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PBX VS VoIP: 12 Key Differences to Help You Decide

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For most businesses, a VoIP phone system offers greater value than a PBX phone system. However, some companies still rely on the PBX because they like that it is carried over dedicated phone lines.

In this article, we will compare PBX vs. VoIP, two different technologies that have been used for several years and have evolved over time.

If you are trying to decide which telephony solution would work best for your business, then you’ve come to the right place. This article will cover the definitions of PBX and VoIP, their differences, pros and cons, and other features.

What is PBX?

PBX stands for Private Branch exchange. It’s an enterprise-grade telephone system that transfers calls between users on local lines while allowing users to share a limited number of external phone lines.

In contrast to a public switched telephone network (PSTN), the primary aim of a PBX is to eliminate the need for each user to connect to the telephone company’s central office.

A PBX, used as a business telephone system, is owned and operated by the firm rather than the telephone company; nevertheless, the telephone company acts as the service provider.

Initially, PBX employed analog technology. However, PBX technology has evolved by integrating the analog system with digital signals for outgoing calls on the local loop using normal phone service (POTS).

Additionally, PBXs can incorporate network switching systems that integrate analog phones into the enterprise’s digital PBX system.

What is VoIP?

VoIP means voice over internet protocol. It’s a technology that allows your internet-enabled devices to make and receive phone calls. 

Many businesses prefer VoIP, especially when handling a large volume of calls and storage data.

VoIP typically needs a stable internet connection to work fine. This also means that VoIP phones work best when the internet connection is fast and stable. Additionally, it includes useful features that help organizations operate more efficiently.

When you make calls using VoIP phone systems, your voice is encoded to digital data and forwarded to the destination. Then, the digital data is re-encoded into audio signals. 

What’s the Difference Between PBX and VoIP? 

VoIP and PBX are two methods of accomplishing the same goal: making and receiving phone calls. Traditional PBX systems have been around for a long time and are utilized mainly by organizations that require a dedicated phone network.

On the other hand, VoIP is a newer technology that leverages the internet to make phone conversations.

You must consider the pros and cons of both alternatives while selecting between the two, the majority of which are based primarily on your position and final objective.

The Internet’s data and bandwidth have been used to link users and offices with PBX. Simultaneously, VoIP began combining additional services to provide more complete communication solutions—while minimizing the drawbacks of owning and maintaining PBXs


Do I Need a PBX for VoIP?

VoIP works independently and doesn’t need a PBX system to function effectively. 

However, it needs a high-speed broadband internet connection and a cloud-based phone for VoIP to perform at an optimal level. 

All features present in the PBX device are available in the VoIP system without PBX hardware.

Pros and Cons PBX Phone System


One of the most outstanding benefits of a PBX system is that power outages and internet disruptions do not affect them. On the other hand, using a hosted PBX system can lower monthly operating costs—even for a high number of users.

Additionally, with a traditional PBX system, calls travel through landlines, which results in a jitter-free audio quality.


Regarding their cons, PBX systems are not flexible enough to grow and scale with your business needs. An example is that putting extra phone lines in your business requires running phone wires and wall plugs, which will most likely add to the expense of a PBX phone system.

These systems are also generally limited to phone calls without any additional features like chat or multimedia sharing. This also limits digital integration with other platforms or technologies, which is necessary for many businesses today.

Since traditional PBX systems are hosted onsite, companies are limited to offer remote work opportunities. In addition, calls can only be made from office phones. Not to mention that the amount of phone numbers and lines available is also limited compared to a VoIP system.

One last downside is that traditional PBX systems require specific and expensive cabinets to work.

Pros and Cons of VoIP Phone System


The major reason businesses switch to VoIP is the lack of bulky equipment and the need for maintenance which substantially reduces costs. 

With VoIP, only your internet bandwidth limits the maximum number of phone numbers and users. So you can add and remove users with ease, and the billing amount will not grow so much, especially compared to PBX.

Regarding the audio quality, since a VoIP system relies on a strong internet connection, fiber optic cables generally eliminate any issues. Plus, you’ll also be able to access your phone system from anywhere, on any device.

On top of that, you will enjoy features like video conferencing, call queuing, voicemail to email, call forwarding, call transfer, integrations and interactive voice response (IVR). This is something that is not easy to set up on a regular PBX.

One last benefit of VoIP systems is that they can still operate during a natural disaster.


The most common concern for VoIP is its dependence on internet access for connectivity and the fact that they require a constant power supply for uninterrupted communication.

