What Is a VoIP Phone Service? Everything You Need To Know in 2024

20 minute read
20 minute read

Voice over Internet Protocol (VoIP) gained popularity in the 1990s, and it is now one of the most used tools in every company’s communication stack.

VoIP is the go-to phone solution for most brands because it provides a crucial level of flexibility for those looking for scaled worldwide communications. The market for VoIP in the United States was estimated to be worth $17 billion in 2023. But what is VoIP, and how can businesses leverage this technology?

This article will explain what a VoIP phone system is, the principle of its operation, and its many advantages. We’ll also compare voice over Internet phones to more conventional landline phones and examine some of their most notable features.

This guide offers everything there’s to know about VoIP phone systems, whether you’re thinking about moving or just curious about this cutting-edge technology.

What Is VoIP?

VoIP is a system that allows phone calls to take place over the Internet rather than traditional phone lines. By enabling quick worldwide communication, this innovation has altered the nature of human relationships. Because of their low cost and versatility, VoIP phones are quickly becoming popular among businesses and customers.

What is a VoIP system

Source: Phone System for Small Business: What Is It and Why You Need It

How Does VoIP Work?

VoIP is a phone service that operates in the same way that emails and other forms of data transmission do. To transmit across an IP (Internet Protocol) network, VoIP converts your speech into a digital signal (data packets) utilizing codecs. VoIP packets can be sent via a LAN or any other VoIP-compatible network. Several types of VoIP are available today, making local phone service optional when you use VoIP to handle an infinite number of calls to your company phone line.

IPT (Internet Protocol Telephony) is another kind of VoIP that operates in a similar fashion. IPT describes a broader category, including internet telephony and voice-over IP services.

Voice, fax, and other communications services may all be sent via IP packet-switched networks using IPT.

In Internet telephony, the public internet serves as the primary transmission network.

IPT Voice-over-Internet Protocol (VoIP) is another kind of IPT in which private, controlled IP-based networks serve as the primary transmission network or networks.

How Does a VoIP Call Occur?

With only a few simple actions, you can initiate a VoIP call. Here’s how VoIP calling works:

  1. When a user calls a number, the call is routed via a router.
  2. A VoIP phone service server receives the call over the internet after being forwarded by the router.
  3. The call is sent via the recipient’s network and the local internet.
  4. The last step is connecting the call to the recipient’s IP phone or other device.


What Is an Internet Phone And How Does It Work?

Businesses specializing in VoIP phone service have many practical uses for small businesses and huge corporations. The emergence of Session Initiation Protocol (SIP) as a technology that works well with VoIP is a welcome development.

As for the VoIP phone or an internet phone, imagine a circuit switch, which, like a VoIP call, establishes a direct connection between two lines but uses up data continuously. Unlike circuit switching, packet-switching may use any available path to relay call data. Data is sent in response to audible speech, but in contrast to the PSTN, silence does not create data.

What Is the Difference Between VoIP And Landline Phones?

Compared to traditional landlines, VoIP phones or internet phones have several advantages. Voice-over-IP relies on the internet, whereas conventional landlines do not. So unlike a landline, it isn’t limiting you to just one device while using your phone line.

What Is a VoIP Phone Service 1

Source: SmarterBusiness

VoIP calls are also safer than those made with a regular home phone service since they are routed through the internet rather than the public switched telephone network (PSTN). This reduces the likelihood of eavesdropping or interception and shortens the delay experienced by callers using Wi-Fi or mobile data.

How Much Does VoIP Cost?

The cost will be a major factor in selecting a service provider. Aside from the cost, additional considerations include a VoIP provider’s reputation, availability of features, responsiveness to customer service requests, and so on. Find out what it will cost your business to switch to VoIP below.

Cost of One Setup

A PSTN phone uses copper lines to link your system to outside phone companies. Because VoIP already utilizes internet infrastructure, little or no installation costs should be incurred. There is an account activation charge, which would be a one-time fee.

Cost Per Customer

A VoIP line typically costs $20 to $30 per user monthly. Toll-free minutes, call forwarding, caller ID, call waiting, call recording, and individual caller ID are just a few of the standard features of a business phone system. Your PBX provider will probably let you choose between yearly and monthly billing cycles.

