transfer and queue calls, have calls ring multiple lines simultaneously, and a auto-attendant phone directory. The main variable cost is international calls which tend to be priced at 3 to 4 cents a minute.

The cost of the VoIP handset (the physical phone) can run from around $50 on the low end to several hundred dollars if you want additional features such as a screen for video calls.  Since the VoIP phone system is hosted on the internet, there are no installation or maintenance costs.

Traditional Business Phone Systems

With a traditional business phone system you will either have individual phone lines or a Private Branch Exchange (PBX) system.  The PBX system is what brings functionality like call transfer, intercom, call Q’ing, group ringing, phone directory etc. to a traditional phone system.

Traditional phone lines average around $35 to $45 per month per line, and the cost for handsets is similar to that of VoIP handsets.  If you want the additional features mentioned above, then the PBX system hardware can run into the thousands of dollars.  If you use a PBX system, you will also need to factor in the cost of having an expert install and maintain that system.

Call Quality

Traditional small business phone systems have historically had a large advantage over VoIP phones from a call quality standpoint.  However, due to increases in internet speeds and technology innovation among VoIP service providers, this is no longer the case for most users.

The quality of VoIP calls is dependant upon the speed and stability of your internet connection.  A typical DSL connection will be able to support 6 concurrent phone calls with full quality audio. This assumes that the same connection is not being used for other bandwidth consuming activities.  If you plan on having more than 6 concurrent phone calls see this article for calculating how much bandwidth you will need.

Another consideration for businesses is whether or not its network services provider institutes a cap on data use. If bandwidth is throttled once a certain data limit is reached, call quality and reliability may be the first thing to suffer. VoIP business phone systems typically consume about 64KB of data with each second of talk time, so make sure to check if your provider has a cap.

There are several tools online that can provide insight into a business’s bandwidth performance. tests a user’s download and upload speed and gives you the results in Megabytes (Mbps).  There are 1000 kilobytes (KB) in a Megabyte.  So for example you want to take the lowest of your upload and download speed from site and divide it by 64.

The VoIP phone system is reliant on both your internet connection and electricity.  Whereas a traditional phone systems can often continue to operate during a power or internet outage, this is not the case with VoIP.  However, many VoIP service providers can automatically route calls to a cellphone or other backup number in the case of an internet or power outage.

Business Phone System Features

Business VoIP and PBX Systems generally provide the following:

  • Voicemail
  • Call Forwarding And Internal Transferring
  • Conference Calling
  • Office Intercom

Business VoIP systems have several features that are not available with traditional PBX phone systems including:

  • Mobility: (Great for sales people and traveling professionals) The ability to use your smartphone as an extension of the office phone system, including the ability to have business calls automatically directed to your cell phone and make outbound calls from your smartphone as your office number.
  • Portability: The ability to use any computer or office phone, as your personal extension.
  • Flexibility: The ability to redesign your phone system (how calls are routed and handled) on the fly by simply logging into your VoIP provider’s dashboard.
  • Just Cool: Having voicemails sent to your email as text messages, find me/follow-me which rings your mobile and home phones as well, video calling, integration with third party applications like CRM, and an e-fax.

VoIP technology has advanced to the point that it’s no longer merely an alternative to landlines. A VoIP system can provide a business features they were never able to achieve with a landline, while also saving money and improving productivity.

If you are looking for a high quality VoIP service provider we recommend Nextiva, and you can read our full comparison guide here.

That’s our article for today.  If you have any questions or comments please leave them in the comments section below.


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Comments (2)

  1. Joe said on

    Thanks, all very interesting. I’m considering cutting the cords on my verizon bill and switching to a VOIP for my business. Currently have a really buggy PBX serving 2 lines over 5 extensions, and an external fax line. Nothing ever routs correctly, voicemails disappear, calls cut off, nothing works right, and the service calls cost a fortune.

    Total verizon bill, 3 lines with DSL = $250/ month. I’m thinking that for roughly the same cost, I can ditch that bill entirely, and sign up for Cable high speed modem + nextiva for 5 users + vfax. Thoughts?

    Only thing I’m unsure what to do about- my alarm company uses one of the lines for monitoring. How do I get around this without hard phone lines?


    • said on

      Hi Joe,

      I contacted Nextiva about your question about the alarm company and here is what they said:

      Majority of alarm companies have a wireless option that customers can use. This is for customers that do not have hard lines at their location. The alarm brain itself houses a CDMA network (basically a cellular phone network) that allows it to communicate with the monitoring service. Most alarm companies will upgrade the unit free of charge but may charge an additional $5 – $10 a month for their monthly monitoring fee to cover the unit cost. This is substantially less expensive than maintaining one hard line into the business. If using ADT, they refer to this unit as “Safewatch Cellguard”

      I hope this helps.

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