what is voip

What is VoIP and How Does it Work?

Part of our Back to the Basics Series. See also: PSTN, SIP Trunking, and Telephony.

IVR Solutions

Setting itself apart from traditional telephone network methods (PSTN) – companies that provide VoIP services give you a personalized VoIP number which allows your company to receive and also make phone calls from any device with an internet connection such as your personal laptop, desktop computer, cell phone, office phone systems, tablets and more.

Whether you are a small business or a large corporation VoIP call center solutions are easily integrated into your current business model. You also get to customize different aspects of your company branding with VoIP solutions.

What Is VoIP?

VoIP is a phrase which stands for voice over internet protocol. Simply put, VoIP is a cost-effective way for you to manage an unlimited number of calls to your business phone number without the need of a local phone service.

Another version of VoIP which is similar is IPT (Internet Protocol Telephony). Really, IPT is an umbrella term that includes both internet telephony and VoIP solutions. 

  • IPT, broadly speaking, is the transmission of voice, fax, and related services over packet-switched IP-based networks.
  • Internet Telephony is a form of IPT where the principal transmission network is the public Internet.
  • VoIP is another form of IPT in which the principal transmission network or networks are private, managed IP-based networks.

How Does VoIP Work?

Here is how a VoIP call works in a few short steps:

  • A caller dials a number and the call is passed from the device to a router.
  • The router passes the voice call to the internet where it reaches a VoIP phone service server.
  • Then the call is transmitted via local internet to the other end of the recipient’s router.
  • Finally the call is then connected to the recipient’s IP device.

Companies that provide VoIP phone services have useful applications for everyone whether it is individual subscribers to large enterprises. Session Initiation Protocol (SIP) has emerged as a technology that complements VoIP quite well. For more information on VoIP call center solutions such as session initiation protocol read more information on SIP Solutions here.

Think of a VoIP call like this – by way of comparison, a circuit-switch opens a direct connection between two lines and eats up data for the entire duration of a call. Packet-switching doesn’t need a direct connection, instead utilizing any number of routes to deliver the call information. When someone speaks, data is sent, but periods of silence don’t generate data like they do on the PSTN.

Benefits of Business VoIP Services?

Knowing what VoIP service is best for your small business or large enterprise is a necessity to lower your costs for domestic and international communications. Along with saving on costs, VoIP services for business allow you to take calls from anywhere on your device via an app. You are also able to easily enhance your VoIP services at the same rate your business is growing, making it easy to add or remove employees in a few clicks via the VoIP application.

However, there are a few disadvantages of VoIP phone services which are caused by poor internet connections or too many people using one host connection in the same area (such as your office building).The PSTN set the standard for call quality, and doesn’t suffer from latency issues because the connection between the lines is constant. In other words, everything happens in real time.

With VoIP data is sent in bursts. Only when someone talks and audio is placed in packets does it get passed between devices. This means that there is greater potential for latency or dropouts if packets get lost, or if there are hiccups in the reassembly process.

How Much Does VoIP Cost?

Now that you know, in broad strokes, how VoIP works, it’s worth re-visiting the distinction between VoIP and Internet telephony. The conflation of these two types of IPT has created a belief that VoIP is free. Remember, VoIP relies on private, managed networks. This means that a company leases internet lines directly from a bandwidth provider, which results in better quality of service.

However, VoIP is generally inexpensive compared to most methods. The short explanation is because VoIP uses less data.

Generally speaking you will pay a VoIP service provider by the month and is normally dependent on the amount of users within your company. Costs can range from $16 per user every month up to $50+ per user every month depending on your provider. There are additional costs which can include VoIP devices (VoIP Phones), licenses for software, set up costs and even training costs depending on how user friendly the application is. With these extra costs in mind one can expect to pay anywhere from $10,000 – $20,000+ for a VoIP system.

VoIP Devices

These constitute the actual handsets, or similar, used to make a phone call. Legacy phones can connect to a VoIP network with an adapter. Other calling options include an IP phones look like regular phones, but they connect to the network using an Ethernet jack rather than a telephone jack. Computers that have the right software and hardware accessories (microphone, speakers, soundcard, headset, etc.) can also be used to make VoIP phone calls.

Media Gateways

“Gateways provide seamless interoperability between circuit-switching and packet-switching network domains.” In other words, the media gateway connects the IP network to the PSTN and allows those two networks to talk to each other. Gateways also handle IP signaling functions and support Local Exchange and Toll switches on the PSTN. On top of all that, gateways can handle a wide variety of traffic types: data, voice, fax, multi-media, etc.


The function of the softswitch is to “control the voice or data traffic path by signaling between media gateways that transport the traffic.” Softswitches use established protocols and specifications to ensure “that a call’s or connection’s underlying signaling information gets communicated between gateways.” This information includes things like caller ID, billing info, and other call triggers. Whereas a media gateway is an actual piece of hardware, a softswitch is software, and can be incorporated into a media gateway.


IP PBXs can do everything that traditional PBXs can do, and a whole lot more. An IP PBX allows companies to leverage its managed intranet for voice and data applications. These can run the gamut from conferencing, to unified messaging, to multimedia, to collaborative applications, and more. IP PBXs can be physical hardware or software, and, as a result, businesses can leverage hosted IP PBXs for their needs.

VoIP Solutions With Plum Voice:

If you are interested in learning more Plum Voice is able to help you with your VoIP service needs. As one of the leaders in the industry we’ll be able to provide you with suggestions, solutions and service that fit your needs.

VoiceTrends is an analytics toolkit designed specifically to measure the performance of VoIP technologies such as DEV, Fuse, Insights and also 3rd party products by collecting data driven insights about your customers to help your business improve call quality, customer support and customer service all while saving you money. Learn more by clicking the link below:

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