What Is Voice-over-Internet-Protocol (VoIP)?

Voice-over-internet-protocol (VoIP) is a technology in which calls are transmitted as data over the internet to other types of phone systems. Phone services using VoIP are less expensive than their landline-based counterparts. They also have many features that landline setups do not, like video calling, text messaging, and automated attendants that greet and route callers without human intervention.

How VoIP Phone Systems Work

In basic terms, VoIP is a type of phone system that transmits calls using the internet. When you make a call with a VoIP service, your system will pick up your voice audio and convert it into data that is then sent digitally to the person you are speaking with.

The method in which a VoIP system converts and transmits data is defined by a piece of code known as a codec. The two most popular VoIP codecs are G.711 and G.729. G.711 requires more bandwidth, but has high voice quality, while the G.729 trades audio quality in order to use less data.

While much of the work is done in the cloud, today’s VoIP services can also be set up to work with public switched telephone networks, also known as PSTN, through a process known as SIP trunking. This alternative setup allows you to make calls to landlines and cellphones in addition to other internet-based VoIP phone systems, which fosters more seamless communications.

If you are interested in learning more about what is involved in setting up your business phone system, check out our free e-book on the subject:

Why Businesses Use VoIP Phone Systems

A common feature in many VoIP business phone systems is free, unlimited domestic calling. Not only that, but select systems even offer unlimited international calls. This can be a large savings over a landline service that could charge a per-minute rate for calls made outside of your local region.

In addition to calling, any mainstream solution available today is going to come with standard VoIP features like click-to-call dialing, a built-in address book, and SMS capability. The majority of platforms also include on-screen softphones, customer relationship management (CRM) software integrations, and auto-attendants to help you better handle all of your call traffic. Advanced features such as these make VoIP a popular alternative to traditional phone services.

Another advantage of going with an internet-based phone service is the fact that your VoIP system is not tied to a specific location in the same way that a landline is. For example, if you have to work remotely, you can simply log into your VoIP service from any device and make calls with your work number. In fact, Gallup studies have shown VoIP-enabled mobile apps have increased team productivity by 21%. This is not possible with a landline service.

For more examples of how VoIP features benefit organizations, visit our article on important VoIP statistics for small businesses.

Who VoIP Is Right For

VoIP serves as a cheaper, yet more powerful alternative to a traditional landline setup. As such, VoIP makes sense for nearly any kind of business. They are also a good fit for remote teams, as workers can log into your VoIP app from their computer or smartphone, regardless of their location. VoIP is incredibly popular among small business users. In fact, year-over-year growth has been steady throughout the years.

VoIP technology is especially helpful in the following environments:

• Call centers: Most mainstream VoIP services include features that are helpful for call center environments, including interactive voice response (IVR), call queuing, and call monitoring capabilities.
• Sales teams: Leading systems provide features for connecting caller data with popular customer relationship management (CRM) solutions like Salesforce and Freshworks CRM.
• Mobile teams: Workers can use mobile VoIP apps so that they can work from virtually any location.
• Growing companies: VoIP solutions tend to come in many different pricing packages. Not only that, but adding new users can typically be done in just a few minutes. As such, VoIP is fantastic for growing teams.

If you want a VoIP service for your business, be advised that you will need a fast, stable internet connection. Try our free VoIP speed test to measure the overall strength of your network.

VoIP Phone System Costs

The overall cost of your VoIP system will depend on what service package you choose and what hardware you require. Basic services like Phone.com start as low as $9.99 per month. On the other end of the spectrum, a system like RingCentral can cost $59.99 depending on your package. It is worth noting that optional equipment, such as a VoIP desk phone, is also available, but not necessary.

Adopting a VoIP service can be overwhelming. If this is your first time using the technology, we recommend using our VoIP checklist to make sure you get the best return on your investment.

Download VoIP Checklist PDF

VoIP Phone System Providers

Because VoIP phone systems do not require the same copper-based infrastructure of traditional phone systems, businesses have a lot more choice when it comes to selecting a phone system provider than they do with landline providers. You can check out our recommendations for the best by visiting our article on the best small business VoIP systems or take our quiz to help you narrow down your choices:

What Type of Business Phone Service Is Best for You?

VoIP Terminology

While the process of making a call using a VoIP phone system can be as simple as how people have made calls with traditional landline phones for years, there are a few terms you should be familiar with when you are making the switch. This can help you have a more meaningful conversation with future VoIP providers. The terms are:

• Softphone: A softphone is an on-screen representation of your virtual telephone. It typically includes screens for dialing, checking contacts, and looking at your voicemail inbox. VoIP softphones work almost identically to the default phone app on a smartphone.
• International calling: International calling refers to calls made to numbers outside of your local country. Depending on your service, these calls are charged on a per-minute basis or you may have unlimited international calling.
• Codec: A codec is the method of data compression used by a VoIP system. Most services use G.729 or a G.711 codec.
• SIP trunking: Session initiation protocol (SIP) trunking is the process of transmitting data, including phone calls, over the internet. This is the underlying technology that powers all VoIP systems. You can also check out our comparison of SIP and VoIP.

Bottom Line

VoIP services are the evolution of the landline phone system. They work over the internet rather than copper lines, they come at lower prices, and they allow for advanced features like automated attendants and video calling.