How does VoIP work?

How does VoIP work?

VoIP (Voice over Internet Protocol) is an effective technology that enables telephone calls to be made over an internet connection. VoIP has become the ultimate telephone system choice for businesses all over the world, so how does VoIP work?…

People prefer using VoIP (Voice over Internet Protocol) phone service over traditional phone lines. Why? It gives several more capabilities than analogue phones, and it can do it all for around half the price.

Cloud phone service providers add powerful features not seen with regular phone service. Call recording, IVR auto attendants, voicemail to email, custom caller ID, data capture, secure card payment processing and so much more. Plus, you can make and receive calls anywhere, remote working and home working built in.

We’ve extended this guide to take a closer look at what you need to know about VoIP. It contains all the vital information you need to know, including VoIP phone service advantages.

What is VoIP?

VoIP (Voice over Internet Protocol) defines the process to place and take phone calls over the internet. Most people consider VoIP telephony to be the future of telecommunications.

No doubt you have already heard or seen an IP address?, that is the Internet Protocol address. An IP (Internet Protocol) address is how computers and devices interact with each other on the web.

VoIP isn’t actually all that new. Telephony has relied on digital lines to bring phone calls since the late 90s. VoIP is a cost-effective way to manage an unlimited number of calls.

So, what does this mean for you?

VoIP solutions operate on any pc, laptop or tablet because it’s built upon many years of open standards. It only needs an internet connection and a softphone application to call anyone without the need for local phone service.

Establishing calls is not the only thing that VoIP service providers can do. They also do routing of outgoing and incoming calls through existing telephone networks. mobile phones and Landlines depend on the Public Switched Telephone Network (PSTN).

Traditional telephones use analogue lines to take voice signals. If you want to make calls, you need to have extra wiring installed.

Many companies rely on specific hardware for their phone service. This machine is known as a Private Branch Exchange (PBX).

It unites internal phone extensions to the public telephone network. Private Branch Exchange (PBX) are generally quite costly to set up and maintain.

call conference image
There’s a better option.

A trusted VoIP service provider can manage everything for you. Just plug your IP desk phone in, and you are done. Digital phones are using your internet connection speed to establish connectivity.

According to data presented by the FCC and visualised by Microsoft, all people in the United States has access to high-speed internet available for 93.5%.

VoIP turns your phone calls into data and sent over the internet. Ethernet cables can be used or skip them if you have a stable Wifi connection or signal. It does so at a much lower cost than older telephone systems. We’ll discuss later on why Voice over IP has so many advantages over regular phone service.

How does VoIP work?

Voice over IP is an essential building block of the internet that uses Internet Protocol. IP telephony is a significant innovation from the century-old telecommunications system.

VoIP phone system helps calls between other phones or over to another telephone company. It also offers other useful functions like voicemail, call forwarding, call recording, and more.

The conversation exchanged in phone calls are using small data packets. These data packets can be sent through the internet around the world in less than a second. For internet telephony, these packets move between your IP phone and a VoIP provider.


Here are the four steps of how VoIP works.

Your IP phone must connect to your router or switch in your Local Area Network (LAN).

Your VoIP service provider will call the other party told by your IP phone when you dial a telephone number.

Your VoIP service exchanges data packets and establishes the call from your IP phone.

These digital signals convert by VoIP phone back into the sound you can hear.

Twenty years ago, you used to require expensive, proprietary equipment to use VoIP — but today, VoIP built upon open standards such as Session Initiation Protocol (SIP). SIP gives complete interoperability between different desk phones, conference phones, and VoIP apps.

VoIP bypasses the telephone company completely. Wheresoever you have a broadband internet connection, you can use VoIP. It’s a significant upgrade from an analogue phone system.

Cloud-based PBXs are capable of features like call routing, conferencing, and voicemail. It operates as their own full-service phone companies that you manage when you think about it.

A stable Fibre Broadband internet connection is all you need, and you can get all the benefits of Voice over Internet Protocol.

Pros and cons of VoIP

The pros and cons that need to consider when considering a VoIP telephone system to replace your existing and now out dated office PBX.

