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VoIP Explained: How Does It Work?

It may be hard to believe, but VoIP has advanced so much since its inception that today it can completely replace your business phone system. The progress that has been made in recent years with regards to internet connections and VoIP technology is astounding. Nevertheless, many people still wonder how VoIP works and whether it can truly replace your traditional phone system.

The answer is a resounding yes. Not only is it possible to rely entirely on VoIP services for your phone calls, but you can even expand the possibilities using unified communications platforms to take VoIP to the next level. But how did we get here? Let’s take a closer look at the history of VoIP, how VoIP works, and the future of this amazing technology.

How VoIP Works: The Internet Is Now Your Phone

The Birth of Voice Over Internet Protocol

Voice over Internet Protocol, shortened to Voice over IP or VoIP, was actually a pretty logical invention when you think about it. Back in the 90s, we all used modems to communicate and connect to the internet. Your internet connection literally went through your phone line, so it only made sense to figure out a way to make phone calls while online.

This was especially important since your internet connection occupied your phone line to the point where nobody else could use the phone while you were online. If you remember those days, you probably remember the sounds the phone made when you picked it up while connected to the internet.

A couple of VoIP phone services appeared in the late 90s, but VoIP calls were limited by the technology of the time. Not only did it seem kind of pointless (why make inferior calls on your phone line when your phone can do it better?) but it was either extremely expensive or riddled with advertisements.

The Invention of VoIP Phone Systems

VoIP service providers recognized that the only way forward was to increase the quality of the call and reduce the cost of adopting VoIP. They made significant changes to how VoIP works by creating new voice encoding methods. The choice of encoder is important, as it determines the quality of the call and how much data the digital signal takes up on the network.

With new voice signal processing, it became easier to use VoIP to make calls, even on slower connections. Some providers even built special VoIP phones with extra processing power built in.

How VoIP and Your Telephone Network Differ

Why do you need to have special processors and encoding and all these other complicated tools just to make a voice call? Well, your traditional telephone uses a very different method to transmit voice data.

On phone lines, your voice wiggles a magnet that generates an electrical impulse, which travels down the line through the switched telephone network. The network connects lines until your voice signal reaches the receiver on the other end, where it again jiggles a magnet and produces sound waves out of the speaker of your landline phone.

With VoIP, there are no electrical signals traveling down lines. There’s no analog telephone network that needs to physically connect phone systems. Instead, data gets put into packets that are switched between one computer and another.

Dangling Dongles

One company sought to bridge the gap between the traditional phone network and the internet network. Vonage came out with its service in early 2000 and promised high-quality VoIP phone calls, even on a regular phone. They turned your analog phone into an IP phone with a simple adapter.

All you had to do was plug your analog phone into the adapter, which was connected to your internet network instead of your phone line. Vonage even invented full home conversion kits so that your entire home phone service would pass through Vonage’s dongle, making every phone in the house an IP phone.

But still, VoIP adoption didn’t take off. Even by 2003, only about 25% of calls were occurring over VoIP, and most of them were between very large enterprises in international settings. The average user wasn’t likely to use VoIP any time soon.

New Technologies Improve Online Phone Calls

VoIP providers obviously profited heavily from corporate clients, but getting VoIP into the hands of the average person was a major goal going forward. If only you could give everybody their own phone number and the ability to make calls using VoIP from anywhere.

Skype saw the writing on the wall and wanted to get ahead, so in 2003 they launched their service, which quickly grew to include phone numbers and VoIP calls over Wi-Fi.

Skype was the first VoIP service that let you pay as you go. You could simply pay a monthly fee for a virtual number, and add credit to your account to make calls using VoIP. Incoming calls were free. Best of all, you could make calls using VoIP to any number, even regular landlines. The bridge was under construction.

The Impact of 3G

Another reason VoIP didn’t take off right away is that the whole world was excited about mobile phone calls! Who wants to be tied to the computer to make a VoIP call when you could be walking around with your brand new tiny cell phone? Since VoIP uses the internet to make and receive calls, you couldn’t take VoIP with you unless you had mobile internet access, which at the time was limited to Wi-Fi in buildings.

