What is a VoIP call and how does it work?

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Employee using VoIP to call with a customer

A VoIP call is a phone call powered by VoIP technology. If you have any involvement in business communications, you’ve probably heard of VoIP. But even if you know that it stands for Voice over Internet Protocol, and that it’s something to do with telephony, you might not know exactly how it works or what it can do.

It’s definitely worth familiarizing yourself with VoIP technology, as it can bring huge benefits to your organization—such as boosting productivity and saving money. As it doesn’t need on-premises Private Branch Exchange (PBX) hardware, it’s a more flexible and mobile option than traditional landlines.

After reading this, you’ll understand what VoIP is, how it works, and why systems like RingCentral VoIP are a valuable solution for businesses of all sizes.

Table of contents:
Team collaborating online using the power of Voice over Internet Protocol

What does VoIP mean?

We know what it stands for (again, Voice over Internet Protocol). But what exactly is it?

VoIP is a type of technology that allows users to make and receive phone calls via the internet instead of the regular phone lines or a PSTN (public-switched telephone network).

It uses packet-switching technology and multiple internet protocols (more on those in a moment) to deliver internet telephony functions that closely replicate traditional phones. A VoIP phone system allows anyone with a broadband internet connection to use Voice over IP from anywhere in the world, via a desktop or mobile device.

VoIP is not to be confused with similar and related technologies, such as:

  • Cloud PBX, the technology that manages incoming calls by routing them to the right person.
  • Session Initiation Protocol (SIP), the component responsible for establishing and ending VoIP connections.
  • WebRTC (web real-time communications), which enables communication through a browser like Chrome or Firefox. VoIP does this via software or an app.

How does VoIP work?

First, let’s clear up the meaning of “packet switching” and “internet protocols.” Packet switching describes the way VoIP uses computer networks connected via IP addressing to make and receive calls, emulating the traditional copper-wired networks.

When making a VoIP call, your voice data gets broken down into small “packets” so that it can travel across various networks as a digital signal. It then reassembles upon reaching the person you’re calling. In turn, their voice data travels back to you in the same way.

 Illustration showing how the internet makes VoIP calling possible

To avoid packet loss (when the voice data gets lost in the network), a certain set of rules apply. These are the internet protocols. There are several types of protocol relating to VoIP:

  • Transport Control Protocol (TCP)
  • User Datagram Control (UDP)
  • Real-Time Transport Protocol (RTP)
  • Session Initiation Protocol (SIP)

The former are the two most common delivery protocols for VoIP. TCP prioritizes quality over speed. It establishes a connection before the voice data is delivered to ensure it’s received safely. UDP, on the other hand, will deliver the data even if the person you’re calling has a bad connection. While faster, it may not be as reliable depending on the network components.

RTP controls how your voice data is delivered. It provides the recipient with essential information such as the media type format of the audio, the security settings, and the IP address where the data is sent from.

SIP is the protocol that handles all the other functions of regular telephone calls. With data transport taken care of, SIP does the dialing, makes the connection, and ends the call.

VoIP-to-VoIP calls

Because the technology aims to replicate a traditional phone system, making VoIP-to-VoIP calls doesn’t feel like a big change. The main differences are that you need a specific device (an IP phone or a softphone) and that calls are often made by clicking or tapping on app profiles rather than phone numbers on a dialpad.

When you dial or click, SIP establishes a connection with your VoIP provider’s server. The server then connects the call to the device of the person you’re contacting. During the conversation, your packets of voice data are broken down and reassembled in real time. When you say goodbye, SIP terminates the connection.

Video: Untethered business VoIP communications

VoIP-to-PSTN calls

Although VoIP services are growing in popularity, many small businesses are still using traditional phone systems. So, what happens if you have a VoIP phone, but the person at the other end doesn’t?

Luckily, you can use something called a “VoIP gateway.” This is a component of SIP, which is used to convert landline connections into VoIP connections and vice-versa. When voice data is transported between digital and analog devices, the gateway translates it into a suitable audio format.

What equipment do I need?

One good thing about VoIP solutions is that they often don’t require a ton of expensive hardware. There are three main types of equipment you can use to make VoIP calls:

  1. VoIP phones
  2. Analog adapters
  3. Computer software

If your business is committing to IP telephony, you can invest in VoIP phones (also called IP phones). These high-tech desk phones are basically mini-computers with all the functionality of a standard landline, connected to the internet through wi-fi or ethernet cables.

Suppose you don’t want to replace your existing analog phones right away. In that case, you can convert them for VoIP with an Analog Telephone Adapter (ATA), which digitizes analog voice data for internet transmission.

Another option is to turn your computer or mobile phone into a softphone, using special software (usually free of charge from your VoIP provider) to transmit internet calls. With a desktop or laptop, you’ll also need a mic and speakers or a headset.

Many VoIP service providers will give you an app to use on iPhone or Android devices, so you can make calls with VoIP instead of using up minutes in your cell phone plan. This is ideal for remote workers as it allows them to use the business telephone number—instead of their personal number—on their mobile device.

VoIP call in progress

Why is VoIP better than traditional phone systems?

VoIP wins over traditional systems on cost, efficiency, scalability, and call quality. It’s flexible enough to be used from anywhere, even for calling non-VoIP phones.

It’s true that VoIP requires a high-speed internet connection, so an outage would mean traditional phones still worked while VoIP didn’t—but if you choose a super-reliable provider like RingCentral, you’re assured of having 99.999% uptime.

