What does VoIP stand for, and how does it work?

You might have heard the term "VoIP" used frequently in the business telecoms world. However, unless you work directly with phone systems, there's a good chance that you don't know what "VoIP" actually means...

Richard Weddle


What does VoIP stand for?

You might have heard the term “VoIP” used frequently in the business telecoms world. However, unless you work directly with phone systems, there’s a good chance that you don’t know what “VoIP” actually means.

VoIP is an initialism standing for “Voice over Internet Protocol.” It simply means that you make phone calls through internet lines, rather than through a mobile network or landline. VoIP takes your analogue voice signals and translates them into digital signals that can move through the broadband line.

Companies can make VoIP calls with a computer, a VoIP adapter, and phone, or with a smartphone. Over the years, more organisations have begun asking “What does VoIP stand for” as they face the demands of remote employees and increasingly global interactions. VoIP is a very useful way of making long-distance calls, without incurring a massive bill.

Here, we’re going to give you a complete answer to the question: “What is VoIP?”

How Does VoIP Work? Introducing the PSTN

To understand how VoIP systems work, you’ll need to know a little bit about the solutions that came before VoIP. The PSTN, or Public Switched Telephone Network, was the system that companies relied on for decades. Unlike the VoIP phone, the PSTN relied on circuit switches to connect callers at either end of the conversation. The PSTN was simple and reliable. However, it wasn’t flexible enough for today’s digital workforce.

VoIP technology changed telecoms as we knew it, by enabling telephone services through computer networks. A VoIP phone uses “packet switched” protocols to turn voice signal transmissions into “packets.” These packets are like electronic envelopes of information. Along with voice signals, VoIP packets also include the network address of the person making, and the person receiving the call.

Because VoIP uses packets of information, it’s much easier to carry data over any VoIP comparative network. In comparison, the PSTN network has a far less dynamic routing and communication strategy. In the world of the “Plain Old Telephone System,” when a line is down, calls will not go through. Packets can only travel on the available routes in a PSTN. With VoIP, signals can move on the same networks that businesses already use to send and receive computer data.

What is VoIP and Why is it Better than PSTN?

According to studies, the market for VoIP is expected to increase to a value of around £157 billion by next year (2020). The fundamental difference between VoIP and previous PSTN systems is that VoIP is built on internet protocols. A VoIP phone works through the IP world, which makes it portable, interoperable, and easy to maintain. Companies often unlock huge cost savings when they switch to VoIP.

Perhaps the easiest answer to “What is VoIP,” is “an internet-based phone system.” Where your PSTN solution uses phone lines and network switches, VoIP uses no phone lines at all. Instead, your VoIP strategy relies on the internet, and the cloud to maintain and deliver your calls. Your on-site router will connect your calls to the internet solution you have in place and open up the IP network provided by your service provider. From there, the VoIP solution begins delivering the various features offered by your VoIP devices.

The most impressive thing about VoIP for most companies is its flexibility. Voice over IP phonelines ensures that you can connect to virtually any device you want. You can even decide if you wish to use a softphone (a software phone), or a smartphone instead of a standard desk device. Just make sure that you have the right security systems in place if you plan on letting your employees use their own equipment as a VoIP phone.

What Does VoIP Mean to Your Business?

At this point you know what VoIP stands for – but what does it mean to your company?

As the world continues to face trends like globalisation and remote working, VoIP offers freedom, mobility, and scalability. With VoIP, you can create a reliable and consistent communication strategy. What’s more, you can ensure that your employees have access to the tools that they need, regardless of where they are or which devices they’re using.

Merely switching to VoIP can be enough to save your organisation between 50 and 75% on your communication costs. Combine those savings with the cost-efficiency that comes with the option to telecommute and embrace a global workforce, and the value is astronomical.

Ready to learn more about VoIP? Call Nice Network today and transform your phone system.