Price Hikes

A VoIP service’s setup and per-user costs are the most significant. However, there are a few more possible costs:

  • No-cost phone time: The number of toll-free minutes in your package may or may not be capped. There will be a cost associated with exceeding the allotted amount.
  • VoIP hardware: A new phone or an analog phone adaptor may be required for your new VoIP phone system.

If your selected VoIP plan can’t cut it, you can always switch to a more suitable package. However, you should anticipate a greater cost because of it.

Pricing of Subscription Voice-Over-IP Phone Services

Two primary variables determine a VoIP phone system’s price and the primary factor is the required quantity of telephone “extensions.” Each phone includes a one-time cost plus a monthly installation, setup, and maintenance fee.

The number of external lines (or “call paths”) is another factor in the total price. For instance, in a company with 10 internal extensions, only five employees may need to make external calls at any moment. You can get by with only five phone lines if you so want. In addition, you’ll have to pay a one-time cost to have your existing phone numbers ported over to your new VoIP service.

Examining VoIP and Landline Costs to Determine Which Is Best for Your Business

When making international or intercontinental calls, VoIP is the way to go for enterprises. Group and conference calls are popular methods of communication and cooperation in many businesses.

If your company’s location has a spotty or slow internet connection, consider switching to a landline instead. It’s also a reliable fallback for VoIP systems in disasters like widespread power outages.

Finding the greatest match for your company requires weighing the pros and cons of both choices. The cost is another important aspect of this. Due to the high expense of setting up and maintaining traditional landline phone lines, VoIP is more affordable. While conventional landline installation might cost up to $3,000, VoIP can be set up for less than $400.

Savings You Can Expect After Switching to VoIP

The typical savings a company might expect after implementing a VoIP system varies greatly based on factors such as the company size and the previous system in place. The savings are roughly estimated to be between 30 and 50 percent.

What Is a VoIP Phone Service 2

Source: HeadphonesAddict

One study found that up to 85% of businesses that switched from an on-premise to a cloud-based phone system saw the most savings.

What VoIP Equipment Do I Need? Essential VoIP Tools And Components

VoIP requires less gear than a standard phone line setup, but you’ll still want to have the basics covered and consider investing in a few extras for features and convenience.

Input: Modem And Router

The modem and router are necessary equipment for a VoIP system. A modem and router provide inter-device communication via an IP network when used in tandem.

First off, a modem is required to connect to an ISP. In the case of wireless modems, a modem simply turns digital data into an analog signal that may travel through a telephone line or a radio frequency. The irony of VoIP is that phone line infrastructure is still required for the hardware.

The router, on the other hand, promotes communication between network nodes by routing data packets. This gadget tracks recipients using just their IP addresses.

VoIP Optional Tools

While a modem and a router are the only technical necessities for VoIP, a few more pieces of VoIP phone equipment may greatly improve your call quality and convenience.

The VoIP Gateway

An analog phone system’s signals may be converted into VoIP data packets with the help of a gateway. It can handle dozens, or even hundreds, of calls at once, so you can maintain using your existing phone system’s infrastructure while using VoIP.

It also allows PSTN, the traditional landline telephone infrastructure that has been around for over a century, to engage more easily with the internet, allowing for more fluid communication between the two.

You may still use VoIP’s mobility and make calls from your computer by connecting to a VoIP gateway.

The ability to construct a bigger network than is feasible with traditional VoIP or landlines is the primary advantage of a VoIP gateway.

Although not strictly necessary for VoIP systems, a VoIP gateway may be a worthwhile investment for big teams since it helps to cut expenses further when migrating from old phone systems to VoIP.

Desktop VoIP Phones

Users unfamiliar with VoIP technology can feel more at ease with a VoIP desktop phone’s conventional appearance. At the same time, they learn to use its advanced features, such as a built-in display for caller identification and speed dialing and buttons for hold, transfer, and conference calls. Headset jacks, microphone jacks, wireless headset adapter jacks, camera jacks, and other connectors may be included on certain devices.

