Written by Aimee Bradshaw Reviewed by James Macey Updated on 30 August 2023 On this page What is VoIP? How Popular Are VoIP Phones How Do VoIP Phones Work? Five Advantages of VoIP What Equipment Do I Need for VoIP? VoIP Hosting Options How Much Does VoIP Cost? VoIP Jargon Decoded Expand Find out everything you need to know about VoIP technologyOne thing is sure: old fashioned telephone systems are out, and making calls over the internet instead is in. This type of telephone technology is called VoIP (voice over internet protocol). These systems rely on wi-fi instead of traditional phone lines, making them far more reliable than conventional phone systems, while also coming with a load of new features and possibilities.Switching your business' phone system to VoIP is unarguably a good idea, but we know how tough it can be to research a topic as technical as VoIP. With over a decade's experience in the technicalities of phone systems, we're here to help you to understand everything you need to know about VoIP. Here are the important facts, in language that makes sense. What is VoIP?At its core, VoIP is technology that turns analog audio signals – in other words, your voice – into digital ones (think MP3), and sends them over the internet. The largest and best-known IP network is the one you’re using right now: the internet!In short, VoIP lets you make long or short-distance voice calls via the internet, bypassing the old phone network entirely. This makes for cheaper calls, and much greater flexibility.VoIP phone systems are often hosted in the cloud, meaning you don't need to install lines and other hardware to use one. Instead, you'll simply pay your VoIP service provider a monthly subscription fee to maintain the system for you. Depending on what your service provider enables, you'll be able to use a variety of devices to make calls – IP desk phones, smartphones, laptops… you name it.VoIP may sound like a much simpler technology than your traditional phone network, but don't fear – most VoIP systems come with a variety of sophisticated call features, from virtual receptionists to personalized on-hold experiences for your customers. How Popular Are VoIP Phones in 2023?It’s incredible to think that free international phone calls were a pipe dream just 30 years ago.After the dot-com bubble burst, web data prices fell, and data-intensive web services like video and VoIP began to emerge. However, early issues with call quality and stability prevented VoIP from being taken seriously as a business solution.Cut to 2023, and many of VoIP’s early issues are a distant memory. VoIP has moved from becoming a choice to a compulsory piece of infrastructure.That said, you should refrain from throwing out your old business phone handsets at this point (unless you genuinely need a new set!). Most analogue business phones should connect up to the VoIP network via a suitable modem or VoIP adapter.VoIP providers should also offer a ‘softphone’ solution, which turns laptops, tablets and mobiles into VoIP-enabled powerhouses, which means you may not even need to invest in a ‘proper’ VoIP phone at all. How Do VoIP Phones Work?VoIP phone systems rely on a process known as packet switching to make and receive calls. With packet switching, fragments of speech are sent back and forth between speakers in small data “packets” during the call. VoIP gateways are then used to compress the data at the one end and reassemble that same data at the other end so that the conversation remains unbroken.Step 1: Your voice is converted into digital formWhen you speak into a VoIP phone handset, your voice enters the receiver as an analog signal. Your VoIP software converts this analog signal into digital chunks (‘packets’) of information using a ‘codec’ – a computer program that converts audio from one form to another.Step 2: Digital information packets are sent across the networkThe digital information is sent to a destination device, across a network. If your VoIP system is local use only (for example, employees communicating within a single office building), it uses a Local Area Network (LAN). If you are communicating more widely, the system will route the data across the internet.Step 3: Digital information turns back to audioThe recipient’s VoIP software uses another codec to turn the digital information back into an audio signal. Some information packets may reach the recipient in the wrong order, or not at all.And that’s the magic of VoIP software! It reassembles all of this information to reproduce the sweet sound of your voice for the people you’re talking to. ▶ Read more: Best Virtual Phone Number Providers for 2023 Five Advantages of VoIP✔ Low CostVoIP phone systems easily integrate with your company’s existing digital network.There are plenty of plans out there, with price differing based on internet speed, the monthly amount of call data you require, and whether you would like any optional extras.You can find small business VoIP plans starting from as low as $40 a month for four lines. This means that VoIP phone systems are far and away the cheapest option for small and medium-sized businesses.✔ Easy Cross-platform IntegrationYou can integrate VoIP services easily with other digital services like CRM software that your office uses. For example, VoIP voicemail transcription delivers important messages to your email inbox, letting you read them on the move.✔ Full HD Conference CallsBecause VoIP systems are digital, they offer features that you simply can’t find on standard phone systems. Many support live video conferencing – an invaluable feature for team members working remotely or across time zones.It’s also much easier to add new features to your VoIP solution than it is with a regular phone system.✔ Never miss a phone callThanks to the set up of find me follow me, you never have to miss a call again. This call forwarding system channels callers through your selected list of numbers and devices until someone picks up. You can even set it up so if you don’t answer, the call diverts to an extension, such as an external call center.✔ Increased PortabilityVoIP systems don’t depend on a specific line to manage call traffic. As a result, your employees’ extensions aren’t tied to their desks but to their phones, so they can make and receive calls on the go.