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Overview of VoIP Phone Systems


VoIP stands for Voice Over Internet Protocol, a technology that allows you to make telephone calls over a broadband Internet connection instead of a regular analog copper phone line (aka Plain Old Telephone Service, or POTS).

How VOIP works


This is how it works: It takes your voice, which is analog, and transforms it into a digital signal so it can be transmitted over the Internet and then converted back to analog on the receiving end.

VOIP phone service features


The receiver could be another computer, a regular telephone, a VoIP handset, a cell phone, or a smartphone.

VOIP service Voice Over Internet Protocol


VoIP offers excellent call quality. The person you’re calling can’t tell whether you’re using VoIP or POTS—there’s little difference in quality. While it’s true that there might be occasional hiccups in transmission, the technology has evolved to the point where service interruptions or interference are no more frequent than a POTS connection, and call quality is considerably better than typical cell phone reception.

The biggest advantage VoIP has over POTS is cost. Domestic calls are free, or at the very least, less expensive than POTS; while international calls are also much less expensive and, in certain cases, free as well. A VoIP phone number, sometimes called a virtual number, is not directly associated with the physical network of a landline, but “appears” to be so. Thus, people from another country could make calls to you at the local rate instead of the higher international rate because your virtual phone number “seems” to be within their local exchange, even though it’s not.

Another advantage is convenience and versatility. Virtual phone numbers can be assigned to ring on multiple devices: a landline phone, a cell phone, or a work or home phone. You can also assign multiple phone numbers to ring on a single handset. At the most basic level, getting VoIP service is almost hassle-free. There are myriad providers available to anyone with a computer and an Internet connection. All you have to do is download the software, and in a few minutes you can start making calls.

VoIP is particularly attractive to businesses. The cost of voice calls is lower, a cost savings multiplied times the number of employees and the frequency of calling. Also, VoIP integrates data and voice communications (including cell phones) in a more cost-efficient manner. Instead of trying to make two types of communications systems work together, the two are already bundled together. According to Forbes magazine, since 2008, more than 80% of all PBX (private branch exchange) systems (the “switchboard” that serves office buildings) sold are VoIP. While the main point of VoIP may be to make inexpensive phone calls, it comes with added functionality including high-fidelity audio, video, and Web conferencing; as well as file transfers, shared presentations, and computer desktop control—all with tremendous capabilities for tracking, analyzing, and reporting data.

VoIP is a multifunction system. SIP (Session Initiated Protocol)–enabled VoIP handsets can handle any kind of communication, whether voice or data: regular phone calls, faxes, voicemail, email, Web conferences, etc. So you could, for example, listen to your email or record a voice message that you could send to a fax machine. The handsets are also scalable—you can add and subtract features as you need without switching out hardware. The plug-and-play capability means that you don’t need a support team to reconfigure the network every time new extensions are added. All you need to do is plug the handset in and it’s ready to go.

VoIP is efficient and secure. Allowing voice and data communications to run over a single network greatly reduces corporate infrastructure costs; the larger the company, the greater the savings. For companies concerned about security, VoIP already has the capability to use standardized encryption protocols, which is much more difficult to provide on a regular telephone connection.

VoIP hardware is inexpensive and versatile. In addition, VoIP handsets are less expensive than traditional telephones and are simpler to reconfigure. Dual-mode VoIP handsets are capable of switching from a cellular connection to a building Wi-Fi even during a conversation, eliminating the need to provide employees with both a cell phone and a “regular” office phone. This not only reduces overall expenses, but lowers maintenance by half, as there are fewer devices to track, control, and support.

VoIP comes with a virtual assistant. Some other handy business features include Auto Attendant—also called a virtual assistant—which not only plays prerecorded music or messages for callers on hold, but also routes calls to departments as well as individuals. This makes your company look bigger than it is, as the “accounting department” might just be your father-in-law, but this feature gives customers the impression that you have a larger organization.

VoIP as a tracking system. Another interesting feature is sometimes called Find Me, Follow Me, Call Hunting, or Advanced Forwarding. It allows a handset (or a number) to move wherever the person goes, whether it’s in the office, at a convention center, or using a home phone or cell phone. A variation of this is Presence, which allows you to track where employees are, and also defines rules as to locations where the handset should or should not ring.

