What is VoIP? The Ultimate Guide to VoIP Technology

What is VoIP and How Does it Work?

UC Today breaks down everything you need to know about VoIP
Unified CommunicationsInsights

Published: June 20, 2023

Rebekah Carter - Writer

Rebekah Carter

What is VoIP, how does it work, and why is it beneficial for today’s business leaders?

VoIP has become a relatively commonplace term in the communication industry.

The rise of cloud-based comms, hybrid and remote work, and UC has accelerated the need for more advanced IP-driven communication systems. VoIP, or Voice over Internet Protocol, allows users to reduce their reliance on traditional telephony systems and landlines.

VoIP transfers audio data and other content over the internet, allowing for greater scalability, call quality, and reduced costs. By 2032, the market for VoIP is expected to reach a value of $108.5 billion as companies look for ways to reduce operational costs and improve efficiency.

With the impending switch-off of the PSTN and IDSN services on the horizon, this tech is quickly becoming an essential part of the communication stack.

What is VoIP? A Definition

VoIP stands for Voice over Internet Protocol.

VoIP is a phone system that uses an internet connection to process (make and receive) calls rather than relying on traditional landlines. It’s basically a digitally transformed alternative to the old-fashioned telephone system.

While the history of the tech began in 1995, demand for VoIP technologies has increased drastically in recent years. Companies now need cloud and internet-based phone systems to align and synchronize global and distributed teams without excessive expense.

The tech also offers an essential alternative to the traditional PSTN and IDSN lines offered by telephone companies, which soon won’t be available in many parts of the world. Instead of relying on landlines, VoIP allows anyone with an internet connection to make and receive a call.

For today’s hybrid and remote workers, VoIP also eliminates the need to be tied to a desk or physical copper wire. All companies need to do to deliver high-quality voice to their teams with VoIP is choose a reputable provider and maintain a strong internet connection.

What’s the Difference Between VoIP and Landline Phones?

So, what’s the difference between VoIP and a standard landline?

Landline or traditional phones are hardwired to a physical location. Conventional phone lines rely on a massive network of interconnected wires to transmit signals worldwide. VoIP replaces this “physical” web with the digital web, using the internet to share information.

VoIP phones aren’t bound to a specific location, and users can access their phone systems using various tools, from softphones or apps to desk phones and headsets.

Here’s a quick insight into the difference between Voice over Internet Protocol and landline phones in terms of functionality.


Functionality VoIP phones Landline phones
Phone calls Yes Yes
Long-distance calling Yes Optional on some plans
User-to-user calls Yes PBX needed
Call Waiting Yes Yes
Caller ID Yes Yes
Simplicity Easy to set up with a VoIP provider Can be complicated to install wires and cables.
Internet connectivity Required Not necessary
Wireless connectivity Wi-Fi, DECT, and Bluetooth headsets and phone systems Some Bluetooth and DECT phone systems and headphones.
Technology IP (Internet-based) Analog signals (wires)
Call quality HD HD quality controls Variable quality
Auto attendant Yes PBX needed
Privacy and security features Yes Varies
Number control Yes Available at a cost
Phone extensions / hunt groups Yes With a PBX
Conferencing Yes Varies
Call encryption Typically included Not usually included

What is VoIP? How Does VoIP Work?

VoIP might seem like a complex concept, but the functionality is quite straightforward. Voice over Internet Protocol systems convert voice and telephone call data into digital files. These data packets are compressed using codecs and transferred over the internet.

A reliable VoIP system can send phone call data through the internet in small packages in a fraction of a second, minimizing connection lag. VoIP solutions use quality-of-service tools to prioritize voice traffic over non-latency-sensitive tasks and improve voice quality.

They also leverage tools like IP branch exchanges (PBX) to manage devices, features, clients, numbers, and gateways, and to provide users with local survivability in the event of a network outage. Some VoIP vendors also offer session border controllers for security, location-tracking databases for E911 call routing, and priority routing tools.

By eliminating the need for circuit switched networks, VoIP instantly reduces infrastructure costs and provides greater flexibility to business owners.

What Equipment Do VoIP Systems Use?