That’s why you must choose a provider who offers system redundancy and backup power.

On the other hand, VoIP systems are vulnerable to cybersecurity breaches like hacking, viruses, and other types of cybercrimes, threats that are less common for PBX systems.

Latency and jitter are also possible disadvantages that can occur due to poor internet connection or inadequate VoIP routing for higher priority calls.

And a final disadvantage is that VoIP works on a limited location tracking for emergency calls making it difficult for emergency services to pinpoint where a call originates.

PBX vs. VoIP: 12 Key Differences

Here, we summarize the 12 remarkable differences between PBX and VoIP to help you decide which phone system benefits your company most.

1. Initial setup cost

ULTATEL is one of the most trusted advisors and communication providers. ULTATEL’s cloud portal can be easily used by non-IT experts and provide simple navigation for every end-user in the clients’ organizations with a cheaper initial monthly setup rate.

Ultatel setup cost is $15.95, which is a lower setup cost than regular PBX system costs. The price of a PBX phone system is largely determined by the size of the company. In most cases, budget about $800 to $1,000 per employee. That includes the base system, the actual phones, additional features, wiring and installation, and any training and support your company needs.

By implementing VoIP systems instead of traditional PBX setups, businesses can save as much as 40-80% on monthly costs and up to $1,000 on individual handsets alone. The investment for a VoIP system on small businesses will be anywhere from $25 to $75 per user per month.

2. Recurring cost

VoIP guarantees a low subscription-based expenditure depending on the number of phones and lines your customer service team needs. In addition, unlike traditional phones, VoIP covers the maintenance and upgrade fees all in one subscription. Now you can cut your monthly phone bills up to 50% and say goodbye to expensive maintenance costs.

The two major on-premise alternatives are PBX and VoIP, and each serves a distinct function, making it apparent which will work best for your business. For most businesses, a VoIP monthly fee of $40 per user is a reasonable estimate. The monthly phone lines, new phone hardware, and professional services for on-site installation, end-user training, and ongoing support are all included in the $40/month per-user fee.

3. Call quality

In the early days of VoIP services, call quality left a lot to be desired. As a result, businesses preferred PBX for high-quality calls. Nowadays, the quality of calls made with both technologies is comparable, and HD voice calls have gradually become the standard.

PBX call quality is determined mainly by the hardware, which includes routers, wiring and phones. If the system is configured correctly and the phone models are of good quality, the calls will be.

The problem is a little more complicated with VoIP, as there might be numerous causes of poor sound quality.

A sluggish or unreliable internet connection is one of the most prevalent causes. If the router is not set correctly, call delays and hiccups may occur, lowering call quality.

In addition, the headset your employees are using and the calling software may also influence call quality.

4. Scalability

With VoIP, your telecommunications can be swiftly scaled.  You will be able to set up extra VoIP phones and add users to your subscription without much effort. All you’d need is a stable broadband internet service or install a network switch.

Additionally, several branch offices can use the same VoIP package. However, this is not as straightforward with PBX. You must add more phone lines and install new gear. Therefore, a new kind of PBX system is required for contemporary workplaces.

5. Flexibility

Another issue that can cause problems for businesses is the inflexibility of PBX phones. PBX phones are often proprietary, which means they are tied to a specific system or provider. 

Do you want to change phone models or vendors? Unfortunately, you’ll have to replace your complete set of equipment in the worst-case scenario because your present models might no longer be compatible.

This also means that PBX phones can only be used inside your business and with compatible phone types. Thus, remote working is out of the question.

You have a lot more alternatives when it comes to VoIP systems. You may use any phone as long as it has a VoIP calling option, and you can also use it anywhere there is a steady internet connection.

Your agents may even be able to handle calls directly from a computer app or their mobile phones. As a result, they can answer calls just like at the office.

6. Reliability

Service continuity is crucial for business operations, especially when it comes to phone calls. That’s why both VoIP and PBX have their own specific challenges and strategies to allow call continuity.

A PBX system is very dependable and secure if properly installed and maintained. In addition, there is little chance of hackers attacking since they use a classic PSTN (Public switched telephone network) rather than an internet connection. 

When it comes to security, VoIP companies are always improving their technology to make it as safe as possible, and ULTATEL employs a variety of security measures to avoid hacking or breach attempts. ULTATEL’s best practices include the use of secure passwords, call encryption, and a reliable firewall.

7. Security

Both VoIP and PBX systems are not exempt from security threats. Attackers may exploit weaknesses and eventually expose your business to fraud, data theft, and income loss. So without a doubt, security is a primary concern for both PBX and VoIP.