✔ Deep Data AnalyticsVoIP makes it easier than ever to track valuable information. Calls can be logged, wait times tracked, and you can even record specific calls on the fly.By giving you greater access to data, VoIP makes it easy for you to learn where your call staff are going right and wrong. What Equipment Do I Need for VoIP?To recap, a VoIP phone is best understood as Software as a Service (SaaS). The innovation of VoIP technology is the method of coding, decoding and transmitting voice data across IP networks.That being said, no software is complete without a physical interface and hardware on which to run. The same is true of VoIP phone systems.There are three types of VoIP hardware configurations. Choosing the right one is essential for getting the most out of your system.1. Analog Telephone Adapter (ATA)A popular choice for Canadian businesses looking to keep the transition cost to a minimum2. VoIP Running Between Two ComputersComputer-to-computer VoIP software, also called a ‘softphone’, gives VoIP functionality to any smart device. Installation is simple and quick, and mobile softphones are a versatile VoIP solution.3. VoIP Across IP PhonesIP phones are specifically designed for VoIP services. They come with on-board VoIP software and a cable that plugs directly into your network router. IP phones also include modern interfaces that grant quick access to a host of handy features, like voice-to-email messaging and call forwarding.IP phones offer a far greater range of VoIP functions than ATA-equipped analog phones. Naturally, these features come at a higher cost than ATAs.If you’re buying your first VoIP phone system, native IP phones would be a sensible hardware choice. If you are upgrading an existing phone system, you may be able to achieve VoIP functionality without replacing all of your old handsets. ▶ Read more: Best Virtual Switchboard Phone Systems in Canada VoIP Hosting OptionsJust like the hardware discussed above, VoIP relies on IP network infrastructure to handle users’ data transmissions. For example, all VoIP phones route their subscribers’ call data through private data centers.So, before you start looking at specific VoIP features, you need to decide how you will ‘host’ the IP network.You have three options:1. On-Premise VoIP (On-Site VoIP)On-premise solutions are VoIP systems that are custom built for large organizations. Instead of subscribing to hosted VoIP services, some companies prefer to acquire their own in-house VoIP infrastructure. This approach involves working with a VoIP provider to build a secure IP network and integrate it with your existing communications systems.On-premise systems provide better security, which is why they’re often used in government departments. There are also potential cost savings to be gained over time from avoiding recurring costs of a hosted VoIP subscription.A serious downside of hosting on-site is that it costs a lot upfront. The types of servers that VoIP networks use are expensive to buy and set-up. This makes on-premise VoIP hosting uneconomical for most businesses. If you have fewer than 500 employees, it’s unlikely you’ll see much ROI from hosted VoIP.2. Hosted VoIP (Cloud VoIP)With a hosted solution, your VoIP provider hosts all essential network infrastructure at their global data centers. You pay a recurring subscription for:Access to their managed VoIP service(s)Enough bandwidth to meet your company’s needsAn agreed (but scalable) number of phone lines/usersTiered pricing for small, medium and large businesses makes hosted VoIP hard to beat in terms of value for money. The subscription model removes the need for a large upfront investment, although fees do increase with the size of your company.Hosted VoIP is also remote worker-friendly. Major VoIP providers offer software that employees can install on mobile devices. Because the service runs on third party servers, you can make and receive calls wherever you are in the world.The scalability of hosted VoIP is its biggest draw, letting you change your subscription type to match your day-to-day business priorities.More often than not, this kind of flexibility will suit you more than being saddled with hardware that will only depreciate over time.However, the flex you gain with a hosted VoIP subscription is offset by the control you lose over the service itself. Your supplier decides which features to include in each subscription tier, which also leaves system improvements to be made at their discretion. Thankfully, the best business VoIP companies go the extra mile to ensure a great experience for their customers. How Much Does VoIP Cost?World-beating VoIP doesn’t have to cost an eye-watering amount. You just have to know where to shop.We looked already at how things like the number of phone lines, bandwidth allocation and features can factor into VoIP costs. In fact, the cost of VoIP depends on more than just these factors. The location of your business, for example, determines your internet service coverage, which may affect the VoIP hosting options and features available to you.Most business VoIP companies pitch their services on a quote-by-quote basis, so the only way to find out how much your VoIP upgrade will cost is to speak to them.You can fill out our price comparison webform in 30 seconds to receive quick quotes from top suppliers. VoIP Jargon DecodedLocal Area Network (LAN)A LAN is a network of computers that’s limited to a particular area, like an office building or a group of buildings.Unified communications (UC)Unified communications just means the different ways- email, IM, phone calls, video conferencing, fax, SMS, etc. – that businesses communicate. UC solutions and systems bring these services together in one place for ease of use.BandwidthBandwidth is the measurement of information that a network can handle at one time. It is representated in ‘bits per second’. VoIP services typically require a bandwidth of 10Kbps in each direction, while PSTN services require 64Kbps.LatencyAlso called ‘lag’, latency is the time it takes for a packet of data to get from one network connection to another. High latency signifies slow network connection speeds, while low latency means fast connection speeds.JitterJitter refers to the inconsistent transmission of voice data, resulting in a jittery audio distortion. It can be caused by high latency on a network.Packet lossPacket loss refers to when information traveling across a network gets lost before it reaches its destination. This may happen if network latency is too high, or if the network is congested with traffic.Find me follow meWhat is find me follow me? It’s a clever forwarding system that prevents you from ever missing a phone call.As an example, you could set up your phone system so when you don’t answer your work phone, the call automatically forwards to your personal phone. The chain would then continue to perhaps another employee phone, and so on.You can even set up a forwarding extension to a contact center, where the call would transfer to should no one pick up internally. Written by: Aimee Bradshaw Writer and researcher Aimee is Expert Market’s resident telephone systems and point of sale go-to. If she’s not writing about business products, you’ll find her daydreaming about dog walking on Dorset beaches. Reviewed by: James Macey Senior Business Software Researcher James thinks all businesses can improve if they use the right technology. At Expert Market, he utilises his 4+ years experience as a researcher to offer specialised advice on a wide range of categories from CRM to Fleet Management.