VoIP phone systems often require much less initial investment than a traditional phone system. However, there are still a few things most companies will need to invest in, such as:

  • An internet connection and router: At least 90-156kbps for strong call quality
  • Compatible devices: Desk phones, smartphones, desktop computers, tablets, or laptops
  • Accessories: Phone systems or microphones and headsets
  • Cables: PoE adapters and ethernet cables for VoIP over Ethernet
  • Analogue telephone adapters: A solution for connecting analog phones to VoIP systems
  • VoIP gateways: A software gateway for converting analog signals into SIP packets

What are the Features of a VoIP System?

The exact features offered to a business for a VoIP system can vary depending on the provider chosen. However, most VoIP systems include IP PBX tools, gateways for linking networks, call policy management software and session border controllers.

Most modern vendors also offer access to features like:

1.      Auto Attendants and IVRs

Auto attendants can answer calls and direct diallers to the correct extension automatically. They can also forward calls to a voicemail or a mobile device outside business hours. IVRs, or Interactive Voice Response systems, offer similar functionality.

However, with IVRs, the system uses voice prompts, speech recognition, and sometimes even natural language processing to assess a caller’s needs and route them accordingly.

2.      Softphones and Hard Phones

Users of a VoIP system can access their telephony features by using a traditional desk phone or an app for a mobile device or computer. These apps are known as “softphones” or software phones, allowing users to interact with phone capabilities anywhere with an internet connection.

Softphones have become particularly popular in the age of remote and hybrid work, but there’s continued demand for desk phones in some professions.

3.      Call Quality Features

Most VoIP solutions offer a higher voice quality than a traditional landline phone. These systems can use quality management tools to prioritize voice traffic in a network. Some vendors also use intelligent features to minimize echo and voice distortion.

Accessory vendors also create specialist headsets and softphones with integrated technology for improved audio experiences.

4.      Voicemail

While some standard landline phones feature voicemail, most of the voicemail capabilities on VoIP phones and systems can be more advanced. Some VoIP vendors offer access to customizable voice recordings and speech-to-text options for transcribing voice calls.

5.      Advanced call controls

Call control capabilities built into Voice over Internet Protocol systems include various ways to manage calls and contacts, such as intelligent call forwarding, find me/follow me functionality, and secure caller ID. Specific solutions can also offer hunt groups, phone extensions, and routing capabilities.

6.      Conference calling

Most VoIP calling systems support multi-user conferencing. While it’s sometimes possible for three people to share a call on a landline, VoIP goes beyond these limitations. Participants can engage in extensive, group-wide calls through apps and systems.

7.      Call Routing

Another popular feature among VoIP systems is call routing. Routing is crucial in the contact center to ensure customers are sent to the right agent based on their needs. Different VoIP and UC systems offer other routing options. Solutions include list-based routing, round-robin routing, time-based routing, intent-based routing, and more.

8.      Call Recording

Call recording is often essential for compliance, call monitoring, and quality control. Most VoIP solutions can offer compliant call recording capabilities with various options. Some can even allow users to choose whether to record calls manually or automatically, and whether to omit specific personal details from call recordings.

Some companies even offer call recording services with built-in AI functionality for transcription and translation.

9.      Number Management

VoIP lines can route calls to various numbers, including existing landlines, mobile, and virtual numbers. Most VoIP providers will allow companies to port their existing numbers into a VoIP system or purchase new numbers. Options can range from local geographical numbers to toll-free numbers.

10.  Call Security Features

VoIP security and protection against call fraud are often major concerns for business owners. Telephone calls can often include personal information, whether HR personnel discussions or customer interactions. Phone service providers use encryption to protect criminals from accessing your calls and other security measures, like session border controllers.

VoIP in Unified Communications

Notably, VoIP can also form a crucial component of a more comprehensive communication toolkit, known as unified communications. With VoIP and other cloud technologies, businesses can combine all their communication channels into one environment.

With Unified Communications tools, companies can often expand on the functionality and flexibility of VoIP. UC solutions offer communication options via video, SMS, messaging, email, and various other channels. They can also provide access to extra tools for:

  • Call analytics and reporting
  • Permission and user management
  • Device and call monitoring
  • Collaboration and knowledge sharing
  • Integrations with contact centers and other tools

What are the Benefits of Voice over Internet Protocol>

So, now you know the answer to “What is VoIP” and “How does VoIP work?” you might be wondering why so many companies have invested in VoIP. As mentioned above, VoIP is quickly becoming the go-to option for many companies moving away from traditional phone lines.

However, the shutdown of the PTSN and IDSN lines isn’t the only reason to switch to VoIP.