Do more for less

Traditional phone companies will charge long-distance fees if you call a different area code. On the other hand, most VoIP providers give you unlimited calling within the US and Canada—and it’s often free or very low-cost. They’ll also have much lower international rates, if any. VoIP may also mean no monthly contracts (and no termination fees).

While traditional carriers charge extra for some of the basic features of voice telephony, VoIP phone systems often include handy calling features, such as:

  • Voicemail
  • Auto attendant
  • Call forwarding
  • Call queues
  • Visual voicemail
  • Voice-to-text

Plus, if you choose a unified communications platform like RingCentral, you also get things like a virtual fax machine, SMS, and video conferencing alongside voice calls—meaning you can call and text or even video chat and send a fax from the same platform.

Low running costs

We already mentioned that you don’t need much hardware for a VoIP system, so that’s a saving right from the start. Traditional telephone systems require on-site hardware, which takes longer and costs more to install. You’re no longer stuck paying the flat rate for a landline, either.

Most VoIP applications don’t need specialist maintenance or tech support either—they’re usually cloud-based, so the service is stored in a remote data center maintained by the provider, with all the infrastructure in place.

VoIP also gives businesses a lot more flexibility. You pay for a subscription or software-as-a-service (SaaS) for as long as you need it—and when you don’t, you just unsubscribe. If you’d purchased your own hardware and equipment, you’d be stuck with it if you changed providers or systems.

A modern business phone system


It’s important that your phone service is adaptable as your business grows, and VoIP makes it simple to scale up when needed. For example, when new employees join the team, there’s no need to install extra hardware or even create a new account—they can join almost instantly from any global location.

Because it’s based on internet technology, it only takes a few clicks to add extensions, while updates and upgrades arrive automatically and free of charge. If you wanted to expand a traditional system, you’d need to add physical cable lines, and each hardware upgrade or service would incur a fee.

How to choose a VoIP system

It may be tempting to see pricing as the main factor in choosing a VoIP provider, but remember that you get what you pay for—it’s probably worth spending a little more to ensure you get the best quality and the most comprehensive package. Do the research and see if a potential solution ticks these boxes:

  • Easy to implement and use
  • Plenty of features
  • Flexible and scalable
  • Secure and reliable

Your VoIP system should be simple to set up, causing minimal disruption to the business. An expert communications provider, such as RingCentral, can get your virtual phone service up and running in a day or less.

It should also be easy for all employees to use, so make sure the system is configured to your organization’s specific needs and ready to be scaled up when needed. A customizable user experience is ideal, allowing you to personalize how you use VoIP.  

Look for extra functions that will help your teams communicate, such as conference calls  and text messages, plus advanced features like caller ID, blocking callers,  and auto attendant. As previously mentioned, a unified communications platform like RingCentral provides a host of services in one neat package.

Top security and reliability are must-haves, protecting your business from threats and service interruptions. Choose a VoIP provider that meets and exceeds industry standards, including FCC (Federal Communications Commission) compliance, which would include Nomadic 911 and robocall mitigation.

RingCentral dashboard showing a customizable user experience

Which is the best VoIP provider?

In general terms, the best VoIP services provide an excellent overall communications experience. If you want us to get specific, we’d say RingCentral takes the prize. That’s because it offers so much more than a VoIP phone system.

As well as HD-quality VoIP, RingCentral gives you a whole cloud-based communications hub that includes conference calls, team messaging, SMS, and fax—all in one platform. As a hosted VoIP provider, it also offers advanced personalized call control functions such as call transferring, screening, and hold music.

You can manage all communications with your mobile or desktop app from any location with a centralized dashboard, helping remote workers to feel connected. With the RingCentral App, employees no longer have to use their home phones for work.

As you’d expect from an industry leader in unified communications, RingCentral VoIP offers carrier-grade reliability and security:

  • Tier 1 network centers
  • 24/7 monitoring
  • Multiple data centers and servers in different locations
  • Multi-factor authentication and single-sign-on
  • SSL-encoded web applications
  • Digital certificates to guard against VoIP fraud

To ensure top-quality VoIP calling, RingCentral provides instructions on checking your internet service and configuring your router. There’s also comprehensive customer support, while the all-inclusive pricing eliminates hidden costs.


How much does VoIP cost?

The cost of a typical hosted VoIP telephone system could go up to $45 per user, depending on the package and features. RingCentral offers a variety of plans, each with one simple bill covering all services.
Of course, some basic mobile VoIP apps allow phone calling over the internet for free. But they are not professional or robust enough for business use, when advanced communication and collaboration features are required.

Can small businesses use VoIP?

VoIP isn’t brand-new—VoIP phones have been around since the 1990s. Until recently, it was necessary to install large on-premise servers, making the system expensive and therefore only available to big businesses.
The advent of cloud technology changed all that, as companies didn’t need to buy and set up the hardware themselves. They can subscribe to a VoIP provider, which hosts the service using remote data centers in the cloud. 
They’ll usually offer different packages for enterprise VoIP customers and smaller businesses. This makes VoIP available to any business, no matter the size.

Do I need a VoIP service provider?

It’s possible for a business to set up its own internet phone solution, but you’d need to have the IT infrastructure and expert skills in place—and be prepared to make a huge investment. You’re much better off letting a VoIP provider like RingCentral take care of the tech, hosting the services on their own secure cloud IT infrastructure.
If you want to know how an award-winning VoIP provider delivers VoIP calling technology, give us a call or view our demo.