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A Plain English Guide to VoIP


Voice over Internet Protocol, better known as VoIP, is a way to make phone calls over the Internet. Since its inception in the mid-1990s, the number of businesses using VoIP has steadily grown, as has the number of ways those businesses are using it.

With the increasing use of VoIP has come increasing complexity–so we created this guide to help you better understand what VoIP is, how it works and why it’s often better than the plain old telephones you might still be using.

The Equipment

Before we break down the ins and outs of VoIP, let’s start with something you’re probably a bit more familiar with: music technology.

Vinyl records hold music, and that’s all they do. To play this music, they require specialized equipment–a turntable–that isn’t useful for anything else but playing records. Now let’s compare records with MP3s. MP3s can be transferred between devices, downloaded from the Internet and even sent via email. They can be played on phones, tablets and laptops–even some refrigerators will play them. MP3s are all about flexibility.

Just like vinyl records, traditional phone systems are inflexible. They’re used for voice calls and faxes, but they require specialized equipment to do both. Apart from these very basic functions, they can do little else. You can’t have a video conference over a traditional telephone just like you can’t watch a movie on a turntable.

Traditional telephones operate on what is known as the Plain Old Telephone Service (POTS). The POTS runs on copper wires, just like telegraphs did in the 1800s. While the POTS is reliable, it’s also very inefficient and inflexible: a single phone call uses a fixed portion of a line, which can’t be used for anything else while the call is taking place.

Though in some places Internet connections are still run over copper lines, most connections are now made on far superior broadband and fiber optic cable. Why are these so much better than copper wires? While vinyl records and the POTS are analog systems, MP3s, broadband, fiber optics and VoIP are all digital. The digital format–and the versatility that comes with it–is why VoIP is so much cheaper, and why it works so well for so many different applications, especially with computers.

There are two types of VoIP telephones: hardphones and softphones. Hardphones look and act exactly like traditional, physical office telephones–from the outside, you can’t tell the difference. VoIP softphones are simply software programs (or apps) that enable computers (or smartphones) to make VoIP calls. Whether you’re using a computer or a smartphone to make calls, the VoIP phone runs on the local computer network.

Since all VoIP phones are digital devices that run on computer networks, they can act like computers and access the same information. They can also join forces with computers in many useful ways, opening up new worlds of functionality entirely unknown with traditional telephones.

The Functions

Many of VoIP’s added functions stem from the fact that a VoIP system is essentially a telephone with a computer screen attached. That screen is an excellent place to provide visual elements that go hand in hand with voice calls.

Want to know if you’ll get a busy signal before you make a call? VoIP systems often provide “presence information,” which shows the availability of other people on the same system. It can, for example, show if a user’s contacts are in or out of the office, available or unavailable, whom they are on the phone with, and more.

VoIP also makes call management much easier, allowing you to drag and drop calls with your mouse to transfer them. You can also record calls with a single click.

Need to send just a quick message to someone? Many VoIP applications come with text chat functions that allow you to exchange typed messages back and forth with other users on the system. If you prefer to see the person you’re talking to, many VoIP systems offer video options that allow you to engage with other users face-to-face.

Plan to be at home, or on the road–or maybe both? “Find me/follow me” (FMFM) is a call routing feature used to make sure the right people can get in touch with you when you want, where you want. For example, if a customer calls your work number and you don’t answer, FMFM can prompt your cell phone to ring. If you don’t answer, it can then prompt your home phone to ring. You can even configure FMFM based on who is calling: for example, business calls can be configured to route to your cell phone, while personal calls are sent to your office phone. FMFM is very popular for people in sales-driven industries, such as real estate and insurance, where missing a call could mean missing a sale.

To further close the gap between salespeople and their customers, many VoIP systems allow companies to place “click-to-call” buttons on their websites, which automatically dial the company’s phone number when a person browsing the site clicks on it.

The Savings

Switching from POTS to VoIP can bring significant cost savings. To understand why, let’s go back to our record/MP3 analogy.

VoIP calls are like MP3s in that they don’t require very specialized hardware. Plenty of VoIP softphone options run on hardware your office probably already has, such as computers and smartphones. In many cases, all you need to do to get started is hook a headset up to your computer.

VoIP phones don’t need dedicated phone lines. Just like MP3s, VoIP calls can be accessed, transferred and played on a computer network. And since most offices already have computers networked together on a shared internet connection, VoIP phones and VoIP calls can just tap into that same network. No new lines required.

Telecom companies charge based on how much of their network your phone call requires–meaning calls that occupy less of their network will cost less. Digital VoIP calls have a huge advantage over analog POTS calls because they use up less space. Consider that an average vinyl record holds about a dozen songs, while an average iPod can hold about 40,000 songs. That gives you a general idea of how much more efficiently VoIP uses its network.

The Glossary

We’ll conclude with a short list of VoIP terms, some we’ve covered in the text above and some we haven’t. They’ll round out this basic introduction to VoIP, the benefits it offers and how your business can start using it.

VoIPVoice over Internet Protocol is a way to make telephone calls (and much more) over the Internet. It is rapidly becoming the technology of choice for business telephony.
AnalogAlong with digital, analog is one of two forms information can take. Vinyl records, standard telephones and even two cans connected by a string all transmit information in analog form.
DigitalDigital information is information that has been converted to a series of digits. Information must be digitized before it can be used with computers or transmitted over computer networks.
CodecA codec is a formula, or code, used to change analog information into digital form. VoIP uses codecs to change the sound of a person talking into a digital form to be sent on networks.
NetworkA network is a group of computers that are connected together. Computers are networked so they can share information and common resources.
LANA LAN is a Local Area Network. Computers in the same office are usually on the same LAN, though some offices have many LANs. Office VoIP phones generally connect to the LAN like a computer.
WANA WAN is a Wide Area Network, like the network of computers spread across a town, city or a continent. A VoIP call usually goes from a LAN to a WAN to another LAN.
HardphoneA hardphone is a physical phone, much like a traditional office phone, that works with VoIP. They’re also called IP phones. They usually connect to a local network with an ethernet connection.
Ethernet ConnectionEthernet connections are commonly used to join computers to LANs. An ethernet plug looks like a regular phone plug, only wider. Most VoIP hardphones connect to LANs with ethernet connections.
SoftphoneA softphone is software that adds VoIP functionality to a computer. Together with a headset or USB handset, a softphone can be used to make phone calls from a computer.
POTSThe Plain Old Telephone Service is the old system of telephones used before the invention of cell phones and VoIP. Compared to VoIP, it is inefficient and very limited in terms of what it can do.
Presence InformationThis is also called “availability information.” It shows, usually with a set of colored icons (red, green and yellow), who on your list of contacts is busy, available, on their mobile phone etc.
Find Me/ Follow MeFMFM is a call routing feature available on many VoIP systems. It’s used to make all calls to one telephone number get automatically rerouted to a series of devices, if the first isn’t answered.
Click-to-CallClick-to-Call is a function that helps integrate VoIP into a website. Putting a Click-to-Call button on your company website allows customers to call you from their computer by simply clicking the button.
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Craig Borowski

About the Author

Craig Borowski graduated from Colby College in 1997 with a degree in East Asian Studies. He moved to Taipei, Taiwan soon after to begin a career in journalism, publishing and translation. Craig relocated to Austin, Texas in 2008 and was director of marketing for the U.S. office of Tunze GmbH before joining Software Advice in 2013.

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