Wireless VoIP Headsets

VoIP headsets, which consist of headphones and a microphone, free your hands during conversations. VoIP headsets are wireless headphones that connect to a computer or similar device, eliminating the need for a separate desktop VoIP phone. The headset may come equipped with features like noise cancellation that enhance the quality of your calls.

It may come down to a choice as to whether a VoIP desktop phone or VoIP headset is used. Both options include capabilities that might improve the quality and usability of VoIP conversations for workers.

In contrast, if your business is solely interested in VoIP capability, a modem, router, and (if required) a VoIP gateway are all it needs to get started.

How To Choose VoIP Provider

You should first be aware of the variety of business phone systems and other communication channels available to your firm. Voice over Internet Protocol is now an option for business phone service. Its low price, flexibility, and user-friendliness are all factors in its meteoric rise to prominence.

It requires only an internet connection to function, which is a major plus for any modern business. Additionally, the availability of the internet allows VoIP systems to couple with other online instruments like video chat and real-time texting.

The first step in choosing a provider for voice over IP services is determining what services best fit your needs. Here are detailed explanations of some widely used VoIP configurations:

  • Hosted PBX: This sort of VoIP is often hosted locally, and it offers extensive capabilities in addition to a dependable server and security system.
  • Cloud PBX: Based on cloud computing principles, this phone system gives you access to VoIP capabilities when you’re on the go.
  • All-in-one: Many modern VoIP systems provide various corporate communication tools. Video conferencing, screen sharing, IM, call forwarding, and other similar services fall under this category. This setup is excellent for distributed teams.
  • CPaaS: Communication Platform as a Service provides advanced technological connections and capabilities for enterprises’ communication requirements. It could build a more robust communication infrastructure than other platforms do on their own.

These days, many VoIP companies provide a wide range of services for various kinds of communication systems. Finding the right system requires first recognizing what type of system you need.

VoIP Features

Making a list of your requirements is a good idea before choosing a VoIP phone because there are many factors to consider. Going from a traditional phone service like a landline to a VoIP system is a major change. Prioritize the attributes of a phone system that would be most useful. The following are a few of the many advantages of VoIP phone systems.


VoIP phone systems are far more cost-effective compared to traditional PSTN phone lines. This innovation provides a suitable medium for all of your communication needs. Compared to PSTN, VoIP phone service offers superior service for cell and voice-over-internet phones and other mobile devices.

Ease of Use

These systems provide cutting-edge technology with a minimal barrier to entry.

A VoIP solution allows you to easily grow the number of users on your network to match the needs of your expanding company.

This may include establishing a minimum number of necessary phone lines and working to reduce the monthly cost of your business’s phone service. But be bold and think beyond the box. Consider the PSTN’s shortcomings and how a VoIP system may help fill them. Putting your needs and wants in writing can help you stay on track and remember everything crucial.

Of course, the platform you choose must support the VoIP functions and features you want. But if you’re not sure what to watch out for, here are a few aspects to think about and the reasons why you should:


Using preset audio instructions, an automated attendant (also known as an auto attendant or voice menu) routes incoming calls to the right agent or department. Using this instead of a human receptionist will save money and time for your business.

Call forwarding ensures that calls from customers will always be answered. One of the numerous benefits of a VoIP service is transferring a call to a different extension or phone number.

VoIP Analytics

Metrics about callers, their habits, how productive agents are, and more may all be gleaned with call analytics. When paired with call intelligence software, the business phone system allows you to leverage call scoring, ensure uninterrupted service, base decisions on captured call data and patterns, and seize growth opportunities.

What Is a VoIP Phone Service 4

By implementing call intelligence software and using any Wi-Fi-enabled device like a softphone to make and receive calls and text messages, the data derived from phone conversations can follow you around.

Other Functions

Thanks to VoIP technology, businesses may now text for professional purposes. This means you won’t have to worry about switching applications if a situation comes where texting rather than calling is more appropriate.

For instance, such a function as text transcription of voicemails allows transcribing your voicemails and transmitting them to you through text messages.

Video conferencing is integral to most hosted VoIP phone systems, allowing for more effective and efficient business communications with clients and coworkers.

