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Updated Apr 01, 2024

What Is VoIP?

VoIP technology uses a broadband internet connection to transmit phone calls. Learn VoIP’s features and everything you need to know to implement VoIP.

Mark Fairlie
Mark Fairlie, Senior Analyst & Expert on Business Ownership
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Human communication has evolved dramatically over the centuries, from word of mouth to letters and telegrams to phone lines that stretch from one end of the world to the other. While you can still make a phone call from your home, the tech underpinning the modern phone network looks different from what Alexander Graham Bell pioneered in 1876. 

Today, many types of business phone systems support VoIP, allowing users to make calls from computers, VoIP phones and other devices. Here’s a look at VoIP technology, how it works and what you need to know if you’re considering implementing a VoIP phone system. 

What is VoIP?

“VoIP” stands for “Voice over Internet Protocol,” which is a fancy way of saying that your phone call is transmitted via a broadband internet connection instead of over traditional phone lines. You can make VoIP calls from regular telephones, computers and other data-driven devices. 

VoIP’s precise uses vary from service to service. Some platforms offer call services to anyone with a phone number, while others might limit calls to other users on the same service.

Editor’s note: Looking for the right business phone system for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

All VoIP services have one thing in common: a broadband internet connection. Without that connection, VoIP services will not function.

FYIDid you know
The best internet service providers offer secure high-speed internet service as well as online backup storage, priority tech support and Wi-Fi services.

How does VoIP work?

VoIP converts your voice into a digital signal that’s transmitted over the internet.

You can use regular phones with VoIP services, but an adapter is necessary to transmit your voice over a VoIP service (some phones have an adapter already built in; check before you purchase). Alternatively, you can make VoIP calls directly from your computer.

VoIP technology vs. landline phones

Landlines are generally fixed-line telephones that use twisted-pair copper wire and plug into a wall jack. Traditional landlines rely on physical signal exchanges, which aren’t necessary for VoIP calls.

Traditional landline cables are electrified, enabling you to make and receive phone calls even if the power is out. Because they have their own source of electricity, they’re not usually affected by widespread outages.

VoIP technology doesn’t require physical signal exchanges. VoIP phones and devices use the same broadband internet connection as computers or routers. They’re extremely reliable as long as you have a fast, secure internet connection.

>> Learn More: VoIP vs. Landlines

VoIP systems also have a much wider array of features than landline networks. While landlines can make and receive calls, VoIP systems can include features like automatic call forwarding, voicemail-to-email transcription and virtual receptionists.

Benefits and drawbacks of VoIP

Many businesses and consumers choose VoIP systems to facilitate improved internal and external communication. However, these systems aren’t for everyone. Here’s a look at the top features of VoIP systems, along with some drawbacks to consider. 

VoIP system benefits

  • Reduced costs: VoIP services can reduce business costs by up to 75 percent, according to Netceed. For residential users, this can be a significant saving. For commercial users with a VoIP-based multiline phone setup, the savings quickly add up.
  • Greater accessibility: When accessibility is a concern, such as for the visually impaired or hard of hearing, VoIP provides the best options to ensure that users can communicate effectively and accurately.
  • Portability: VoIP numbers are purely digital (also see what a virtual numberis). You can access or move them between mobile devices, computers and hardline phones with the push of a button.
  • Scalability: Adding multiple phone lines to a traditional phone service can be expensive and time-consuming, but adding a new VoIP line is effortless and can often be done within seconds. VoIP is the perfect tool for companies that need to add new lines during busy seasons and drop them once traffic returns to normal.
  • Variety of commercial features: VoIP programs have various helpful business features, including virtual receptionists and call forwarding.
  • Better audio quality:Early VoIP technology was plagued by dropped calls and poor audio quality, but that has changed. Now, VoIP offers better audio quality than traditional landlines.
  • Easier multitasking: Being connected to the internet means sending more than just voice files over a VoIP connection is possible. Send photos, videos and documents – all without hanging up the phone.
  • Better security: Phone taps are a thing of the past with VoIP. These networks can be secured with high-level encryption and identity management, so there’s no risk of protected information falling into the wrong hands.
  • Greater functionality: Previously, features like call queueing, hunt groups and music on hold required investment in an expensive, hard-wired PBX. VoIP platforms include these features, which can be controlled via easy-to-use web- or app-based dashboards.
  • Customization options: A VoIP dashboard, especially when integrated with a CRM or other business software, offers advanced customization options like skills-based routing and integrated customer information (when someone’s history appears on the screen if they call in). Many also feature call analytics software so you can evaluate individual and team levels of performance.

VoIP system drawbacks

  • Dependence on internet connection: Without a stable high-speed internet connection, VoIP can’t function. Unlike with traditional telephone lines, if a storm or other natural disaster knocks out your power, it will take your VoIP network with it.
  • Latency issues: When a data packet hits transmission delays, known as latency, it can interfere with your ability to communicate. Poor internet connections, insufficient routers and incorrect cables can cause latency.
  • No location tracking: In the event of an emergency, traditional landlines and mobile phones offer location tracking when you call 911, so that first responders can find you even if you’re not able to provide your location. Because it’s internet-based, VoIP can’t offer that same sort of location tracking.