3G changed all of that. When mobile telephone service providers started to put up 3G towers, and the iPhone 3G came out, suddenly we all had internet access everywhere. Forget copper wire: we had high-speed internet over the air!

While you could use 3G for VoIP calling, it was far from ideal. Just being internet-connected wasn’t enough, you really needed a more powerful broadband connection for VoIP. Today, phones with more powerful 4G and 5G are being launched as we speak, which means VoIP calls can happen anywhere.

SIP Trunking

Another big problem for VoIP was its inability to make emergency calls. Every VoIP service had to post giant warnings in red text saying you couldn’t call 911 with VoIP and shouldn’t rely on it for an emergency call. Naturally, it’s going to be hard to replace your traditional phone if you can’t make the most important call of your life with VoIP.

SIP trunking solved that problem by creating a connection between the public telephone network and your private network using VoIP. Now it was possible for any business to have a seamless connection between multiple locations using VoIP.

For companies who’d rather not pony up for this extra service, E911 services exist today that cost as little as $0.99 a month and can be added to any VoIP system to ensure access to emergency services in your local area.

Cloud PBX for VoIP Phones

The analog telephone is on its deathbed at this point, but VoIP solutions were not quite ready for the big time. One of the reasons companies stick with their existing phone system is that they can set up extensions and have hundreds of phones running off of just a few phone numbers.

VoIP phone system providers recognized this problem and set out to solve it. However, this would require more internet-connected devices and more VoIP phones to work. Nevertheless, it became possible with the Cloud PBX.

Like your phone company’s private branch exchange, which is where a local phone line is split into several “company lines” or extensions, a Cloud PBX handled all of this up in the cloud. Someone dials your virtual phone numbers and then punches in the extension number, and the Cloud PBX routes the call to the right phone.

VoIP Phone Service Providers Flourish

With all of these tools at their disposal, VoIP phone companies were ready to take over. Over the last few years, as cloud computing grew and more devices went online, it became much easier to find a VoIP provider. Today there are dozens of companies that offer basic VoIP phone service for an incredibly low price. You can get make VoIP phone calls for free!

Call quality improved greatly as internet speeds increased worldwide, so now your voice calls don’t sound like you’re underwater or on a planet far away. You can actually enjoy a real-time conversation over VoIP now, and you don’t even need special phones to do it.

Mobile phones today have all the processing power needed to transmit voice signals in HD. They can use the extra data bandwidth to transmit more information, for example using Caller ID with VoIP is now a standard feature.

The Future of the VoIP Phone System

So, now that every device has an IP address and using a VoIP service is easier than ever, have we reached the point where a VoIP phone system is the only phone system that you’ll be able to use? Well, not quite, but we’re close.

It’s pretty clear that the telephone companies are dead in the water. It’s expensive to lay new lines for traditional phones, and it doesn’t make much sense to do so when the local internet company is laying better lines that can handle VoIP. Data is king now.

But, at least in the United States, there are still many people who are unable to enjoy lightning-fast internet speeds due to their remote locations.

5G, Wi-Fi 6, and VoIP

Your mobile service provider is likely implementing 5G in a city near you. That is going to improve the quality of your calls. It’ll also make it easier to rely on your VoIP provider when you’re on the go.

Wi-Fi 6 is the new standard of wireless data transmission and the main benefit of it is that more devices can use the router and connect directly without losing speed. This has been one reason why large offices haven’t all switched to VoIP yet. It’s difficult to get an Ethernet cable to every device, so having a reliable Wi-Fi connection may be just what your VoIP phone system needs to flourish.

Analog phone sales continue to decline as mobile phone sales rise, so we expect to see more people ditching the landline and switching to VoIP for their calling needs.

Which System Should Replace Your Telephone?

If you’re tired of your old phones, then it’s time to switch to the phone system of the future. While you could stick with your existing service provider, there’s never been a better time to jump ship and join the VoIP army.

Look for a system with unlimited calling, zero long-distance charges, a free virtual number upon sign up, and unified communications features. With these providers, you won’t need phones anymore as your laptop, PC, tablet, and mobile phones will all be able to place calls on your phone system. Let your data do the talking with VoIP in 2021.

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