Advanced Features

Since VoIP phone systems provide more than phone service, using their additional, more sophisticated capabilities is in your best interest. Among them are AI, call analytics, interactive voice response (IVR), and native third-party integrations as aspects of VoIP. However, the more sophisticated the services you want, the more you may expect to spend.

Pricing for more robust VoIP packages varies by supplier. As you go through the premium tiers of a given platform, you’ll often get access to more powerful features. You may buy individual features from certain other suppliers a la carte, ensuring that you pay for just the services you need.

Customer Support

Your VoIP tool is used for all your important internal and external conversations. Therefore, any problems must be addressed immediately. Some service providers can assist around the clock because they outsource their customer service during typical business hours. The vast majority of VoIP companies provide phone assistance during standard business operating hours.

Both home and commercial VoIP users benefit greatly from having ready access to helpful support staff. That’s why it’s important to understand exactly what help you’ll receive and how soon you can anticipate it. In addition to these features, consider the following when choosing a VoIP service provider:

  • Simplicity: Users shouldn’t waste more time than necessary waiting, especially if calls are routed to many agents. The best customer service is where a real person answers the phone and helps you solve your problems. Talking to a real person makes it much simpler for both sides to ask questions and provide more information when required.
  • Free choice services: A comprehensive customer support package will provide you with more than just live chat with an agent. This might be a website, a video instruction, a frequently asked questions section, or something else entirely.

Cloud PBX — Phonexa’s virtual phone system — is an ideal choice if you need to manage a large volume of calls while providing a safe communication line for your company’s customers and employees. Cloud PBX is a telephone system that operates in the cloud and provides greater control with reduced expenses.

Reasons To Rely on Cloud PBX

Dynamic Capabilities

Displays caller journeys, allowing businesses to finish the loop and capitalize on growth prospects.

Smart Call Routing

Connects leads to the agent best suited to serve them based on agent scoring and agent queue availability.

Integrated Solution

Integrates with Phonexa platforms for call tracking, lead distribution, and more.


Can swiftly satisfy rising demand without the need to install bulky equipment.

Increased Agent Productivity

Uses call recording and agent scoring, which tracks keyword usage and conversions.


Allows businesses to connect to their phone system from anywhere without purchasing or upgrading hardware.

Top Technical VoIP Terms


Bandwidth is the maximum amount of data that can be sent through a network during a given time.

The term “bandwidth” is sometimes used interchangeably with “internet speed;” however, it refers to the quantity of data that can be sent across a connection in a given length of time.

  • Throughput vs. Bandwidth. The term “throughput” refers to the amount of data sent in a given length of time. Throughput is the quantity of data that actually reaches its destination after accounting for issues like network latency, transfer rate, packet loss, and others.


A codec is a technique for compressing audio or video for transmission across a network, such as the Internet. By compressing the data transferred across VoIP codecs, call latency and audio quality may be improved.


DSL stands for Digital Subscriber Line and is a high-speed data connection that uses the regular telephone lines that enter your house or office. DSL’s two main advantages for VoIP are its superior fault isolation and higher throughput because of less resource congestion.


A device’s identity on the internet or a private network is denoted by its IP address. “Internet Protocol,” or simply “IP,” refers to the standards regulating the data structure sent over the internet or a local area network.


Interactive Voice Response refers to an automated phone system technology that allows callers to navigate menu options via touch-tone keypad selection or speech recognition to transfer their call to specific departments or specialists without speaking to a human agent.


Source: The Definitive Guide To Call Tracking: How It Works & What Is Its Impact


Latency refers to the time it takes for the other party to receive your transmission after you’ve spoken. The inability to have meaningful talks and the resulting dissatisfaction might stem from latency levels that are too high.


The private branch exchange, or PBX, is a telephone network used only inside an enterprise. It’s a phone system for businesses that connects their phones to the public telephone network and manages call forwarding and switching.


The Real-time Transport Protocol (RTP) is a network protocol that allows transmitting voice calls over the Internet through real-time audio and video streams.