Best features of VoIP

If you’re considering implementing a VoIP system, many setups offer helpful business features that can benefit your organization enormously. Here are some of the most useful VoIP features.

  • Voicemail and voicemail transcription: You aren’t always going to be able to answer the phone, and no one wants to have to listen to a voicemail two or three times to get the relevant information. Voicemail transcription makes it easier to get the gist of the message without picking up your phone.
  • Call forwarding: Take your VoIP phone number with you with the tap of a button. Call forwarding lets you connect to your VoIP line wherever you have internet access, and it often works with mobile phones.
  • Find/Follow Me:If you’re getting a lot of calls but can’t answer all of them yourself, a Find Me and Follow Me system can push your calls to preset contacts. If none of these individuals is available, the call gets shuffled back to your voicemail.
  • Do Not Disturb: If you can’t take a phone call, the Do Not Disturb function keeps your phone quiet, automatically sending calls to your voicemail.
  • Hold systems and hold music: If you must put a call on hold, having a hold system is much more efficient than setting down the receiver and hoping the caller can’t hear you. A hold system with a music function is professional and courteous.
  • Conference features:VoIP ensures successful conference calls with features that let you hold multiple conversations without needing an additional program like Zoom.
  • Call recording and transcription:VoIP systems can record phone calls, highly useful for staff training. Some systems can also transcribe calls and add them to an individual customer’s contact history for greater depth in data for each customer.
  • Interactive voice response (IVR): IVR is the automated menu you may hear when you call a business (sometimes known as an auto attendant). This is a valuable tool for answering basic questions, especially for companies that receive a high volume of calls.  
  • Operator panels:A VoIP-enabled operator panel keeps track of incoming calls and where they need to go. This is helpful for businesses that receive many phone calls that must be transferred to multiple recipients.
  • Call queues:When you set up your VoIP system with a call queue, it’s much easier to answer calls in the order received.
  • Unified communications: Some VoIP systems integrate video, SMS, MMS, social media messaging and other communication channels with standard phone services on a single platform. This gives customers more ways to get in touch with you.
  • Presence data: Many VoIP platforms allow users to set their status – for example, available, away from desk and busy – and everyone else using the system can see that status. This can improve internal communication and reduce or eliminate the number of incoming calls being transferred to an extension where no one will pick up.
  • Integration and analytics: As mentioned earlier, integrating your customer relationship management (CRM) and VoIP system enables analysis of metrics like call volumes, call patterns, and employee and team performance. This data can be used to improve operational efficiency, identify staff training opportunities and improve customer service.
Did You Know?Did you know
The best business internet providers offer speeds up to 10 times higher than residential lines, with options such as DSL and cable internet as well as business broadband and fiber-optic internet.

How much does a VoIP system cost?

A VoIP system’s exact cost depends on several factors, such as these:

  • How many lines you need
  • The features you want
  • The number of domestic phone calls you make and receive per month
  • The number of international phone calls you make and receive per month
  • Whether the system is hosted or on-site

Numerous other factors can affect your overall VoIP system cost. In general, hosted VoIP is relatively inexpensive, costing as little as $10 per monthly user. Costs such as necessary equipment may add to the total, but it’s still generally affordable. 

On-site VoIP setups can cost $1,000 per user, sometimes more. Also, because your equipment is on-site, you’re responsible for all maintenance and troubleshooting.

What equipment do you need for VoIP?

Setting up a VoIP system is relatively straightforward.

First, you need a secure, stable high-speed internet connection and a router and modem to connect to the internet. Bandwidth requirements vary, but even a small business should have internet speeds of at least 25 Mbps. 

From there, you can set up a VoIP call without any additional hardware directly from your laptop, desktop or connected mobile device.

As mentioned earlier in this article, if you want to make calls from a traditional phone, you’ll need an adapter that connects your phone to the internet. You can also invest in VoIP phones that integrate the phone and adapter into one device.

Features such as your operator switchboard, hold menu and call queue may need additional hardware to help you keep track of incoming and outgoing calls, but that’s something to discuss with your service provider.

What to look for in a VoIP solution

Whether you’re a commercial customer or a single user looking to upgrade your phone system from landline to VoIP, these are some essential factors to consider.