Integrating VoIP with other systems. Many VoIP systems also integrate emails and calendar systems such as Microsoft Outlook. This lets you “click to dial” an Outlook contact and automatically record calls you make and receive.

To make VoIP calls, a person or business needs:

  • A high-speed broadband Internet connection (at least 256 kilobytes a second: DSL, cable, newer satellite, or anything that isn’t dial-up).
  • A modem.
  • A computer equipped with a microphone (these days even the least expensive computer has one), or an adaptor to a regular phone (only necessary in lieu of a computer).
  • Software from a VoIP provider.

In most cases, voice calls (whether made by regular telephone or another VoIP number) placed to a VoIP number can be received on the computer itself; or routed to a regular telephone, cell phone, or smartphone.

While there are dedicated VoIP phones for consumers, most of these systems are aimed at business use. A hybrid approach—intended mostly for consumers without computers—is to sell an adapter that can be plugged into a regular telephone handset.

The Downside of VoIP (because there’s always a catch)

So, if VoIP is such a great deal, why hasn’t it put the phone companies out of business? Well, because nothing is ever perfect. While it’s true that traditional phone companies are slowly going the way of the dinosaur—and VoIP is one of many factors leading to final extinction— there are still a number of things good old copper wire connections that date back to Alexander Graham Bell do very well. One is emergency calling. While you can get some kind of 911 service over VoIP, it is typically expensive, and not always as reliable.

This leads to a more important issue, which is: if your Internet goes down, there goes your phone system, not just emergency calling. The old dinosaur phone company has backup power for all its circuits, which is why even in a blackout, you can still call for help on your corded phone, or just talk to your neighbors if need be.

International calling can be a bit iffier on VoIP than a regular landline connection, particularly to countries where the phone network is more extensive than the Internet, and especially so when neither is of high quality. (Make sure to take note of the list of countries covered by the particular VoIP plan.)

Last, while VoIP quality for the most part is comparable to a landline (and sometimes spotty cell phone reception has reduced general perceptions of acceptable quality), a slow, spotty, or crowded network can affect audio quality, even to the point of dropping calls.

Calculating Costs

Some VoIP services are free. Download the software and you can be up and running, making free calls to other service users, and even, in some cases, placing domestic calls to landline phones and cell phones without charge.

Two of the more popular VoIP services—Google Voice and Skype—are available to anyone with a computer and an Internet connection, with no initial setup costs or service fees. Domestic calls to any phone number on Google are free, with a charge for international calls. Skype calls to other Skype users are free regardless of location, with charges to landline and mobile phones. Skype also incorporates file transfer and video-conferencing capabilities, which are also available through Google+ “hangouts” and through a Gmail plug-in.

Facebook recently incorporated a VoIP feature into its Facebook Messenger app for the iPhone and iPod Touch in the U.S. and Canada. The app lets Facebook users call one another for free over a Wi-Fi connection or the phone’s data connection.

While long-distance calls typically incur a per-minute fee, it is usually less expensive than POTS. For basic VoIP services, these are charged on a per-call basis, either from an established credit fund or a debit or credit card. There are also some plans as low as $5 a month for a limited number of international-calling minutes (e.g., 500 per month) and unlimited nationwide calling. Unlimited worldwide calling plans start at around $20 per month. Some companies offer trial periods of one to three months at a lower promotional price.

VoIP services that include some kind of hardware—either handsets or phone adaptors—or which are aimed at business users, start with a monthly service fee. Some companies offer trial periods of one to three months at a lower introductory promotional price, after which they rise to the regular rate, typically about $30 a month, although it could be higher with more feature-rich plans.

By the way, if you run a small business, maybe fewer than 10 employees, you might think that a residential plan could work just fine and, in principle, it would. However, read the terms of service before you buy. Most consumer plans forbid use of the service for commercial purposes.