SIP Trunking

Session Initiation Protocol (SIP) trunking enables users to conduct voice and data communications via a network, namely the Internet. With SIP trunking, you may make international and domestic phone calls via the Internet using virtual phone lines (or “trunks”).


A one kind of virtual phone is the softphone. It enables users to make phone calls through an internet connection using any device (desktop or mobile) installed with the software. In a nutshell, softphones allow you to make and receive calls without needing a physical handset.

Wrapping Up

Corporate VoIP phone services are a potent instrument for improving efficiency and saving money in the workplace. These services fully use the internet’s capability to integrate speech, video, and data flexibly and scalable. VoIP’s main benefits are its low price, increased productivity, better teamwork, and simplicity of use.

It’s important, however, to remember that VoIP may have certain drawbacks. The quality of calls may improve if the internet connection is reliable or if more bandwidth is available. Companies need high-speed internet connections to resolve this problem and ensure their VoIP supplier has QoS capabilities to prioritize voice traffic.

Because VoIP calls are sent through the internet, there is a risk that hackers might intercept them. By partnering with suppliers that provide strong security measures, such as end-to-end encryption and secure VoIP protocols, businesses may reduce their exposure to this danger. Moreover, the organization’s sensitive data may be further protected by investing in comprehensive staff training on cybersecurity best practices.

In addition, companies with unique requirements, including the ability to make international calls or send and receive faxes, should do their homework and choose a VoIP service that supports those demands and VoIP protocols. To guarantee a trouble-free VoIP installation and continuing assistance, comparing providers’ response times and areas of competence is important.

In conclusion, VoIP phone services may drastically improve company communication thanks to their low prices, high productivity, and cutting-edge tools. Businesses may use VoIP to their advantage by enhancing operations and staying ahead of the competition, but only if they carefully analyze the possible restrictions and choose a reliable supplier. Adopting VoIP services is crucial in today’s fast-paced business environment, where companies must differentiate themselves to flourish.

Cut your monthly fees, maintenance costs, and on-call management software using Cloud PBX – a cheaper and more flexible phone system. Schedule a consultation with one of Phonexa’s experts today to learn how a cloud phone system can serve your business!

Frequently Asked Questions

How good is the call quality of a VoIP phone?

The sound quality of VoIP calls has been brought up as an issue on several occasions. People keep asking this, even though this technology has been available for decades. It’s understandable to be wary about business VoIP if your main exposure to the technology has been via free consumer services like Skype.

Free services provide as promised, allowing users to make low-cost or free calls to loved ones. They are not obligated to provide customers with the highest possible standard of service. Since you are not contributing to the cost of operation, they have little need to provide enhancements or new features. Since home internet connections are often slower than those found in businesses, calls may be interrupted frequently, and the sound quality may need to improve.

However, VoIP services designed for businesses are of a far higher quality. Upgrades to high-definition voice quality are available on several of their plans. Put your worries about VoIP’s suitability for the quality requirements of your business to rest. VoIP call quality is superior to plain old telephone service (POTS) calls.

Can VoIP handle multiple calls?

The PBX server settings and available bandwidth will determine the results. Conference calls with hundreds of participants are possible with sufficient bandwidth. Your PBX, the server to which your VoIP phone is most directly attached, must be set up to support many incoming calls simultaneously.

Can I use a standard phone with VoIP?

Yes. With VoIP, you may make and take calls from any device, including standard landlines, without incurring extra charges.

Can I transfer my phone number to VoIP?

Yes! The Federal Communications Commission (FCC) mandated that VoIP companies enabled consumers to migrate their phone numbers a few years ago, provided that doing so is technically feasible. VoIP service providers can assist with this change.

Is VoIP cheaper than traditional phone services?

Yes! VoIP utilizes the internet to make phone calls, so you’ll end up saving a ton on long-distance fees. Calls inside the United States are often free, while international calls are much cheaper with VoIP than with a traditional landline.

What is a virtual number in VoIP?

A virtual number is a phone number that doesn’t belong to a certain company or individual. You may also utilize virtual phone numbers to monitor the success of individual ad campaigns.
Callers from far away may contact your office by dialing what is a local number to them.

Got Questions?

Get in touch! We are available 24/7.

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