VoIP Phone Systems Explained: What to Know about Voice over Internet Protocol

Your small business could save up to 50% with a VoIP phone system—but what is it? Business.org explores the advantages (and some disadvantages) of VoIP.

VoIP is a cute acronym for the more technically chilly term Voice over Internet Protocol—and even though you’ve probably never heard of either, you’ve used it. Skype, FaceTime, Google Voice, and the like are all VoIP-based platforms you’ve conversed over without even thinking about the connection. Not that you should—it’s 2018. When was the last time you stopped and pondered the internet? Exactly.

Digital VoIP telephone connections are gradually replacing the analog PSTN (Public Switched Telephone Network) that’s carried calls for well over a century. For residential use, the advantages of VoIP are nominal; you’ve likely turned down your internet or cable provider’s telephone bundling offers because you’re still paying off that iPhone X. For a small business, however, a VoIP telephone system could be a vital money saver (not to mention space saver, equipment-wise).

How VoIP works

VoIP converts a voice call into a digital signal and sends it via the internet; to reach a non-VoIP number, it’s transformed into a standard analog telephone signal. VoIP phone calls can be made directly from a computer, a VoIP phone, or a standard phone connected to a VoIP adapter. Because the voice signal is broken up into data packets as an IP call, spread over the internet, and reassembled at its destination (kind of like a Star Trek transporter), rather than tying up a copper peer-to-peer landline circuit, long-distance calls are less expensive through VoIP—another savings point.

How VoIP doesn’t work

Although VoIP service is superior to traditional phone systems on many fronts, it does have a couple of glaring weaknesses you should consider before going digital. First, your phone connection is entirely reliant on your internet connection—stable, high-speed internet service is a must for a VoIP phone system to function. Second, none of that matters in a power outage because nothing is going to work (conversely, those old landlines can still operate in a blackout). Solid, high-speed internet service and power backups are good to have anyway; for VoIP systems, they’re essential.

VoIP vs. traditional phone systems

Pro Bullet VoIP is less expensive
Pro Bullet Traditional phones don’t rely on internet
Con Bullet VoIP is susceptible to power outages
Con Bullet Traditional phone lines are being phased out

Why go with a VoIP phone system instead of a standard landline setup? As mentioned previously, the PSTN is being phased out nationally and globally, so you may not have a choice in the near future. Fortunately, VoIP systems offer all of the same standard features required to run a business, as well as several useful extras (see next section).

VoIP can also piggyback off your existing internet service to connect directly to your business’s PBX (private branch exchange, or closed office telephone network), eliminating the need for a separate line and most, if not all, legacy phone equipment. You can also place or receive phone calls through multiple devices (desk phone, computer, mobile phone, tablet, etc.) with VoIP, and overall, the sound quality is just better (with the proper internet setup and bandwidth availability, that is).

Why your business should consider a VoIP phone service

If your company is already using a PSTN phone system—sometimes referred to in less technical terms as POTS, or “plain old telephone service”—a VoIP system could be installed in its place fairly seamlessly. Depending on their calling requirements, employees would either see immediate improvement in their communications or not even notice the changeover.

On the most basic level, VoIP phone systems are indistinguishable from standard telephone services in performance and desk hardware. If, however, your company has more employees working on the go outside of the office, you might want to look into a comprehensive business cell phone plan instead.

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Standard VoIP features

Most VoIP service providers (and there are many; you’ll find far more choices than traditional PSTN phone companies) offer the following features in their business plans:

  • Web-based system administration
  • Mobile management (Android/iOS)
  • Auto attendant
  • Hold music
  • Call forwarding
  • Conference bridging
  • Caller ID
  • Call blocking
  • Call waiting
  • Call transferring
  • E911 registration
  • Find Me/Follow Me
  • Ring groups
  • One-line sharing on multiple phones/devices
  • Video conferencing
  • Voicemail to Email (as audio file)
  • Voicemail to Text
  • Fax to Text (as PDF)

Other VoIP advantages

  • Virtual phone numbers: VoIP users can choose a phone number with any area code (limited with some providers), as VoIP numbers aren’t attached to any location. If your company sends most of its over-the-phone business to Florida, but your office is in Texas (let’s say you’re an alligator cowboy boot enterprise), you could assign yourself a Florida area code and the calls would be charged as local, avoiding long-distance charges.
  • Number portability: Anyone who’s been in business for an extended period of time knows the pain of negotiating with a legacy phone company to keep their established number during a move or changing phone numbers completely (and in the process, every last piece of marketing material). VoIP numbers aren’t attached to copper lines and destinations, so they can easily move with your business.
  • Multiple device ring: As mentioned previously, VoIP calls can be placed from IP phones, computers, tablets, and mobile phones—and it works both ways. Incoming VoIP calls can be set to ring multiple devices simultaneously or in a specific order, one after the other. No matter where you are or which device you’re using, you won’t miss a call (unless you’d rather miss the call, in which case there’s still voicemail).
  • UCaaS: Rather than utilizing isolated systems for voice calls, email, instant messaging, video conferencing, and software and app access, UCaaS (unified communications as a software) combines all forms of in-house and outbound communications, usually for an additional subscription fee. With a SIP (Session Internet Protocol) trunk, which replaces the PSTN and integrates an office’s internet and PBX, a VoIP network and all other multimedia comms are streamlined into a single system.
Not sure which option will help you grow?

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Hosted vs. cloud VoIP

Even though they should know better, some providers use the VoIP descriptors “hosted” and “cloud” interchangeably, as if they were the same thing. That’s not quite right: while they’re both still internet based, a hosted VoIP solution is managed and maintained on- or off-premises by your business for only your business; a cloud VoIP is administered and operated by the service provider as a shared resource between you and other clients. Kind of like the difference between owning your own espresso machine and making regular Starbucks runs—everything’s fine until the machine breaks down, and then you’ll miss that barista who never spells your name right. Unlike Starbucks, cloud hosting is generally cheaper and less annoying, making it a smarter choice for smaller businesses that don’t want the extra hassle and expense of hosting.

VoIP pricing and costs

In Business.org’s 13 best business VoIP providers review, plan prices range from around $20 a month per line for basic plans to $55 a month per line for more top-tier, feature-heavy plans. And that’s just 13: the state of California alone has over 40 business VoIP providers, spanning small independents and large corporate telecom companies.

No matter where you are or which provider you choose, however, VoIP phone systems are typically less expensive to install and maintain because they operate on a service most offices already have in place (the internet), even after the initial purchase of VoIP-compatible phones or adaptors. Physical phone costs can also be countered with BYOD (bring your own device) plans, which allow employees to use their own laptops, tablets, and phones with the VoIP system, an alternative that standard telephone systems can’t provide.

Do you have any experiences with VoIP phone service, positive or negative? Are you using a provider you’d recommend? Let us know in the comments below.


At Business.org, our research is meant to offer general product and service recommendations. We don't guarantee that our suggestions will work best for each individual or business, so consider your unique needs when choosing products and services.

Bill Frost
Written by
Bill Frost
Bill Frost has been a writer, editor, journalist, and occasional graphic designer since the grunge-tastic ’90s. His pulse-pounding prose has been featured in Salt Lake City Weekly, Coachella Valley Independent, Wausau City Pages, Des Moines CityView, Tucson Weekly, Las Vegas Weekly, Inlander, OC Weekly, and elsewhere; he’s currently a senior columnist at SLUGMag.com. When not cranking out quips, Bill actualizes beer money as a musician and podcaster. You can reach him at bill@business.org.
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