Choosing a Vendor

There are all sorts of VoIP features, price plans, and services to choose from. In general, you’ll want to take these five factors into consideration:

  1. What is the service plan? The range of services offered does, of course, determine how much you’ll pay for a monthly plan. Look for plans with unlimited calling minutes, including connections to desired international locations. Do you want to keep your existing phone number, and is there a charge to do so? What other options do you need? Most providers can offer toll-free numbers, fax service, and the ability to add lines. The question becomes: which has the package that offers everything you need at the most affordable price—and without cancellation fees?
  2. What calling features are available? You should be able to acquire everything you can get on a regular phone: call hold, voicemail, caller ID, call waiting, call forwarding, conference calling, etc. Also, check out which 911 and directory assistance services are offered. What kind of special features do you want? Multiple voicemail boxes, visual voicemail (your voice messages converted into text messages or email), mobile apps, music on hold? Don’t assume if you’re a small business that some features are luxuries. These features not only enhance productivity, but  they equal the playing field. The beauty of VoIP is that small businesses can now afford the features/functionalities once only attainable by large companies.
  3. Is the system easy to use and install? It should be. But make sure that the company has a reputation for ease of installation, as well as readily understandable operating instructions. There are multiple consumer rating sites online; check out the evaluations for multiple VoIP providers. Ask about training videos; you can find videos on YouTube that will teach you in minutes how to do amazing things with your VoIP system!
  4. Will your VoIP provider help you? Most VoIP systems are easy to manage through computer dashboards. But no type of technology is flawless. Does the VoIP provider offer customer support via email or telephone? And is there a fee for using customer support? Maybe if you have a good IT staff, support isn’t going to matter much. But if you don’t, you probably won’t want to spend a lot of time reading the documentation to figure things out for yourself. Many phone systems host active forums where other users post answers to questions and provide solutions to common problems.
  5. Hosted or self-hosted? In most cases, you’ll want the VoIP provider to host the software. For hosted systems, you access the software that controls your phones through the Internet. But if you’ve got a savvy IT team and a VoIP provider with a strong reputation for providing technical support, a self-hosted option could save considerable money over the long run. But it requires some upfront expenses, including a private branch exchange (PBX), and a gateway to convert from analog signals to digital distribution.

Comparison Checklist

Some of the key factors you should take into consideration when comparing vendors are listed below.

Print Checklist

( Show Text Version )

  1. Plan Basics
    • Startup cost
    • Monthly cost
    • Unlimited local calling
    • Unlimited long-distance calling
    • Unlimited international calling
    • Length of contract required
    • Keep current phone number
  2. Basic Features
    • Call waiting
    • Call forwarding
    • Conference calling
    • Hold call
    • Voicemail
    • Call blocking
    • Call return (*69)
    • Caller ID
    • Directory assistance (411)
  3. Advanced Features
    • Dual-capable handsets
    • Toll-free number
    • Virtual phone number
    • Virtual office
    • Music on hold
    • Auto attendant (virtual assistant)
    • Presence
  4. Integration with Other Systems
    • 911 service
    • Video conferencing
    • Fax-sending capabilities
    • Fax-receiving capabilities
    • Email integration
    • Manage with mobile app
  5. Service Issues
    • Cancellation terms
    • Hosted or self-hosted
    • Installation or setup required
    • Technical support available
    • Free software upgrades
    • Maintenance required
    • Warranty for hardware
    • Instructional videos
    • User forums

( Hide Text Version )

VOIP Phone Service Checklist

Glossary of Terms

  • Bandwidth: The amount of data a connection can transmit or receive. The higher the bandwidth, the faster the connection.
  • Digital Subscriber Line (DSL) or Digital Subscriber Loop: DSL is used to deliver digital Internet connections over conventional analog phone lines.
  • Ethernet: The digital networking system used in the majority of computer-to-computer connections.
  • Foreign Exchange Line: A phone connected to a network outside of the telephone company’s local exchange.
  • Local Exchange: Telephone services provided within a provider’s authorized territory. 
  • Packets: Units of data. When your voice or other data is transmitted over the Internet, it’s divided into blocks of information, or packets, that are reassembled at the receiving end. 
  • Public Switched Telephone Network (PSTN): Another term for POTS (Plain Old Telephone Service), the copper wire network that carries analog voice signals. 
  • Session Initiation Protocol (SIP): A communications standard used to send and control voice and video calls over the Internet.
  • Softphone: VoIP service that is software-based—i.e., which uses the computer as the telephone.
  • Virtual Number: A telephone number not directly associated with a landline telephone. The advantage is that a company or person located in a different area code, or even a different country, can appear to be located in an area code or country without having to pay for a foreign exchange line (a line outside of the local exchange).
  • Visual Voicemail: This voice-recognition software turns any voicemails you receive into text messages and sends them to you via email or text. It eliminates the need to make a call to retrieve your messages.


*Source: “VoIP buying guide for small business,” PC Magazine.

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