What Is VoIP?

As technology and business become ever more intertwined, business owners are finding that their
dependency on technology is growing, perhaps more than they are comfortable with at times. This
brings forth certain challenges. A small business owner needs to be genuinely and completely focused on their industry. They eat, breathe, and live whatever their product is. In doing so, they become a specialist in their field and trusted by their customers. However, small business owners are finding that they cannot escape the technicalities that they so often would rather not, nor do they have the time to, deal with. Often, this involves questions related to their IT, network, and business phone service. The latter being the subject of this article, many business owners today are wondering, “What is VoIP?”

If you are like me and are scouring the web for the quickest answer to your most immediate question,
here is the most direct answer:

What is VoIP?

VoIP is an acronym for Voice Over Internet Protocol and is the technology involved in allowing you to
make a phone call using a computer network or over the internet.

For those of you more interested in the types of VoIP and the details behind it, read on!

The Old and the New

One way to think about Voice Over IP is as a language. In our everyday lives we are surrounded by
various languages. These languages all help us to communicate with each other and to convey our
thoughts and intent. The computer and telephony world also have “languages” that allow various
devices to speak to each other. Imagine having machines and devices all over the world, created by
different people, which were all programmed to communicate in an entirely different way. The world
would be chaos. Thus, these languages, or programming structures, had to be created and standardized so that devices could be programmed in the exact same way and be able to send and receive information globally. For much of the age of Telephony, the “language” has been the same – Analog signaling, also known as POTS (Plain Old Telephone Service). These POTS lines have provided business phone landlines through analog signals for many decades. These analog signals have provided the “language” that telephone technology has used to transmit our phone calls locally and internationally. These “analog” signals are the same method that our voices and ears use to transmit sound, and the same basic technology that two cans with a string between them used to transmit our voices as children.

The Problem With The Old

However, analog business phone lines come with a few inherent problems. The most notable is that they have become more and more expensive to maintain due to costly infrastructure. Historically, the
material used to transmit telephone calls has primarily been copper which, although extremely
conductive, has become quite an expensive metal in recent decades. In addition to this, copper lines can be quite susceptible to weather conditions such as rain, heat, and cold. All these potential structural issues, combined with the fact that for each pair of copper telephone wires only one analog phone call can be made, you can see how the cost to maintain hundreds of millions of telephone pathways has become exorbitant for both the telephone companies and consumers alike.

In fact, the cost for this aging infrastructure had become so expensive, that by 2015 the Federal
Communications Commission adopted rules governing the retirement of copper lines to help manage
the transition to new mediums for telephone and internet infrastructure.

The Internet Is Born

In 1983, the Internet was born and brought with it a new communications protocol, or “language”, that
was known as Transfer Control Protocol/Internetwork Protocol (TCP/IP). Although VoIP had its origins
tested well before this time, even as early as 1938 by Homer Dudley, this standardized way of
communicating was really the birth of it’s being able to be truly developed for the masses. Now, there
was a way for companies all over the world to use the same programming language and ensure that,
when they spoke into the phone at one end of the earth, the sound came through the receiving end in a way that was intelligible to the hearer.

In this way, it was now possible for someone to speak into a phone receiver (analog) and convert that
voice to computer language (TCP/IP) in ones and zeros to then be transmitted globally for much less cost than it had ever been before. In fact, where in the past a single pair of copper wires transmitted a single phone call, now, extremely thin strands of glass or plastic fibers in fiber optic, which are only 1/10th the width of a human hair, are now capable of transmitting around 25,000 telephone calls each. Of course, not all voice over IP is transmitted over fiber optic cables. Now, with the pervasive use of Internet through cable, DSL, fiber optic, fixed wireless, and other mediums, voice over IP is a technology that can be used through the Internet over any stable medium.

VoIP Business Phone Options

When looking at the differences between the structural operation of copper vs fiber optic cables, it
becomes extremely evident why the use of voice over IP technology has become a mainstay in a
business environment. Even if a business is using coax or copper cabling to obtain internet service, those same cables can now be used to transmit phone calls, without additional wiring or installation. So, what is VoIP? There are essentially two types of voice over IP used in business today, on-premise VoIP systems and externally hosted VoIP systems.

The essential function of each of these systems is the same, each including their own set of features such as auto attendants, call queues, extension transferring and dialing, and so forth. However, it is the purchase, installation, and maintenance of these two systems that make them so different.

On-Premise Phone Systems

On-premise systems are business phone systems that reside on the customer’s premise. These are
generally wall mounted computers that handle the routing for all your phone call traffic within the office.

They also handle external call routing. Newer on-premise phone systems which are also based on VoIP
technology, can use Internet Protocol to communicate within the customer’s office. They may not
necessarily use the internet for phone calls, and a customer can choose to use some other means, such as a POTS line to make and receive external calls. But all communication locally between extensions and departments within the office occurs through the on-premise phone system using the VoIP protocol, or
language.

An example of this may be when a phone call comes in from a customer and five different phones, out of the 10 phones on site, all began to ring. It is the phone system computer, which has been programmed this way, that tells these five phones to ring. Once someone has answered, it is also the computer that tells the other four phones to stop ringing. If the person that answered that call wants to transfer to extension 105, it is the on-premise phone system computer that directs that call to be transferred to the handset for Sally’s desk, since she sits at extension 105.

The Problem With On-Premise

These on-premise business phone systems, though, are physical pieces of equipment that need to be
maintained. That means that a technician must come out to install, program, and replace parts when
needed. Historically, since the system exists outside or separate from the computer network and
environment, the cost for these parts and services have risen, and fewer and fewer technicians have the skillset to service them. Just one of these on-premise systems can cost up to $10,000 or more, not
including maintenance charges.

There are some on-premise phone systems, such as 3CX, that allow your on-premise system to operate on the same network as your computer system, thereby saving the business money, but those have limitations that are easily overcome with a Hosted VoIP system.

Hosted VoIP Systems

A phone system being “hosted” simply means that the computer (or server) for the phone system does
not reside at the customer’s location. Instead, it is in a data center belonging to the business phone
service provider. This means that, when the phone handsets on-site communicate with each other, or
the outside world, they are communicating with this Internet-based telephone server first.

One of the biggest benefits to having a hosted phone system is savings on hardware. Since the main
computer or “brain” of the system is maintained by the phone system provider, this means that the only hardware cost to the business owner is the cost of handsets or desk phones needed by the business.

In addition, because hosted systems are located in a virtual cloud, they can easily be upgraded to include the most modern business phone solutions such as auto-attendants, mobile applications, CRM integrations, transcription, voicemail to email and more. On-premise phone systems on the other hand
are not as flexible and usually incur license cost for each additional feature. It is easy to see why
businesses can save so much by switching to hosted VoIP.

Is VoIP Right For Your Business?

The short answer is, for most businesses – yes. This article has shown that voice over IP technology
provides the lowest cost with the most flexible feature options for small and medium size businesses.
That said, there are some things you would want to consider before making the jump. Check out our article, “Should I switch to VoIP?” to find out more, get quick answers from our Frequently Asked Questions page. Better yet, contact one of our consultants today to find out more about what Hosted Voice over IP can do for your business telephony.