Pros of VoIP

Call anyone worldwide – International long-distance cost are as cheap as £0.02 to reach the USA  or £0.04 per minute to call say Mexico for example.

High-quality sound – There’s a remarkable difference in the call quality, so the audio isn’t muffled, fuzzy or has a constant crackle.

Cheaper cost – Many companies have realised substantial cost savings and reduced their phone bills by up to 50%.

Remote-ready – Wherever you work, you can use your phone service. If you work from home, no technical setup is necessary.

Advanced features – Run your company with leverage premium features, such as call queues, call recording, wallboards, dashboards, hosted IVR auto-attendants, menu options, secure card payment processing and data capture. Business phone service plans are often included.

Cons of VoIP

A VoIP telephone system requires a high-speed and stable internet connection – VoIP doesn’t operate well on satellite-based internet or ADSL connections. You’ll need at least 100 kbps or 0.1 Mbps per phone line.

A VoIP phone system makes your analogue desk phones obsolete – VoIP uses new technology that doesn’t rely on analogue signals. You’ll likely want to upgrade old phone handsets to new IP handsets. We recommend the Yealink T4 range of IP handsets.

Emergency services limitations – In the unexpected event, you need to use your VoIP phone to call 911, you may need to tell your actual location to the operator. Voice over IP systems defaults to sending your company’s mailing address to public safety operators.

Check out our complete comparison between VoIP and landlines. It’ll help you recognise the differences.

man using phone

How easy to use VoIP?

With a good Fibre Broadband connection and a compatible router in place a new VoIP business phone system is simply a case of plugging in the handsets. It many cases it does not require an engineer to visit site and install. Certainly for home workers it is a case of plug and play.

It’s even simpler to use your VoIP phone service on your Android or iPhone. Just download a free VoIP app, sign in, and you’re able to make calls using VoIP.

How much does VoIP cost?

The cost of a VoIP phone system or VoIP extension is surprisingly cheap when you consider all of it features. The answer is that you can expect to pay approximately £12 per user per month with a free call bundle included. The cost savings are significant compared to on-premises PBX or a traditional phone system.

Here’s how much VoIP typically costs:

Initial costs: £25 – £55 per extension/user

Monthly costs: £9.50 – £28 per extension (basic user to contact centre agent)

International calls: £0.02+ per minute

Device costs: £70 – £300 per IP phone

We strongly recommend you to get a free quote to know the exact VoIP cost.

Top VoIP phone system features

These attractive features are available with a cloud-based office phone system. Here are the following most popular VoIP features that companies will enjoy using.

1. Auto attendant (also known as IVR)

It projects a professional image with a phone menu that greets incoming calls. For example, if you’ve called a company and had to press 1 for sales, 2 for support, you’ve used an auto attendant.

An auto attendant is in place to direct callers, to the correct department or person. Your auto attendant can also send callers to voicemail when all lines are busy and out of hours.

You can incorporate Secure Card Payment Processing and Data Capture in to your Hosted IVR also known as an Auto Attendant.

2. Desktop and Mobile apps

With cloud communications, when you’re not in the office, you won’t miss calls. Many VoIP service providers now provide an app for your desktop and mobile device.

Telecommunications apps can be used with or without a separate desk phone. It’s your choice.

When working at home, it’s more important than ever to equip your team with a VoIP solution. These apps help you manage phone calls, exchange text messages, join conference calls, and much more.

3. HD call quality

There’s almost nothing worse when you ask callers to repeat themselves. HD Voice improves the sound quality of your phone calls. This VoIP technology performs phone calls sound twice as clear as a regular phone call.

For more fuller sound, many VoIP headsets and phones provide noise-cancelling capabilities. This high-definition sound quality is remarkable even for long-distance calls.

4. Unified Communications & Collaboration (UCC)

VoIP business telephone systems have evolved over time and are now often referred to as Unified Communications & Collaboration systems.

