What Is VoIP?

VoIP is a type of internet phone service that stands for “voice over internet protocol.”  VoIP service providers allow your small business to make higher-quality phone calls with the same features — and more — as older outdated phone service providers.

Business owners like VoIP services because of better call quality, lower costs, mobile calling capabilities, and updated features.

Our What Is VoIP guide can help you learn how to take advantage of VoIP phone services for your own business.

Recommended: Sign up with Ooma to get the latest VOIP technology for your business.


Why Use VoIP?

VoIP phone services offer reliable calling, lower costs, and more features for businesses. VoIP also lets you run your business from anywhere with any internet-enabled device.

Reasons to use VoIP for your business phone line include:

  • Easier to install: Many VoIP services can be installed in just a few minutes, and there's no need to make any changes to your phone system or network.
  • Lower hardware costs: VoIP services require less hardware and equipment, making it more affordable to get started with VoIP.
  • Video conferencing: Many VoIP service provider plans let you conduct video conferences.
  • Multimedia capabilities: VoIP services allow you to create and maintain high-quality audio and video calls over the Internet, which is a big draw for businesses.
  • Increased security: VoIP phone service is more secure than traditional phone providers, making your business safer.
  • No long-term contracts or monthly fees: VoIP technology has paved the way for unlimited calling plans with no contracts.
  • Convenience: It's easy to use your VoIP services on a smartphone or tablet, which allows you to stay connected even when you're not physically at the office. All you need is a high-speed internet connection, which many cell phones come with already.
  • Simple IP phone installation and configuration: Setting up an IP phone is simpler than setting up a traditional PBX phone.

Recommended: Compare RingCentral.com vs Phone.com vs Ooma phone service.

How Much Does VoIP Service Cost?

VoIP services offered by our best business phone services of 2022 range from $10–$99 a month. Installation fees can range from about $50–$100 per drop.

Service fees depend on each company and the features of a given plan, as well as the availability of customer support and other perks. You will pay more for features like text messaging/SMS, access to a mobile app, unlimited minutes and conference calls, voicemail-to-text delivery, and video conferencing.

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Recommended: Read our Best Phone Services review to find the best VoIP provider for your small business.

How Easy Is It to Switch to VoIP?

Switching to VoIP service requires some work, but it’s worth the effort for most small businesses. To switch your business to a VoIP service, follow these steps:

  1. Purchase the necessary equipment. Everyone using the system will need VoIP-enabled phones (IP phone) or a VoIP phone adapter as well as an internet connection. You will also need associated equipment such as routers, ethernet cables, etc. The exception is with a hosted VoIP service. This allows you to make VoIP calls using your computer or smartphone with no extra equipment. 
  2. Ensure that you have a good internet connection for your business. Many experts recommend at least 100 kilobits per second (kbps) per line.
  3. Choose a VoIP provider. Base your choice on the type of business you have, the needs of your business, and any additional services you may want.
  4. Choose a VoIP plan. The right plan for your business will depend on the features you need, how many calls you plan to make, the number of users, etc.
  5. Install the system. Unless you have a sophisticated IT staff, this step may require outside professional help, especially if you have a large system. On the other hand, a small system might only require connecting a few phones.
  6. Train your employees. VoIP phone systems are more complex than landline-based systems that your staff may be familiar with. 

Recommended: If you're planning on switching to VoIP, it may make sense to get a toll-free number for your business. With some VoIP carriers you can also designate a specific phone number for your business.

Pros and Cons of VoIP

VoIP phone systems offer a variety of benefits for small businesses:

  • Better quality sound. VoIP can have higher call quality compared to a landline phone system. Of course, this will depend on the quality of your internet connection. You will need to have decent speeds and good coverage around the office for a reliable VoIP system with high-quality sound.
  • Lower cost. VoIP phone systems can cost less than their landline-based equivalents. In fact, some experts have found that a business can save up to 60%.
  • Flexibility. You can make calls over a VoIP system from anywhere you have an internet connection, including from home. 
  • Useful features. A landline phone system basically just makes calls and records voicemail. A VoIP system offers a host of advanced features. These can include call recording, auto attendants, voicemail-to-text delivery, video conferencing, etc.