According to the VoIPSA security threat taxonomy, VoIP threats may be classified into six primary categories: 

  • Social threats: Those targeted at humans. Extortion, blackmailing, identity theft, are examples of social threats.
  • Threats of eavesdropping, interception, and modification: This type of attack includes intercepting and rerouting unencrypted connections for malicious activities.
  • Threats of Denial of Service: This type of assault might prevent genuine users from accessing the VoIP system.
  • Threats to Service Abuse: This danger is manifested in the form of billing evasion and toll fraud.
  • Physical access threats: include unauthorized physical access to VoIP equipment or the network physical layer of the OSI model.
  • Threats to Service Interruption: These are difficulties that are not deliberate yet may cause VoIP services to be unavailable or useless. 

Ultatel consistent penetration testing, updates, and call encryption provide a very secure communication channel that’s very hard to compromise.

8. Standards-compliant

A very vital difference between PBX and VoIP is the standards-compliant solution. Unfortunately, when it comes to PBX systems, the standard complaint is not really considered but is crucial for VoIP systems.

At ULTATEL, we pride ourselves on offering a cloud-based innovative solution that follows all VoIP protocols and best practices, giving users and businesses access to cutting-edge routers, phones and other devices for quality cloud communication. 

We also have a robust web app dashboard that is security protected with the latest HIPAA-compliant communication and the STIR/SHAKEN framework.

9. Outages

It can be a challenge to keep your phone system operational during a power outage.

The best thing you can do is set up a backup power supply. ULTATEL’s VoIP service can assist you in selecting an Uninterruptible Power Supply (UPS) that can connect to your phone system and keep it operational even if the power goes out. This solution depends on batteries, which will buy you enough time while you can restore power.

ULTATEL offers 2N+2 redundancy, nearly twice as much as other standard Tier III centers, to ensure that businesses using ULTATEL do not encounter unnecessary downtime with their service. Additionally, unlike many other providers, ULTATEL’s system is monitored by on-site Operations Control Center engineers 24/7, providing its customers with total reliability.

10. Internet usage

The internet usage differs between PBX and the latest VoIP phone. PRI is a considerably older technology that is used in traditional trunking for a PBX. It is often located on a different network from your LAN and requires more effort and money to manage.

By contrast, VoIP may connect to your current network infrastructure (Ethernet). VoIP calls need just approximately 100 kbps per line. You may use our VoIP speed test to see whether or not your network complies with these criteria.

11. Vendor options

Cloud-based phones have caused a decline in the demand for traditional PBX systems, impacting companies offering on-premise PBX systems exclusively.

However, the demand has kept very high for VoIP, as many telecommunication companies have also invested in cloud phone-based systems after the COVID-19 pandemic.

12. Contracts & terms

Another area that differentiates PBX systems from VoIP systems is the contract’s terms and conditions. While On-site PBX installation commonly involves long-term service contracts and bi-annual software licenses, VoIP contracts are usually shorter in time and have fewer requirements.

Ultatel offers a long-term contract and a monthly payment option with no hidden charges. Rigid contracts, surprise fees, and mysterious charges are infamous with traditional phone companies. With ULTATEL, there are no hidden fees or mysterious extra charges.

Summary & Takeaways

ULTATEL VoIP offers top-notch audio quality and the most innovative features in the market at a fraction of the cost compared to traditional PBX.

You will start saving money right away when switching to ULTATEL’s cloud-based phone system. You won’t have an expensive installation fee or any maintenance costs.

If you do not have dependable internet connectivity, the best alternative is an IP PBX system. You’ll access your system via gateways connected to your phone line; however, a robust internet connection is still advantageous.

  • VoIP phone systems and hosted PBX rely heavily on internet access, whereas traditional PBX relies on copper wires to transmit signals.
  • If you’re looking for flexibility, affordability, cutting-edge features, and a phone system that can evolve as your business does, VoIP is the right choice for you.
  • Setting up a PBX system involves wiring lines and connecting hardware which can take a long time, whereas a VoIP system is incredibly simple and fast to set up.
  • Customizing calling preferences and settings is another benefit of VoIP over PBX.
  • The internet usage differs between PBX and VoIP since PBX doesn’t require an internet connection to operate.
  • Traditional PBX systems often come with a restricted set of fundamental capabilities, and the more advanced systems usually come with a higher price. On the other hand, VoIP can provide a variety of sophisticated telecommunication features through affordable recurring plans.

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