Key functions within a UC platform:

Call Management with Contact Centre features

Instant Messaging & Group Chats with Colleagues

Instant Messaging with Website Visitors

Team Presence

Video Calls & Screen Sharing

Conference calling

5. VoIP security and Call encryption

VoIP security is vital for business owners. Telephone calls handle confidential information like credit card numbers and HR conversations. Loss of data can be costly for any business both financially and in terms professional reputation.

Why not ask your potential VoIP service provider can be asked about call encryption. VoIP technologies like SRTP and TLS scramble call data making eavesdropping near impossible.

It would be best if you considered whether a VoIP provider is meeting industry standards and accredited. It’s useful to have a requirements checklist when selecting a business phone service.

Helpful questions to ask when looking at a VoIP office phone system include:

Can you access real-time call logs?

What is the uptime of VoIP service?

How many data centers do they have?

Are they accredited (SOC 2, PCI, ISO/IEC 27001)?

Do they provide HIPAA compliant IP telephony?

6. Call recording

A telephone system can be configured to record phone calls between your staff and customers. Is your team handling calls with precision and care?

Call recording is a feature most used by contact centre supervisors and company management to ensure that their staff all managing customer interactions correctly. Call recording is an important aid for training staff.

Call recordings are generally accessed via a secure online portal. The VoIP service provider will usually charge for call recording storage based on a per GB of data basis. The call recording feature may be charged on a per user, per month basis at around £3 – £5.

Do you need a VoIP phone?

VoIP means that old phone handsets won’t run as-is. You will need to buy replacement IP phones or use a special adapter to retrofit your current phones.

The good news though is that IP desk phones can usually be rented which helps to spread the cost and some providers will offer free IP phones within their overall offering. If you do purchase your IP phones outright you can expect to pay in the region of £70 for a basic phone, around £140 for and executive phone and circa £350 for a top end phone.

If you are deciding whether to transfer to VoIP service, there are a few factors to consider below:

1. Do you work from home?
Many UK businesses now have a work force that works from home at least some of the time. Flexible working practices in all industry sectors is the norm now.

Almost all VoIP business phone systems now come with softphone applications that can be downloaded on smartphones, PCs and Laptops. These features will mean that your home working staff and staff that are on the road will be able to make and receive calls as if they were in the office.

2. Is VoIP Reliable?
In a word Yes ! VoIP is a reliable technology.

This hasn’t always been the case though, but audio quality and stability have improved significantly to the point where more than half of all UK businesses already have a VoIP based telephone system.

The key thing with a hosted VoIP phone system is that it has to sit on a good quality local network. This means a decent Fibre broadband connection, a suitable router with SIP ALG turned off and good quality cables connecting all devices.

What you need to look for in a VoIP provider?

Not all telecommunications service providers are the same, but to decide on the best office phone service, consider your specific business needs. Certainly, having a commercial phone system adds reliability and credibility to your business.

You will need to decide or think about your needs for now and in the future when choosing a phone system for your business.

Assess your current and future needs

Voice over IP functionality

Video conferencing needs, or is this already covered by Zoom or similar

Incoming call volumes

Current resources and staffing

Most free or ridiculously cheap VoIP solutions will likely fall short, so discuss which must-have features you need to identify with your team.

It is certainly important to think about both the handling of your inbound calls and what level of outbound calls your team makes. Generally speaking UK calls will be low cost or included, but International calls do carry a cost. Do you know if your company makes international calls, if so which countries?

Tips for selecting the best VoIP provider

Once you know your requirements and VoIP features, look for a service provider that fits your budget and grow with you. Take into consideration the availability of live help, customer reviews, and documentation.

These are various qualities to look for in a VoIP phone service provider:

– Compatible with your network

– Proven reliability with minimal downtime

– Multiple, redundant data centres

– Live support open 24/7

– Optional professional services

– Examples of clients in a similar industry

– No-pressure sales experience

As you can see, VoIP is the clear winner over analogue landlines. VoIP provides the best value, cost savings, and the most useful features.

Finally, when you are in discussion with a VoIP provider, don’t forget to ask about the possibility of a discount for an increased commitment on your part.