A VoIP Primer-Everything You Need to Know about VoIP


This article is geared toward the business person who is considering adopting voice over Internet protocol (VoIP). I will briefly describe the history and function of VoIP, and the considerations you should take into account before choosing a vendor.

VoIP is a very simple concept. Instead of using a traditional telephone company's internal network for voice services, VoIP connections use the Internet. By using this electronic highway, you can take advantage of the Net's ubiquitous presence to obtain lower-cost telephone services.

Although voice travels through the telephone company's dedicated network via time-division-multiplexing (TDM) protocol, TDM is not suitable for the Net. In 1996, when the International Telecommunication Union (ITU) adopted the H.323 communications standard for the Net, VoIP started. One of the first general appearances was via Microsoft Messenger and the chat facility. It worked because the user's computer had a set of chips allowing bidirectional conversion between analog and digital, and the user provided a plug-in microphone. Around 1991 Motorola introduced very low-cost high-speed integrated chips to handle analog-to-digital/digital-to-analog (ATD/DTA) conversion for audio encoding and decoding. Multiple chips could be built into hardware cards to handle concurrent audio sessions. Today, all personal computers (PCs) have these chips integrated into the motherboard.

Now I'll turn to a basic description of how VoIP helps make regular phone calls over a broadband high-speed Internet connection instead of a regular telephone line. Just an important point to realize: the primary reason for considering VoIP services is cost savings; convenience is only a secondary consideration.

Audio Components of a VoIP System

How do DTA and ATD converters work? An analog telephone device connects to an adapter box. This adapter includes an ATD chip that samples the input analog audio signal around 20,000 times a second (even though the chip can do it 10 times faster). Each sample measures the audio signal voltage and transforms the audio voltage measurement into a number. The numbers are collected and are placed in a record, one number behind the other. Every few milliseconds the completed record is replaced by another empty one. The completed one is compressed (to reduce transmission time), and this compressed record is sent out to a destination via the Internet.

On the receiving end, the record containing the stream of numbers is read, decompressed, and placed in a receiving queue. The first record in the queue is the active one. From this record, one number at a time is read and presented to a DTA chip, creating an output (audio). The presentation rate to the DTA converter is equal to the session initiation protocol (SIP)-negotiated rate at which the record was filled, allowing audio to be reproduced at the same pitch and speed at which it was measured by the sampler.

VoIP had to wait for suitable protocols and hardware devices in order to act as a bridge between the Internet and legacy telephone systems. The H.323 standards on which VoIP depends allow you to use the Internet to concurrently transmit voice, video, and faxes. VoIP works with hardware interfaces to emulate a telephone exchange or a private branch exchange (PBX). A PBX device connects to the local telephone system via either an integrated or external VoIP gateway. The gateway providing the interface between the phone system and the Internet is often referred to as a point of presence (POP). Many such POPs are PC-based and consist of hardware. In simpler terms, the VoIP gateway will determine if your originating telephone call will route through the Internet or via the public phone system.

The initial telephone protocols to traverse the Internet were many, and required a substantial knowledge of protocols, definitions, recommendations, and standards such as inter-asterisk exchange (IAX), SIP, H.323, H.225, real-time transport protocol (RTP/RTCP), remote function call (RFC) 3550, H.245, H.501, H.450, H.460, T.120, T.38, Skinny Call Control Protocol (SCCP), Unified Networks IP Stimulus (UNIStim), and more. Eventually several of the critical protocols were merged into one, the SIP.

Prior to VoIP, one's telephone number was assigned to a physical location. One of the features of VoIP, however, is portability of telephone number location. The absence of a fixed physical location means that your telephone number follows your laptop, or follows a telephone adapter installed on a universal serial bus (USB) adapter. Now, a visit to a foreign country will still provide home-based telephone service to the assigned telephone number. Certain business requirements were imposed on VoIP vendors and their customers to respect emergency calls, among others. This requirement was resolved for statically located telephones (residences and businesses), but remains unresolved for portable VoIP phones.

