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What is a VoIP Phone System?

By: Sheryl Cannes
Updated on: April 05, 2024

The Internet changed communication forever, and VoIP phone services take advantage of the Internet’s speed and availability to expand communication possibilities. As businesses search for faster, better ways to connect team members, clients, and customers, VoIP services continue to grow in popularity and sophistication. VoIP offers distinct advantages over traditional phone lines and adds versatile functions, all using a high-speed Internet connection.

What is VoIP? Voice over Internet Protocol

VoIP stands for Voice Over Internet Protocol. That’s a fancy way of saying sending a phone signal over the Internet. This digital option has slowly been replacing public switched telephone networks (PSTN, sometimes called a POTS system) and PBX systems for a few years. It’s not typically used for residential purposes, though more people use them now because working from home is much more common. However, you’ve probably used a VoIP system without realizing it because FaceTime, Skype, and Google Voice use VoIP technology.

How Does VoIP Work?

Essentially, using an Internet connection, VoIP phone, or VoIP phone adapter, you make a call that’s transferred into a digital signal and sent via the Internet. It works for both digital numbers and standard analog numbers through the transferal process.

With VoIP, the phone call’s signal gets broken down into data packets, which then travel across the Internet and get put back together when they arrive at their destination. If it sounds like something out of science fiction, you’re right. It’s an idea that was bounced around for decades before becoming a reality.

VoIP requires a few specifics before you can get started, but it’s not generally a complicated process. First, you need a reliable high-speed Internet connection with a good bandwidth of at least 100kbps for uploads and downloads. If you’re dealing with slow speeds, calls can break up, lag, get dropped, or not go through—not exactly good for business.

VoIP providers often supply the software and the actual handling of the calls. Many also offer plug-and-play phones certified for their service. In some cases, you may use a VoIP phone adapter to take advantage of your existing equipment and infrastructure but with the advantages of an updated system. Aside from the actual phone, there usually is not any other hardware required to start.

Benefits/Features of a VOIP Telephone System

For many businesses, VoIP offers distinct advantages that affect the bottom line and enhance functionality compared to traditional phone systems. They also simplify phone systems in many cases. Here is a list of the advantages in greater detail.

1. Low Cost-Per-Call

In a traditional system, landline calls use a copper circuit. VoIP takes those circuits out of the mix, drastically reducing the price of each call, especially long-distance calls. VoIP cost-per-call also saves money because it uses an existing Internet connection. Usually, bundling services like Internet with VoIP reduces the cost of both. That leads to the next benefit.

2. Service Mobility and Reduced Internal IT

VoIP service providers can handle most IT issues online versus maintaining an employee or an entire department to handle internal IT problems related to the phone system. Even if the provider has to come onsite, you’re dealing with one provider to take care of the Internet, phone, and the associated hardware and software.

Reducing the number of providers can reduce the mental and financial burdens of maintaining your business’s communication. Plus, businesses can spend fewer resources on IT support, funneling those resources elsewhere.

3. Simple Hardware and Installation

The hardware for a VoIP system consists of the telephones and little else. For some, it will only be the VoIP adapter, which requires nothing more than plugging them in. The initial installation causes little disruption to your normal workflow, nor does it require much technical expertise.

4. Versatility of Features

VoIP systems come with a long list of features that may or may not be included or even possible using a traditional system. Features like:

  • On-hold audio tracks
  • Call forwarding
  • Caller ID
  • Call blocking
  • Call waiting
  • Call transferring
  • Multiple device ringing
  • Number portability (Take your number with you no matter where you move your business)
  • Virtual phone numbers (Choose a number with any area code)
  • Voicemail

VoIP systems can communicate with traditional PSTN networks and mobile numbers. They can also contact VoIP systems from other providers, so there are no connection issues with clients and customers who may not have the same provider or system. That’s a distinct advantage in a world where new technology and providers pop up overnight.

5. Simple Conference Calls

VoIP allows conference bridging, which lets each person connect to the call with a phone number provided by you. It can be a few people or over 100. The VoIP system can answer several calls at once and “bridge” them into the conference call, linking all attendees.

6. Efficient Client/Customer and Team Member Interaction

Standard VoIP offers simple, cost-effective communication within the office and with customers. Mobile VoIP opens a new door to at-home and workplace communication. Today, business doesn’t always take place in an office. Team members work from home or may travel but still need to stay in touch with the home office. Mobile VoIP services use apps that allow mobile devices like smartphones or tablets to send and receive calls using a data connection. Some mobile VoIP services offer video conferencing, a service that’s not a part of a traditional VoIP system.

VoIP services also allow you to set up how you get notified about voicemails or instant messaging. It can convert the messages into a text or email that’s then sent to a specific mobile device.

7. Scale Up

VoIP offers simple scalability. The cost of adding another employee only includes the cost of a certified phone or VoIP adapter. The ease of scalability keeps overhead low and lets you ramp up your business to fit the needs of team members and customers.

When VoIP Doesn’t Work

VoIP’s advantages run far and wide, but there are a few times when it’s not the best option. If you have a poor Internet connection, landlines and analog phones offer better reliability. Traditional landline phones use a different system other than your Internet, so you can completely lose your Internet and still stay in contact with customers and team members. The same can’t be said for VoIP.

Another downfall of VoIP systems is power outages. Outages that affect your Internet connection will also take out your phone system. It’s a risk that you take when your services are bundled. Most of the time, it’s a strength, but in a blackout, it’s a weakness.

Hosted vs. Cloud VoIP Systems

VoIP systems can either be hosted or cloud-based. A hosted VoIP system is managed and maintained by the service provider by and for a single business. That may take place on or off-site, but for large businesses, it’s a streamlined way to manage internal and external communication.

Cloud VoIP systems act as a shared resource with other businesses through the service provider. Small businesses get the benefit of the VoIP system without taking on the sole cost of maintenance and service. Cloud systems are generally cheaper because several businesses use the same cloud service rather than hosting themselves.


Is VoIP viable for team members who work from home?

Standard VoIP and mobile VoIP can connect team members in different locations. Certified or IP phones can be connected in a home office, as long as team members can access a high-speed Internet connection. Calls that come into their office phone number can be forwarded and answered on their home phone using the VoIP system.

Mobile VoIP is another option for work-from-home or traveling staff. Apps provide the connection and forward calls and messages to wherever the team member can get reliable mobile phone coverage.

What kind of businesses use a VoIP system?

Almost any business can use a VoIP system to update and streamline their customer communications. Hospitality, software sales, professional services, real estate, healthcare, e-commerce, and more can all benefit from the efficiency, extra features, and mobility of VoIP. It works for both large and small businesses, though they might use different hosting options.

How many people can I have on a conference call?

It depends, in part, on the service provider. However, there’s potential for dozens to hundreds of people connecting to the same call. They can call from their desk phone, mobile, or business phone systems using a provided number, and the VoIP system will bridge the calls together. It creates the infrastructure to connect large or small groups, maximizing everyone’s time and talents.

A Final Note

In many cases, VoIP phone service offers a better quality of service that consolidates and expands the functionality of business communication. The convenience, ease of scalability, and cost-per-call alone make it a viable option for those looking for a better, more efficient way to keep team members and customers connected.


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