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What is VoIP (Voice Over Internet Protocol)?

what is voip

As a business owner, you’ve probably seen the acronym VoIP everywhere—but what does VoIP stand for, and what does it do? This innovative technology enables users to make and receive calls anywhere with a robust Internet connection, allowing businesses to improve communication protocols.

If you want to incorporate VoIP as part of your communications network, this guide is for you. In it, you’ll learn what VoIP is, how it works, when you should switch, and how to find the best provider.

What is VoIP?

VoIP (Voice over Internet Protocol) enables the transmission of voice and multimedia content over the Internet or any other IP-based network. Rather than using traditional analog or digital telephone lines, VoIP converts voice signals into digital packets and sends them over an IP network.

With VoIP, users can make phone calls using computers, smartphones, tablets, IP phones, and even traditional telephones with adapters. VoIP uses the same underlying infrastructure as the Internet, allowing for cost-effective and efficient communication.

How Does VoIP Work?

VoIP works by converting analog voice signals into digital data packets and transmitting them over an IP network.

When you speak into a VoIP-enabled device, the system undergoes analog-to-digital conversion, converting the waveform into a series of digital samples.

The VoIP system then divides this voice data into small data packets, sending them over an IP network to reach their destination.

VoIP employs a Real-Time Transport Protocol (RTP) to manage timing and sequencing to prevent latency, packet loss, and congestion.

The voice packets are extracted from the IP packets and reassembled correctly at the receiving end, enabling recipients to hear the message.

Related: How Does VoIP Work?

Pros and Cons of VoIP

Despite its ever-growing popularity, many businesses remain skeptical of VoIP because of its supposed cons. However, VoIP’s superior advantages make it a must-have in the office.

Advantages of VoIP

  • Cost savings: Calls made between VoIP users are typically free, and even calls to traditional phone numbers are generally more affordable than conventional telephone service.
  • Mobility: For remote workers, VoIP provides flexibility, enabling users to take calls on the go.
  • Scalability: VoIP systems are easy and affordable to scale because they don’t rely solely on fixed hardware.
  • Easy integration: If you run a CRM platform or something similar, most VoIP systems are compatible and quick to integrate.
  • Unified communications: Because VoIP supports voice, video, and messaging, teams experience seamless and unified communications, increasing efficiency and productivity.

Disadvantages of VoIP

  • Internet dependency: Latency and instability can disrupt VoIP connections. Offices must always have reliable Internet connectivity.
  • Power dependency: Traditional phone systems can continue to function during power outages as the telephone company’s infrastructure powers them. However, VoIP systems require power and internet connectivity at your location, so always have a backup ready. 
  • Emergency calling limitations: VoIP systems are not location-specific and can make it challenging for emergency services to pinpoint where a VoIP caller is. 
  • Security concerns: VoIP calls and data transmitted over the internet are susceptible to potential security risks, such as eavesdropping, call interception, or unauthorized access. Implementing security measures like encryption, firewalls, and secure network configurations is essential to protect VoIP communications.

Key Features of VoIP

VoIP offers a range of features that enhance communication and collaboration. The specific features available can vary depending on the VoIP service provider and the type of VoIP system. Here are some key features commonly found in VoIP:

  • Voice calling: Users can make high-quality voice calls to other VoIP users and traditional phone numbers over the internet or IP networks.
  • Video calling: Using webcams or built-in device cameras, users can have face-to-face conversations.
  • Call management: VoIP systems offer various features, including call forwarding, call waiting, call hold, call transfer, and three-way calling, providing robust control over incoming and outgoing calls.
  • Voicemail: Callers can leave messages when the user is unavailable. Voicemails can be accessed and managed through voicemail boxes, email notifications, or web interfaces.
  • Auto attendant: Virtual receptionists automatically answer incoming calls and provides callers with options to direct their calls to specific extensions or departments. It simplifies call routing and improves the overall call-handling experience.
  • Interactive Voice Response (IVR): IVR systems use voice prompts and touch-tone keypad inputs to allow callers to interact with automated menus, retrieve information, or perform specific actions without speaking to a live operator. 
  • Presence and availability: Learn when colleagues are available, busy, away, or on a call, facilitating better communication and collaboration.
  • Instant messaging and chat: Users can exchange text messages in real-time, either one-on-one or group discussions, enhancing communication and collaboration within the organization.
  • File-sharing and collaboration: Users can exchange documents, presentations, and other files during calls or chat sessions.
  • Integration with other applications: VoIP systems can integrate with other software applications and tools, such as customer relationship management (CRM) systems, email clients, calendars, and collaboration platforms, streamlining workflows.

VoIP vs. Landlines

While VoIP systems can integrate with landlines, the two are starkly different. Infrastructure-wise, landline phones use traditional copper wires and the public switched telephone network (PSTN) infrastructure. In contrast, VoIP operates over the Internet.

VoIP also offers cost advantages over landlines, as charges for international calls are lower or even occasionally free. In addition, VoIP systems are more flexible, as users can make calls over various devices.

However, landlines have more consistent quality with minimal issues, whereas VoIP systems rely on stable Internet connections. Regarding power outages and emergency calls, VoIP is less dependable.