After registering as a telephone company, a VoIP vendor will begin providing telephone services in competition with the traditional telephone companies. Between VoIP providers, certain agreements are negotiated to permit POP-to-POP connections. Between the POPs, arrangements are made to provide free domestic long-distance calls, and (in some cases) free calls to international cities.

VoIP Solution Overview

As a VoIP user, you'll need

  • high-speed access to the Internet using anything from a single cable connection up to speeds provided by one or more T1 lines;
  • one or more server PCs with installed interface cards;
  • VoIP software; and
  • a connection interface to the Internet that is programmed as a POP gateway.

Disadvantages of VoIP Solutions

Sound quality
In general, VoIP sound quality matches that of the normal telephone system, and provides AM-radio quality (which is adequate for voice and music, but not for stereo high-fidelity reproduction). The Internet does not guarantee that a message will travel directly or immediately to its destination, as the IP does not control the route taken by a message. Occasionally, at destination a SIP record may be dropped because it arrives late or out of sequence. For the listener, this infrequent loss is heard as a fraction-of-a-second silence (a “click” or a “pop” sound). The reason for the temporary sound problem, if it occurs, is that SIP traffic “competes” with other Internet traffic, and cannot be guaranteed to be transferred as a priority message (i.e., ahead of the pack). However, a mere 1- or 2-percent packet drop degrades voice quality. Currently, only larger VoIP providers with high-speed interconnect POP gateways in major cities are able to provide service guaranteeing no packet loss.

Internet or power outages
Most home telephone handsets are cordless. When power is lost or the Internet is down, there will normally be no telephone service, as the cordless phone plugs into the VoIP adapter. In geographic areas where power losses are frequent, it makes good sense to have an uninterruptible power supply (UPS) to power the cordless phone, the modem, and the VoIP interface adapter.

Emergency services
Even though VoIP service can follow you wherever you plug into the Internet, most VoIP installations are at fixed locations. There is generally a legal requirement for the VoIP vendor to provide emergency service numbers for these locations. The way it works is that the VoIP vendor has a web site where the client can provide information such as city, postal code, or other identification. Based on that information, the VoIP provider will link incoming emergency calls to your local emergency phone number. As indicated in the previous section, though, if there is a power outage, there will be loss of VoIP service and as a consequence, loss of emergency contact ability.

Security issues
If you're connected to the Internet, you know you're exposed to viruses, worms, spam, and other malicious threats. In addition, there are regulatory issues associated with ensuring protection. Industries such as banking, health care, and retail must protect personal information. All traffic in a network can be intercepted unless proper security precautions are in place. A VoIP phone system is a server, and like a web server is susceptible to

  • denial of service attacks, which overload your server to the point where it cannot cope with message handling;
  • phone service thefts, which involve the use of your system to send spam or make use of toll charge systems;
  • eavesdropping (typically with the goal of gaining access to credit card information);
  • fax and voice attacks, which flood your mailboxes with spam; and
  • phone number spoofing, where an incoming call is from someone using a telephone number that does not belong to the caller.

Advantages of VoIP Solutions

Telephone service savings are more substantial for residential households than for businesses. Large businesses already pay very low rates for long distance, which suggests that savings for long-distance calls alone would not justify moving to VoIP. The VoIP home telephone system provides major savings (over 50 percent) for home use. Just a note: many homes are entirely cell-phone serviced, with the secondary phone being from a VoIP provider. Therefore, VoIP is a great cost saver for long-duration conversations or long-distance calls.

However, because voice and data can be consolidated, and because rates are in fractions of a cent (to say nothing of the added capabilities of newer PBX systems), there is a possibility for small to midsized businesses (SMBs) to install VoIP telecom systems similar or superior in functionality to what large organizations provide for themselves. VoIP technology allows the merging of e-mails, mobile telephones, video, and more.

