What Is a VoIP Phone and How Does It Work?

September 01, 2021
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What Is a VoIP Phone and How Does It Work?

Today's business communications are constantly changing. Years ago, it simply involved voice calls. Now, businesses use calls, messaging, email, mobile apps, chat, and video conferencing to communicate internally and externally on any given day.

This evolution in communications doesn't just change employee and customer behavior. It also changes the hardware and software required to make it happen. That's where Voice Over Internet Protocol, or VoIP, comes in. VoIP phones empower businesses to replace outdated, traditional telephones with a complete communications package that happens all on the internet.

Chances are, you've used more than one VoIP-powered app already today. Examples include:

  • Skype
  • Google Hangouts
  • Zoom
  • WhatsApp
  • Facebook Messenger

VoIP is changing the world of communications. With easy setup, low costs, and greater functionality, it's a technology that the future is embracing.

Below, we'll deep dive into the nitty-gritty details of VoIP, including what it is, how it works, and why you should consider using it.

VoIP (Voice Over Internet Protocol) phone – Definition

As mentioned, VoIP stands for Voice Over Internet Protocol (you might hear it referred to as IP telephony, too), and it's a technology that enables you to make and receive voice calls over the internet.

Traditionally, callers communicated over the Public Switched Telephone Network, or PSTN, or what we think of as landlines. VoIP, on the other hand, sends voice communications using data packets over a packet-switched network, which we know as the internet or local area networks (LANs).

All you need to make these calls is a device, an internet connection, a microphone, and VoIP. No traditional phones, analog lines, or circuit transmission is necessary. Simple, right?

VoIP can utilize cell phones, desk phones ("hard phones"), mobile devices, and even computers equipped with headset microphones ("softphones") to connect callers—allowing you to communicate with new or existing hardware.

Whether scaling a call center or expanding your business to include life-changing communications, VoIP can connect you to team members and clients with lower costs and greater functionality.

What does VoIP phone mean?

A VoIP phone refers to any VoIP-enabled device that can transfer voice data over the internet. A VoIP phone could be a mobile device, desktop, tablet, web browser, or desk phone.

VoIP phones vs. traditional phones

VoIP phones and traditional phones have quite a few differences for fulfilling a relatively similar purpose. Here are the main differences:

  • Pricing: Cloud-based VoIP calls are cheaper than traditional phone landline calls. Plus, most customers and businesses already have internet installed, so while VoIP demands additional usage fees, you won’t be purchasing additional services.
  • Features: VoIP providers offer several advanced features you won’t find with traditional phones, like automated attendants, call parking, call flipping, real-time analytics, business integrations, and more.
  • Device flexibility: Traditional phones are often limited to a specific physical location, while VoIP phones can be your desktop, desk phone, or on-the-go mobile device.
  • Emergency services: VoIP phone numbers are location-dependent, so dispatchers don’t always know where to send emergency services unless the caller provides the details during a call. This makes traditional phones a more reliable system for emergency calls.
  • Call quality and reliability: VoIP calls rely on a strong internet connection, which used to be less accessible years ago. However, you can now find reliable bandwidth in most locations, making VoIP phones just as reliable and high quality as traditional phones.
  • Scalability: Scaling VoIP phone systems is simple—you can purchase additional lines and licenses and enable your employees’ personal devices. However, scaling traditional phones is a bit more complex—you’ll need to purchase more phone sets and wired phone lines to add more users to your system.

How do VoIP phones work?

At a basic level, VoIP phones work by sending and receiving calls over the internet instead of through traditional telephones and wiring. Speaking with a bit more detail, here's how VoIP works:

  1. Your VoIP-enabled device connects to the internet with an assigned IP address.
  2. Your VoIP service establishes the connection and begins exchanging data packets over a packet-switched network via media delivery protocols, like Session Initiation Protocol or SIP, when you dial a phone number.
  3. Your VoIP phone converts the data packets into sounds that you can hear.

Should you use a VoIP phone system?

