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What Can VoIP Do For You?

Ron Pacchiano
Last Updated April 17, 2024 10:17 pm

According to a recent study only 12 percent of the people surveyed were familiar with the concept of VoIP. Of those that knew it related to some type of phone service, even fewer understood how it actually worked. Given those statistics, now seems like good time for a quick overview of VoIP and how it relates to your network.

In this article we’ll focus more on VoIP in a small business environment as opposed to those specific to a home user. However, the majority of this discussion applies to both.

Let’s begin with something important to all small business owner money. Consider this, a report published by TeleNomic Research reports that small businesses (companies with fewer than 500 employees) spend on average $543.17 per month for telecommunications services; 89 percent of which are for local, long distance and wireless telephone services.

Yet high telephone bills are only one aspect of the expenses small business owners face when it comes to their telecommunication systems. Traditional telephone systems are typically difficult to manage and support. They require their own communication lines, custom hardware, and usually a special support team. Just adding or removing a single user could cost hundreds of dollars. Not to mention the cost of adding additional extensions.

There was a time when you had no choice but to pay these prices simply because you couldn’t get these services anywhere else. Today, though, you have more options. Imagine a local phone number that followed you anywhere. Take a VoIP phone on the road, and you can place or receive calls from almost anywhere as if you were sitting at your desk. Since your phone number is mobile you can make “local” calls back home or call around the globe without worrying about cell phone roaming or hotel surcharges.

Also, imagine getting your phone messages forwarded to your notebook as e-mail attachments. Think of how helpful it would he to archive phone messages and conversations (with the other party’s consent, of course) as electronic files on your computer. And consider if this came with great features like call waiting/forwarding, voicemail and three-way calling at no extra charge. That is what VoIP can do for you.

VoIP allows you to make telephone calls using a broadband Internet connection instead of using a regular analog phone line. Some services using VoIP may allow you to call only other people using the same service, but other services will allow you to call anyone who has a telephone number including local, long distance, mobile, and international numbers. Also, while some services work only over your computer or a special VoIP phone, still, other services allow you to use a traditional phone through an adaptor.

How VoIP Works

VoIP is a collection of digitally encrypted voice transmissions that are carried over a network based on a single common language, or protocol in this case, the Internet Protocol TCP/IP. VoIP converts the voice signal from your telephone into a digital signal that travels over the Internet and is then converted back at the other end, so you can speak to anyone with a regular phone number. When placing a VoIP call using a phone with an adapter, you’ll hear a dial tone and dial just as you always have. VoIP may also allow you to make a call directly from a computer using a conventional telephone or a microphone.

VoIP works as a peer-to-peer application, entailing handshaking and direct media exchange between two IP devices,. To call someone, the user dials the telephone number, the handset translates that number into IP address format (e.g., 123.456.11.22), and the device sends encrypted data packets whose payloads contain messages conforming to a particular call-setup protocol between the two devices. They then establish a common connection for voice exchange. Their device rings, they pick up, and media packets flow in both directions.

To better understand how VoIP works, it’s helpful to compare it to how conventional phone calls operate. When you place a “regular” phone call using the Public Switched Telephone Network or PSTN (also known as POTS, for Plain Old Telephone Service) it’s known as a circuit-switched telephony, because it sets up a dedicated connection between two points for the duration of the call.

VoIP, on the other hand, is known as packet-switched telephony, because the voice information travels to its destination in countless individual network packets across the Internet. This type of communication presents special TCP/IP challenges because the Internet wasn’t really designed for the kind of real-time communication a phone call represents. Individual packets may and almost always do take different paths to the same place. It’s not enough to simply get VoIP packets to their destination. The packets must arrive in a fairly narrow time window and be assembled in the correct order to be intelligible to the recipient.

To improve performance, VoIP employs encoding schemes and compression technology to reduce the size of the voice packets so they can be transmitted more efficiently. Audio signals are also digitally processed in order to accentuate the voice information and suppress background noise. To conserve bandwidth, VoIP systems stop transmitting during lulls in a conversation and even generate some “comfort noise” to forestall the eerie silence that might make you think the call was disconnected.

VoIP uses a number of compression standards that offer different balances between packet size and audio quality. Generally speaking, the higher the compression the more simultaneous calls you can have, but the lower voice quality will be.

Despite all of the advantages of a VoIP system, it does have its drawbacks. For instance, some VoIP services will not work during power outages and the service provider may not offer any type of back-up power solution. Many VoIP providers may not offer directory assistance or white pages listings which is essential to the small business.

Preparing for VoIP

The key to success with VoIP ultimately comes down to proper planning. The scope of a VoIP implementation can vary according to an organization’s needs and desires, ranging from the relatively straightforward – using VoIP for local and long-distance calls or to communicate between a company’s multiple offices – to more complex deployments like call centers.

In most cases, saving money immediately with VoIP won’t require you to purchase any additional phone equipment or jettison what you already have, because devices called media gateways let conventional phone equipment (ranging from individual phones to an entire PBX) interface with your Internet connection. Taking advantage of VoIP’s most cutting-edge features (like the ability to have your calls follow you as you travel) typically require specialized VoIP phones or other equipment and/or a hosted PBX service.

Related Webopedia Categories:
Webopedia > Communications > Internet Telephony

Adapted from PracticallyNetworked.

Key Terms To Understanding VoIP for Business:

Short for Voice over Internet Protocol, a category of hardware and software that enables people to use the Internet as the transmission medium for telephone calls.

Short for Transmission Control Protocol/Internet Protocol, the suite of communications protocols used to connect hosts on the Internet.

Short for Public Switched Telephone Network, which refers to the international telephone system based on copper wires carrying analog voice data.

The science of translating sound into electrical signals, transmitting them, and then converting them back to sound; that is, the science of telephones.


Ronald Pacchiano is a contributing writer for SmallBusinessComputing.com and PracticallyNetworked.com, both are Internet.com sites. .

This article was originally published on May 05, 2006