Merging Technologies
On the business front, the driver is the lowering of total operating costs via the merging of Web and VoIP, as well as the merging of the PBX with VoIP functionality onto the common network. Unless the company is in the tier-one category, the cost benefits only arise with this merging of technology. Large telephone installations such as those present at tier-one companies will normally have sufficient telephone use to warrant a dedicated network, independent of the Web. The benefit to tier-two and tier-three companies arises from the extra no-cost functionality that VoIP offers (see table below).

Telephone Services

The services that are available at competitive costs with a standard VoIP service are summarized in the table below.



Analogue telephone adapter

Use your analog phone to connect to VoIP system


Use your PC as a telephone

Voice-mail boxes

Retrieve your messages by using phone, e-mail, or the Internet. For the latter, voice-mail alerts or the messages themselves can be e-mailed

Caller ID

See name and number of caller

Call waiting

While you are on an call, receive notification when another call is signaling

Call transfer

Transfer all incoming calls to another number

Call forwarding

Forward call to another number after a certain number of rings 

Call return

By dialing *xx, the last incoming call will be called (*xx is typically *69)

Call hold

Place a caller on hold in order to take another line

Call hunt

Ring, sequentially, multiple alternate phone numbers when lines are busy

Do not disturb

Block calls between certain hours

Free long distance

Pay no extra charges for domestic long distance

Caller ID block

Do not show your outgoing caller ID

Forward on busy

Transfer call to another number if phone is busy

Conference calling

Add a third party to the call

Anonymous call block

Block all calls that show caller has deliberately blocked ID

Repeat dialing

Receive callback when your target number becomes free

Unlimited extensions

Support as many extensions as you have

Unlimited auto-attendants

Generate phone prompt menu messages (e.g., press 1 for sales, 2 for Parts, 3 for accounting)

Cell phone integration

Forward calls to your cell phone

Laptop integration

Forward calls to your laptop

Integrated paging

Receive loudspeaker voice page for user to pick up call

Remote phone

Interface to Internet, allowing call to business extension to be directed to the Internet

Extension groups

Create and name a group (e.g., sales) so that all phones in a group ring when the call is received. First person to pick up will block the others

Customize caller ID

Customize caller ID by extension

Direct inward dialing

Enable inward dialing directly to a user’s desk phone

Directory services

Use voice or touchpad to reach telephone extension of recipient

Music on hold

Select on-hold music

Extension call recording

Record all calls to specific extensions (e.g., for help desk call tracking)

On-the-fly recording

Optionally record call via *xx number

Voice-mail callback

Choose to call number of caller who left voice-mail message

Voice-mail group

First individual to retrieve voice-mail can block the others

E-mail integration

Initiate a call with one click, if phone number is in your e-mail software

Call pickup

Anyone can pick up a call to a group

Call parking

Park a call on one extension for pickup on another

Location features

A distributed workgroup can be located in several cities or branches

Multivendor support

Integrate with other telephone systems


Page an individual with loudspeaker connection

System diagnostics

Tools to manage system errors or problems

Reporting software

By extension, from/to or to/from sequences, or by call duration

Speed dialing

Program phone buttons or *xx functionality

Analog or digital interfacing

Accommodate older PBXs


Prevent unauthorized access or unauthorized toll-charge telephone calls

Right-sizing Your Phone System

Each telephone line in an office must terminate on a port. Modern electronic PBXs or POPs are built with a fixed number of ports per computer card (typically, 32). One would use port numbers to determine the number of desk sets. Sizing a phone system requires a certain expertise. It starts with the evaluation of number of concurrent calls during prime time, line utilization level (minutes per hour for all phones averaged), impact of lost calls, and of course, costs. Note that a 32-port phone system can have any combination of lines and telephones (up to 32), determined by the amount of lines or stations the manu¬facturer can support on the modular circuit board.