A VoIP phone service also offers the following:

1.      Lower Costs

Though the price of services can vary, running a VoIP system’s often much cheaper than a traditional phone system, most companies pay around $30 per month per user for VoIP access. Plus, plans often include international calls and advanced features.

The factors that influence VoIP plan costs can include the following:

  • Advanced features and functionalities
  • Available third-party integrations
  • Type and number of phone numbers required
  • Desired level of provider support
  • Setup and installation costs
  • Add-on costs for E911 fees, USF fees, Number porting, etc

While some providers charge monthly, others offer pay-as-you-go pricing, so companies only pay for what they use.

2.      High-Quality Audio

VoIP systems can deliver high-quality audio in a range of different circumstances. No matter how far away a contact is, a VoIP system should be able to deliver their voice packages to the other user quickly and clearly, without any fuzziness.

With advanced phone features like call quality control systems, companies can invest in upgrading the quality of their calls even further.

3.      Global Flexibility

Most VoIP phone systems will support global calling as standard, with much lower international and long-distance rates than you’d get from a traditional landline provider. Additionally, companies can distribute the same numbers among all staff members wherever they are.

This means organizations can ensure they’re sharing the same number wherever they are, or using specific numbers to help routing calls.

4.      Advanced business phone features

VoIP phone solutions and UC platforms generally include access to a broader range of phone features, such as auto-diallers, virtual receptionists, hold music, call waiting, and auto-dialler options. The exact functionality available will vary depending on your provider.

However, most VoIP companies will allow organizations to scale their functionality and add new features according to their needs over time.

5.      Greater scalability

Whether opening a new branch in a different country or hiring more staff members, adding numbers and lines to your tech stack is extremely simple. There’s no need to spend money and time installing a dedicated line.

Most VoIP solutions allow users to add team members to their ecosystem with just a few clicks in a dedicated account dashboard.

Does VoIP Have Any Disadvantages?

For most companies, VoIP represents the ultimate way to upgrade their voice-based communications for the new digital age. However, it does have a few downsides worth considering.

First, companies must ensure they have a strong internet connection to make telephone calls. This could mean upgrading the network infrastructure in the business before investing in VoIP. The slower the internet connection, the more the call quality will suffer.

Fortunately, the technology doesn’t usually require a lot of bandwidth, and most vendors will offer consultation and guidance to help teams prepare their networks.

Another potential issue is that power outages could lead to lost VoIP capabilities. While regular phone services work during power outages, VoIP relies on access to the internet. Most companies use backup systems and failovers to address this issue.

Is VoIP Right for You?

As the world of communications continues to change, the question “What is VoIP, and what can it do for me?” is becoming more common. VoIP is a robust, scalable, and flexible solution to modern communications. It’s also becoming increasingly necessary in the world of hybrid and remote work.

However, because it’s reliant on the Internet, businesses need to ensure they’re planning their transition carefully with the proper infrastructure. It’s also essential to find the right VoIP provider to work with. Look for a vendor that can offer the following:

  • Proven reliability with a robust SLA and minimal downtime
  • Compatibility with your network and bandwidth requirements
  • Live and consistent support from a dedicated team
  • Multiple redundant data centers for managing calls
  • Exceptional scalability for when your business grows
  • Access to a host of advanced calling features
  • Value-added services where necessary

Plan correctly, and choose the right vendor, and Voice over Internet Protocol is sure to be an investment that pays off for your business.


What is an example of VoIP?

Whenever you use a computer to call someone over the internet, using Microsoft Teams, Skype, Facebook Messenger, or something similar, you’re using Voice over Internet Protocol applications.

Are VoIP calls free?

Most VoIP calls aren’t technically free, though they are cheaper than traditional landline calls. Some providers will offer access to some free calls, however. For instance, you might be able to call internal numbers in your business for free.

Can you use a landline phone with VoIP?

While you can use a range of desk phones and different types of devices with VoIP, you may need an adapter to use a traditional analog phone.

Do you still need a landline with VoIP?

No, these systems don’t require a traditional telephone line. However, you need a strong internet connection to send and receive voice data.

What is the purpose of VoIP?

Voice over Internet Protocol technologies streamline external and internal business communications, reduce the costs of telephone calls, and provide access to more advanced features than a landline device. They also remove the need to rely on traditional phone networks.



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