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What Is VoIP?

Shannon Flynn
Shannon Flynn
business.com Contributing Writer
Updated Mar 30, 2022

VoIP technology allows you to make calls over the internet. Learn how VoIP works and if it's right for your business.

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, it looks a lot different from the lines that 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.

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

Did you know?Did 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. There are also specialized VoIP phones that contain an adapter, or 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. 

VoIP systems also have a much wider array of features than a landline does. 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 implement VoIP systems to improve and facilitate 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: According to managed IT services provider Fortis, VoIP setups can cost 40% to 80% less than traditional landlines. This might not seem like a huge expense for a single home or user, but it adds up quickly for commercial applications.
  • Greater accessibility: When accessibility is a concern, such as for those who are 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. You can access or move them between mobile devices, computers and hardline phones with the push of a button.
  • Scalability: Adding a new line to a traditional phone service can be challenging, but adding a new VoIP line is effortless. 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 it’s possible to send more than just voice files over a VoIP connection. 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.

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 thinking about implementing a VoIP system, many setups offer helpful business features that can provide enormous benefits to your organization. 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 are 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 additional programs like Zoom.
  • Call recording: VoIP systems can record phone calls, which is useful for many businesses.
  • Interactive voice response: IVR is the automated menu you may hear when you call a business. This is a valuable tool for answering basic questions, especially for businesses 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.

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 do VoIP systems 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 onsite

Numerous other factors can affect your overall VoIP system cost. In general, hosted VoIP is relatively inexpensive, costing as little as $20 per user per month. Costs such as necessary equipment may add to the total, but it’s still generally very affordable. 

Onsite VoIP setups can cost $10,000 or more. Also, because your equipment is onsite, 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, as well as a router and modem to connect to the internet. Bandwidth requirements vary, but even a small business should have internet speeds of at least 75 Mbps. 

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

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 in 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 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.

Top VoIP providers to consider

Here’s a look at some of the top VoIP providers to consider for various needs and budgets. This is by no means an exhaustive list. There are as many VoIP solutions out there as companies that utilize their services. 

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.

TipTip: Read our exhaustive reviews of the best business phone systems to compare prices, ease of use, features and customer support.

Nextiva

Nextiva offers an excellent variety of features in addition to typical VoIP connections. You have access to automated customer data at your fingertips and a live chat option for communicating with customers and clients. Nextiva is often ranked as the best VoIP provider for commercial applications. Read our comprehensive Nextiva review for more information.

Grasshopper

Grasshopper is among the easiest VoIP solutions to use. It’s ideal for freelancers or small business owners who don’t have a lot of phone traffic but who wish to use a business phone number. With Grasshopper, it’s easy to create memorable vanity numbers that are easier for customers to remember. Read our review of Grasshopper for more information.

RingCentral

RingCentral is a great choice for midsize and large businesses that get a lot of phone traffic or have many remote workers who collaborate over the phone. Forget Zoom: RingCentral lets you set up video conferences for up to 500 people for no additional fees. Read our complete RingCentral review for more information.

Ooma

Ooma is another excellent option for small businesses and freelancers. In addition to its easy setup, the mobile app lets you manage everything on the go, and the program provides unlimited calls to the U.S., Mexico, Canada and Puerto Rico. Read our complete Ooma review for more information.

Image Credit:

Ridofranz / Getty Images

Shannon Flynn
Shannon Flynn
business.com Contributing Writer
Shannon Flynn is a writer who has spent five years covering all things technology, including business technology tools and software, cybersecutiry, IoT, cryptocurrency and blockchain. She is the Managing Editor at ReHack and a contributor at MakeUseOf, LifeWire and SiliconAngle.