VoIP Software and Hardware Requirements

To use VoIP, you will typically need specific software and hardware components. Here are the standard requirements for VoIP:

  • Internet connection: A reliable and stable internet connection is crucial for VoIP. Consider high-speed broadband or dedicated internet connections.
  • VoIP service provider: Choose a VoIP service provider that offers the features and pricing plans that suit your needs. ULTATEL provides comprehensive VoIP solutions for many industries.
  • VoIP software or application: To make and receive VoIP calls, you’ll need to install softphone applications for computers and mobile devices, which emulate a phone interface on your device.
  • IP phones or adapters: IP phones are specialized hardware devices designed specifically for VoIP communication. These phones connect directly to your network and operate similarly to traditional phones but use IP protocols for voice communication. If you have existing analog phones, you can use analog telephone adapters (ATAs) to connect them to the VoIP system.
  • Headsets or speakerphones: Depending on your preference and environment, you may need headsets or speakerphones to facilitate voice communication. 
  • Network equipment: Ensure your network equipment, such as routers, switches, and firewalls, can handle VoIP traffic effectively. Quality of Service (QoS) configurations may be necessary to prioritize voice traffic and ensure consistent call quality.
  • Power Backup: Consider having backup power sources, such as uninterruptible power supplies (UPS), to keep your VoIP system operational during power outages.

How Much Does VoIP Cost?

VoIP systems typically cost $20 to $30 per user. However, these costs may vary according to your service provider. Some service providers offer plans and bundles with additional functionalities. Pricing structures can be based on the number of users, minutes of usage, or a flat monthly fee.

Equipment costs can also influence your VoIP setup fees. IP phones, ATAs, and softphone applications range in price depending on their capabilities. Service providers may charge an additional fee if you require a physical setup.

Expect to pay more for additional features that your basic package may not include. Some paid add-ons include CRM integrations, auto attendants, and virtual phone numbers.

Another consideration is support and maintenance. Your service provider may charge a fee if you need help outside of your system’s basic configuration.

How to Set Up VoIP

Setting up VoIP involves several steps to ensure a smooth implementation. Here’s a general guide on how to set up VoIP:

  1. Know what you need: Assess your objectives and consider the features you need to achieve them. Review your existing systems, desired components, and budget restraints.
  2. Pick a service provider: Research and compare various service providers. Read online testimonials and speak with a customer service agent.
  3. Install the proper Internet connection: Assess your Internet connection and consider factors like download and upload speeds, latency, and data usage requirements. If necessary, upgrade your internet service to ensure it meets the demands of VoIP.
  4. Select the necessary equipment: Consider the devices you need depending on your VoIP system. Then, ensure your network infrastructure can support VoIP traffic.
  5. Configure your system: Set up your system according to the instructions provided by the company. Some providers offer additional assistance.
  6. Test the system: Ensure all components work as they should by making test calls. Try out various features and review call quality.
  7. Train team members: Train users on how to use the VoIP system, including making and receiving calls, using features, accessing voicemail, and troubleshooting fundamental issues. Offer documentation or conduct training sessions to ensure users are comfortable and familiar with the VoIP system.
  8. Transition and go live: Plan the transition from your phone system to VoIP. Notify stakeholders, inform customers or clients of any changes to phone numbers or communication channels, and coordinate the cutover to VoIP. Monitor the system closely during the initial days of going live to address any unexpected issues promptly.

Related: How To Setup A VoIP Phone System At Home Or In Your Office

When to Consider Switching to VoIP

Considering every other business is doing it, switching to VoIP may seem intuitive. However, jumping on the bandwagon isn’t the only reason you should switch.

Going from PBX to VoIP makes sense if you want to reduce phone bills and cut costs. Accessing lower call rates via VoIP is also cost-effective if you have remote workers who require more flexibility.

Alternatively, switch to VoIP for business expansion or relocation, as these systems are easily scalable.

Another reason using VoIP may make more sense for your business is if your infrastructure is old or your traditional phone contract has expired. Renewing these contracts is typically expensive and requires complex physical setups that many smaller companies can’t afford.

Switching to VoIP provides a competitive advantage, as these systems streamline communications and allow you to reach customers and stakeholders faster.

How to Choose a VoIP Provider

With so many VoIP providers, narrowing your choices can take time and effort. Here are some tips for picking a good VoIP provider:

  • Study features and functionality: VoIP service providers have different offers. Consider what you need for your business—talk specifics and see whether your chosen provider aligns with your requirements.
  • Scour reviews: Find out what people say about your chosen provider online. Are they reliable? Are they often available? If previous customers cite issues, observe how your chosen provider alleviated these problems.
  • Consider your costs: Evaluate pricing models and cost structures of different providers. Consider the cost of installation, additional features, and expansion.
  • Read customer support and service level agreements: Determine the level of customer service you require and whether your provider can satisfy these needs. Understand their commitments to uptime and support response time.
  • Think about security and compliance: Inquire about the security measures implemented by the provider, such as encryption, network security protocols, and compliance with data protection regulations like GDPR or HIPAA if relevant to your industry.
  • Request a trial or demo period: Take advantage of trial periods or demos offered by VoIP providers, as you can test their services, features, and call quality firsthand before committing to a long-term contract.


Is VoIP reliable?

VoIP systems are as reliable as your Internet connection. If you connect to an unstable broadband network, expect it to compromise VoIP call quality.

Is VoIP secure?

While VoIP is more susceptible to phishing, there are ways to beef up your security measures, such as encryption, user management/authentication, and regular software updates.

Is VoIP call quality better?

VoIP call quality is better on a stable and fast Internet connection.

Is VoIP easy to use?

VoIP is easy to set up and use, as you follow manufacturer instructions. Most controls are intuitive because VoIP systems can integrate with your existing ones.

When was VoIP developed?

VoIP technology dates back to the 1990s, with the first commercially available application launching in 1995. The original VoIP system was called the VocalTec Internet Phone.


VoIP has revolutionized the communications industry for years, so if your business lacks a VoIP system, now is the best time to make your move. You can use the best VoIP offers with a stable broadband network, ample research, and the proper setup.

If the next step on your checklist is finding a reliable VoIP service provider, look no further than ULTATEL. Learn more about our services and how we can help.

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