What is VoIP and How Does it Work?

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In this beginner’s guide, we will answer what is VoIP, and how does VoIP work behind the scenes. The goal is to help you understand how VoIP can save you money and help you grow your business.

What is VoIP?

VoIP (Voice Over Internet Protocol) is a phone technology that allows you to make and receive phone calls using the internet instead of traditional phone lines.

Unlike landline phone systems that are limited to a single desk phone in your office, VoIP lets you make and receive business phone calls from your laptop, tablet, regular smart phone (using an App), and even VoIP compatible office phone sets.

Since all calls are made over the internet, it’s extremely cost-efficient for both domestic and long distance (international) calls. Most business VoIP providers offer unlimited minutes without any extra cost.

How VoIP Actually Works?

To have an understanding how VoIP phone works, we will take a look at what happens when you make or receive a phone call on VoIP phone.

When you make a phone call using VoIP, their business phone number app or VoIP adapter takes the analog audio signal and turn it into digital signal.

This digital voice data is then sent to the business phone service provider using your internet, and then finally the message is routed to your customer’s phone.

This process happens nearly instantly which is why sometimes VoIP sound quality is even better than regular phone calls.

How is VoIP different than Traditional Phone System?

VoIP works differently behind the scenes from a regular landline phone system.

Traditional telephony systems use the circuit switching method for connecting calls. When you make a call through the Public Switched Telephone Network (PSTN), you’re connected to the person on the other end, and they’re connected to you in a circuit.

The ‘Circuit switching’ technology is used for more than a 100 years now. It is reliable and still works, but is not the most efficient or cost-effective.

VoIP uses the ‘packet switching’ method instead. This means that data is only sent when needed. A brief, instant connection is created each time you speak. The connection doesn’t need to go both ways all the time. You and the person you’re talking to will not normally be both speaking at the same time.

Plus, packets of data are sent efficiently. They can use many different paths through the internet. The packages are then put back together when they reach their destination.

The data packets can also be compressed to save space. This lets them travel even more quickly through the internet.

All of this happens very fast. Unless there’s a problem with your internet connection, you will not notice any delay during the call.

While VoIP may sound quite technical and complicated, the main thing to understand is that VoIP is a more efficient method of transferring data during phone calls.

You probably have already used VoIP before without knowing it, through an app like Skype or Google Voice.

VoIP Advantages – Benefits of Using VoIP

Switching from a traditional telephone company’s service to a cloud based VoIP phone system has many benefits.

Lower Monthly Cost

One of the biggest advantage of VoIP is that you have lower monthly cost on both domestic and international calls.

Most VoIP phone providers will often include unlimited domestic calls for free. International calls are normally very cheap, too.

Aside from that, you’ll also save money on repair and maintenance service expenses that you currently pay your landline phone provider.

Take calls from anywhere – Completely Portable

With VoIP, you don’t need to be in an office, on-premise, sitting by your desk phone to take phone calls. You can take incoming calls from wherever you are using an app on your phone, tablet, or laptop computer.

This is a big advantage for teams that are working remotely or out on the field. It is also great if you’re traveling.

Advanced business phone features

VoIP solutions normally include lots of extra business phone features. For instance, you can set up conference calls easily with VoIP.

Plus, most VoIP service providers offer a virtual receptionist, hold music, call waiting, voicemail to email or text, and much more. You can even get advanced telecommunications functionality like video conferencing.

This may also get you additional cost savings because often traditional telephone service providers charge recurring fees for these add-ons.

Improved Scalability and Flexibility

Another advantage of VoIP is higher scalability. Whether you’re hiring more staff or opening a new branch office in a new city, VoIP makes it easy to grow.

Unlike a traditional phone service that would require to spend money on expensive hardware on dedicated line, VoIP lets you add your team members with just a few clicks inside your account dashboard.


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