Do not acquire a system that has no expansion capability, and always make sure the cost to add ports, lines, or phones will be reasonable. By the way, some standard configurations include 3 external lines for 8 telephones, 8 lines for 16 telephones, 12 lines for 24 telephones, and 24 lines for 48 telephones, with less then a 1 percent chance of a lost incoming call (e.g., where the caller receives a busy signal).


Selection Criteria

Author Carrie Higbie, in an October 24, 2006 article from Business IP PBX Guide, wrote:

For many companies, the tough decision isn't whether to use IP telephony or not—it's which vendor to choose. There may be considerations of current voice or data vendors already at use in an organization, and each vendor provides a different set of features and management tools. With all of the variables involved, the choice may seem daunting.

Indeed, sometimes upstart vendors often can deliver better price or feature value than large vendors.

Some of the concerns are the options in the list of features tabled above, purchase price and warrantee periods, scalability to growth, support, backup for temporary electrical outages, and more. My research indicates that a new PBX phone system should cost a business between $699 and $1,000 (USD) per user. Amortized over 5 years, the monthly cost is between $12 and $18 per month, per user. But pricing options range widely. You can choose monthly plans that are fixed and predictable in cost, or you can buy a lot of equipment outright. Both are good choices under different circumstances. Per-user prices can drop significantly for larger companies that have more employees and that must purchase larger systems.

Very few businesses actually purchase a phone system in isolation. Most end up purchasing new telephone sets or service packages that increase the total purchase price. Regardless of your decision, pay attention to total cost of ownership (TCO) over a three-year cycle. Maintenance costs can hit you when you least expect them.


Research Considerations for Your VoIP Decision

  • Analyze business telephone use. How many users do you have? What types of phones? Basic phones or programmable? Assess the number of phones and amount of equipment needed. There are two important things to consider: a) number of employees; and b) number of extensions needed for fax machines, modems, credit card terminals, etc. Are all lines busy more than 50 percent of the work day? If so, you may run the risk of restricted line availability (and busy signals for incoming calls).
  • How many lines would it take to reduce line use to 30 percent? Do this study to determine if the current number of lines is sufficient for growth for the predictable future.
  • If you are a single-site operation, you will not need multisite VoIP capabilities.
  • Determine the difference in cash flow between buying and renting phone system hardware. Regardless of your particular situation, renting provides certain benefits. It enables a business to create a short-term solution without having to make a huge investment or having to invest in an upgrade to a newer system.
  • Would an on-site PBX serve you better than a hosted version of PBX? For SMBs, the hosted option might be advantageous. A business might move to VoIP to reduce the number of direct lines to the public telephone system, as each additional line incurs a connection and line charge. Use cost benefit analyses over the short and long term to decide which way to go. Hosted IP PBX pricing is normally fixed per user. Monthly charges are based on a flat fee per user. With hosted IP PBXs, each telephone will be what is termed a SIP phone (SIP adapter built-in). SIP phones connect directly to the Internet.
  • As part of the acceptance testing, verify that the new equipment can be integrated with existing office technology. This is a necessity. New phones must be compatible with any headsets, conferencing tools, voice mail, and call forwarding systems that are going to remain in place.
  • Decide what features are required from the table above. In general, the following features are essential:
    • Conference calling
    • Voice mail
    • Call forwarding and call transfer
    • Call hold
    • Call park and call pickup
    • Extension groups
  • Nice-to-have features include the following:
    • Automated attendant
    • Directory services
    • Presence features (i.e., the ability to record an “away” message or business hours message, to which an incoming caller will be redirected upon first ring)
    • Paging
  • Management and administrative services include the following:
    • Reapportionment of charges based on department use
    • Rights management (who may make long distance calls, or have access to certain functionality)
    • Ability to relocate a local without relocating the telephones

The Last Word

The move to VoIP is beginning to avalanche in the sense that there are a great many providers and alternatives. My recommendation is that if you are upgrading from an existing phone system, save money with a hosted solution if you have 20 locals or less, or if your business is volatile, seasonal, or there is uncertainty in terms of business growth.

For more information, see TEC's library of VoIP white papers.

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