What Is Voice Over Internet Protocol (VoIP)?

Definition & Examples of Voice Over Internet Protocol (VoIP)

VOIP Phone
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Voice over Internet Protocol (VoIP) is the hardware and software necessary to send voice and video over the internet. This technology offers many benefits to small businesses. If you are a small business owner, learn whether switching to VoIP would be beneficial.

What Is VoIP?

VoIP is a technology that allows people to make calls over the internet. This technology consists of hardware that is used to generate digital signals and the software that is used to manipulate, send, and receive the signals.

VoIP allows people to call each other from numerous devices—phones, computers, tablets, or any other internet-enabled device—from anywhere that has a broadband connection.

VoIP is steadily replacing the Public Switched Telephone Network (PSTN), which is in decline due to the growth in the use of mobile devices. Converting to VoIP has major cost advantages for telecom providers, as the PSTN requires dedicated and costly switching hardware, whereas VoIP uses relatively inexpensive servers and software and operates over existing broadband networks. 

How VoIP Works

Specialized hardware (or even a phone) is not necessary to make VOIP calls—there are a number of software-based VoIP phone services available. The only requirements are a laptop or PC with a headset, speakers, or microphone, or another device with internet capabilities.

VoIP information is packetized—broken down into small pieces—and individual packets may take different paths over the internet. VoIP technology makes use of compression and encoding technology (where the packets are reduced in size then converted to code). This ensures that packets are correctly ordered when they reach the recipient; otherwise, the transmission would be garbled.

After you sign up for a service and download and install the end-user software, you can begin making VoIP calls to other devices. Skype is one example: Along with the ability to make video calls from device to device for free, you can call non-VoIP landlines or mobile numbers inexpensively.

Newer VoIP platforms are being created all the time to help people connect in numerous ways. There are many advantages as well as disadvantages to using VoIP. 

Advantage and Disadvantages of VoIP

  • Not as reliable as traditional phone networks

  • Loss of sound quality due to compression and decompression of data

  • Security issues are prevalent in other internet technologies

  • Most VoIP providers lack support for emergency numbers such as 911

Advantages Explained

Traditional phones systems required extra lines and fees for users. With VoIP, one line is used for internet and calls, and long distance fees are either eliminated or much lower because the calls are sent over these existing internet connections. The service can also come with different features such as conference calls, video, and instant messaging.

Installation of VoIP doesn't take much effort. You connect to the internet, and software generally configures everything for you. If it doesn't, many providers offer technical support with their services.

CRM software is also designed to work with VoIP, offering real-time calling data, call recording for customer experience improvement, and more.

Disadvantages Explained

Since traditional phones systems had their own power source, they were generally more reliable in event of power failures. VoIP depends on external power sources, and cannot be used for emergency services if there is no power.

Data sent over VoIP is fragmented into smaller pieces and reduced in size, then resized and re-assembled at the receiving end. Compression can cause a loss of quality due to this technology.

Since VoIP uses software, it is vulnerable to attacks by malicious code, viruses, or hackers. This means that users should have security software installed, and ensure that if they need secure communications that security is included in their service.

The Federal Communications Commission requires that VoIP providers connected to the PSTN must meet enhanced 911 requirements (providing call-back numbers and locations). Most VoIP providers are not connected to the PSTN, therefore do not provide this 911 support. This means that numbers and locations may not be transmitted, and you might not even connect to the 911 center in your area.

Types of VoIP

There are a variety of ways to connect with VOIP services. There are adapters to connect a standard phone to the internet—Integrated Access VoIP allows businesses to use their existing phone lines and equipment, instead of installing costly networking equipment to be used strictly for voice calls.

Session Internet Protocol (SIP) is a system that uses a server and networks to establish and communicate voice and video between multiple authorized stations or communication devices.

Hosted (also known as managed) VoIP is rapidly becoming a popular option for businesses. The service provider hosts the hardware and service software in the cloud and routes calls to/from the customer's existing phone systems, thus saving the customer VoIP equipment and management costs.

Key Takeaways

VoIP is communications technology over broadband connections that is replacing traditional phone lines and services. VoIP is beneficial for businesses because:

  • Equipment is cheaper.
  • It provides managed communications (not needing communication support personnel) for businesses, further reducing costs.
  • Voice and video are able to be transmitted to multiple connections.
  • Multiple types of devices can be used, creating flexibility.