  • Ease of use:It shouldn’t take a degree in electrical engineering to operate and maintain a VoIP system. The best systems are straightforward.
  • Simple installation:Minimize stress and expense with a VoIP system you can set up yourself without requiring professional installation. 
  • Accessibility:Accessibility features are essential, especially for commercial customers. Explore the accessibility options that are available within the VoIP solutions you’re considering.
  • Cost:Don’t choose a VoIP system whose cost is beyond your budget.
  • Security:For commercial applications, opt for a VoIP system with integrated encryption to ensure there are no leaks that could potentially compromise client information.
  • Features:A VoIP solution should offer all the features you need so that you don’t have to compromise or look for add-on services.
  • Mobile access:You should be able to access your VoIP line both in the office and on other connected devices via mobile apps. Many solutions offer their own mobile apps.
  • Third-party integrations:If you utilize other third-party programs for communication, ensure your VoIP solution offers integration.
  • Scalability: VoIP systems are eminently more scalable than traditional landline systems. The best VoIP systems make adding and removing lines and integrating new locations easy.
  • Reliability: VoIP, like internet connections, suffers from downtime. Check out an individual provider’s uptime statistics to see how reliable they are. Some networks offer a 100 percent uptime service-level agreement for higher-spending companies.
  • Compliance: For companies operating in highly regulated industries like healthcare, integrated compliance with HIPAA is useful. The same holds true if you do business in highly regulated areas like California or the European Union.

Top VoIP providers to consider

As with choosing any business phone system, you should do some research and find the company that will work best for your needs before you buy hardware or commit to a contract.

Below, discover the VoIP options available on a selection of the best business phone systems currently on the market, together with a link to a full review of each service.

Zoom

Zoom may be best known for its video conferencing capabilities, but there’s much more to the service. Starting at $10 per user per month, this is a fully featured VoIP platform offering features like unlimited calling (plan dependent), auto attendants, call queues and free extension-to-extension calling. The service offers excellent on-platform productivity tools, end-to-end encryption for enhanced security and a wide range of integrations with apps like Salesforce.

Read our in-depth Zoom review.

8×8

8×8 is an advanced and scalable VoIP service that offers a full range of switchboard features, including call routing, call queueing, auto-dialers and auto attendants. There is excellent integration with major CRM platforms, built-in compliance with legislation like GDPR and HIPAA, and a great suite of AI integrations. The service starts from just $24 per user per month.

Read our comprehensive 8×8 review.

Vonage

PCI-DSS, ISO 27001, HIPAA, GDPR and much more – Vonage is great for businesses of all types but excels for companies to which compliance is important. Key switchboard features include voicemail, virtual receptionists, call groups and over 30 other functions. Priced from $17.99 per user per month, the service offers unlimited calling and SMS, highly capable video conferencing, and omnichannel communications. 

Read our latest Vonage review.

Dialpad

Dialpad’s AI-driven platform is scalable, customizable and intelligent. Its marketplace is broad, and the apps on it allow direct integration with CRM systems and other business software. That makes it great for streamlining business operations and enhancing productivity. Prices start at $15 per month. Core VoIP switchboard features include unlimited calling, SMS, MMS, customizable voice greetings, alerts for unplayed voicemails and outbound dialing. 

Read our up-to-date Dialpad review.

RingCentral

RingCentral’s VoIP capabilities are excellent, with an extensive range of features like call queueing, multilevel auto attendants and call recording. Video conferencing on the platform is also a standout, as is its range of team collaboration tools. From $20 per user per month on annual billing, there are an impressive 300-plus native plug-ins to other business apps and software in the RingCentral marketplace.

Read our in-depth review of RingCentral.

Ooma Office

Ooma Office is a full VoIP platform that starts at $19.95 per month. Companies benefit from unlimited calls to the U.S., Mexico, Canada and Puerto Rico, and a host of other features, like call recording, flipping and transfers, as well as Find Me, Follow Me and ring groups. The compatibility with existing devices like paging and intercom devices is impressive. We really liked the Caller Info match service which displays on-screen information about customers calling in, enabling quicker sales and service resolutions.

Read our comprehensive review of Ooma Office.

NextivaONE

This impressive blended, omnichannel network allows companies to take charge of their inbound and outbound calls, texts, emails, and more from the same dashboard. There is compliance with a wide range of standards, including PCI DSS, HIPAA, SOC 2 and ISO/IEC 27001. The service features its own competent CRM system but also offers integrations with many leading third-party CRMs and call center software platforms if you want to continue using them.

Read our latest review of NextivaONE.

GoTo Connect

From $27 per user per month, GoTo Connect’s simple and intuitive dashboard makes operating and configuring the system easy. This reliable and quality VoIP service also provides 24/7 support to customers. In addition to standard switchboard features like call routing, call queueing, SMS and social media integration, GoTo Connect’s analytics and reporting tools are excellent, as is the vast range of security and privacy protections it provides.

Read our up-to-date review of GoTo Connect.

Shannon Flynn contributed to this article.

Mark Fairlie
Mark Fairlie, Senior Analyst & Expert on Business Ownership
Mark Fairlie brings decades of expertise in telecommunications and telemarketing to the forefront as the former business owner of a direct marketing company. Also well-versed in a variety of other B2B topics, such as taxation, investments and cybersecurity, he now advises fellow entrepreneurs on the best business practices. With a background in advertising and sales, Fairlie made his mark as the former co-owner of Meridian Delta, which saw a successful transition of ownership in 2015. Through this journey, Fairlie gained invaluable hands-on experience in everything from founding a business to expanding and selling it. Since then, Fairlie has embarked on new ventures, launching a second marketing company and establishing a thriving sole proprietorship.
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