That being said, although VoIP has many advantages, there are some disadvantages as well:

  • More equipment. A VoIP system requires not only a good internet connection but routers, VoIP-enabled phones, etc. This often entails a higher upfront cost. 
  • 911 call limitations. Unlike when you call 911 on a landline, calling on a VoIP phone won’t automatically reveal your location to the operator. You will have to tell them where you are.
  • Power outages. Because a VoIP phone system and its associated equipment rely on electricity, you can’t make a VoIP call if the power is out.
  • Training. Your employees will likely have to be trained on how to use a VoIP phone system – especially the advanced features.

Recommended: Google Voice for Business has in recent years become a popular choice for businesses. Another option is to add a business line to your cell phone.

How Does VoIP Work?

VoIP service providers let you make phone calls over the internet on a computer, smartphone, or VoIP phone or handset. Whatever device you use will have a VoIP app or adapter installed on it. The basic calling process works like this:

  • The app or adapter converts the sound of your voice from an analog signal to a digital one that can be sent over the internet. 
  • The digital signal goes to your router, which sends it to the servers of your VoIP provider. 
  • Those servers then route the signal to the receiver on the other end. The receiver’s VoIP device reconverts the digital signal to an analog audio signal that they can hear.

This process happens quickly and often results in better call quality than a traditional phone system, which uses the circuit-switching method. This maintains a two-way connection at all times. 

By contrast, VoIP divides call data into compressed chunks called “data packets.” A data packet is only sent when someone speaks, which results in the connection not being “on” all the time. What’s more, packets can be sent along whatever the system deems to be the most efficient route.

Although voice over internet protocol is more efficient than a traditional phone system, it does mean that two people can’t talk at the same time. This is why it’s hard to understand people on a VoIP call if they’re interrupting each other.

Learn how to get a VoIP number for your business.

How to Set Up VoIP for Your Business

To get started with an IP phone system, you’ll first need to find a VoIP provider, choose a plan, purchase and install the hardware, and set up a good internet connection. Most VoIP providers will let you transfer existing numbers from your old phone system to your VoIP system. 

The steps for setting up and configuring your VoIP system will depend on the size of the system, how many employees you have, how large your office space is, your network setup, etc. Your VoIP service provider will likely provide the required procedures to set up your specific system.

That being said, “plug and play” VoIP systems are the easiest to set up and typically follow a similar pattern:

  • Plug in the AC adapter and VoIP-enabled phone or handset
  • Connect the phone to the switch or router
  • Attach the handset to a base unit (if there is one)
  • Wait for the phone to initialize
  • Test the connection

You can place a VoIP call with a VoIP-enabled handset, an IP phone, a computer, or a smartphone with the right VoIP app installed on it.

Frequently Asked Questions

What is VoIP and how does it work?

VoIP (voice over internet protocol) is an internet phone service that lets a small business make phone calls over the internet instead of a standard phone line. The rise of broadband internet has made VoIP much more practical than it used to be. 

There are many advantages to using a VoIP phone system, including better call quality and features that analog phone systems can’t match.

Why would someone use a VoIP phone?

VoIP has several advantages over other phone systems. In particular, it offers better voice quality. VoIP services also offer advanced features that traditional phone services don’t, including call recording, text messaging/SMS features, access to a mobile app, unlimited minutes and conference calls, voicemail-to-text delivery, and video conferencing.

Are VoIP calls free?

There are free business VoIP solutions, but they offer fewer features than paid services and aren’t as suitable for most small businesses. Individuals can make VoIP calls for free over smartphone apps. 

Even then, there are limitations. For example, you may not be able to make or receive incoming calls to or from a landline phone, and the quality of your internet connection will have a huge effect on voice quality.

Can you use a VoIP phone at home?

Yes, you can use a VoIP phone at home. For example, you can use your smartphone with your VoIP phone service to make incoming calls and receive phone calls. VoIP phones can be set up at home using a broadband internet connection.

What is PTSN?

The public switched telephone network (PTSN) is the infrastructure that supports traditional phone lines (i.e., landlines). Unlike VoIP technology, which operates over the internet, PTSN phones run through underground wires.

While traditional phone lines are more reliable, they are also more complex to set up, and their plans are more expensive.

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