VoIP phone systems offer significant advantages over traditional phone landline systems, but these aren't right for everyone. Here are a few benefits and drawbacks you should consider before investing in your business communications system:

Benefits of VoIP phones

  • Call routing: Easily route your calls to a VoIP phone, regardless of where you've plugged in your physical network. This allows you to take calls anywhere in the world, as long as you have a reliable internet connection.
  • Portable numbers: Since VoIP numbers are virtual, you can take them wherever you go. That means you keep the same number anywhere in the world.
  • Lower costs: Because VoIP doesn't require investments in traditional private branch exchange or PBX systems and landlines, you can switch and save significantly on your phone bill. Plain old telephone services (POTS) cost your business each month for each line, while VoIP saves you money with pay-as-you-go pricing. This allows you to easily scale up or down in response to demand.
  • Clearer quality: Thanks to the evolution of the internet, finding a high-quality connection is simple and easy. This leads to clear calls with no noticeable latency, lag, or dropouts. However, if you don't have a quality connection, VoIP can become a con (more on that later).
  • Multichannel functionality: SIP trunking enables you to provision SMS and MMS functionality from your phone numbers, allowing you to send texts, images, and videos—creating a more seamless conversation.
  • Security and privacy: VoIP technology can eliminate security and privacy threats with encryptions and identity management advancements.

Plus, with Twilio Voice Insights, you can analyze your call performance to troubleshoot customer issues faster and deliver better communication experiences.

While VoIP has a number of benefits, it's not all sunshine and rainbows. There are a few downsides to VoIP that you should keep in mind.

Drawbacks of VoIP phones

  • Quality dependent on internet connection: VoIP is only as reliable as your internet connection. While VoIP doesn't require too much bandwidth, you'll still need low latency on your network for lag-free conversations.
  • Limitations for emergency services: The 911 system is built with traditional phones in mind. So when you dial 911, first responders will be alerted to the fixed location of your landline. However, with the portability of VoIP calling, calling 911 will only transmit the address you provided at the time of setup—not your current location. Of course, you could provide your location details when making the 911 call, but that's not always a possibility in an emergency.
  • Power dependency: If you lose power and have no backup solution, your VoIP phones won't work. However, landlines don't require local electricity to make calls—they rely on power sent through the landline from the power companies. These companies usually have backup generators in case of a broad power outage, allowing you to keep making calls.

What to look for in a VoIP provider

Not every VoIP provider offers the right set of features and functionality for your business. Some VoIP providers simply offer additional phone numbers and call-forwarding features, while others enable SMS, team messaging, file sharing, and call management features.

Here are a few things you’ll want to consider when looking for the right VoIP provider:

  • Price: Think about whether you can afford the VoIP provider's different tiers. Some charge for more advanced features, while others provide free international calling to select destinations. Examine your budget and determine what you can afford now and at scale.
  • Scalability: Consider how big you plan to grow your team and customer base. Some systems cater to small teams, while others support big businesses with hundreds or thousands of employees.
  • Features: Think about what features you’ll need to support your team and provide top-notch experiences for your customers. This could be IVR systems, multilevel automated attendants, call parking, video conferencing, and (possibly, most important) APIs, SDKs, and integrations.
  • Channel support: Consider what channels you plan on using for your business. If you’re just looking for voice systems, you can go for cheaper options. However, if you want to add SMS, video conferencing, team messaging, WhatsApp, Facebook Messenger, and live streaming, you’ll need a more advanced VoIP provider.

Build a VoIP system with Twilio

Consumers and businesses alike are dropping old landline technology in favor of wireless and VoIP-enabled phones, and it's not hard to see why. Businesses that adopt this technology now will have success for years to come and get access to all the VoIP advantages we shared.

With flexible voice pricing options as low as $0.004/min for inbound and outbound calls, there's no reason to delay making the switch. Want to get started? Check out all our no-code voice apps that you can build in less than 5 minutes. Plus, take a look at how you can build a VoIP system with Twilio, 3CX, and Python.