What is VoIP (Everything you need to know)

VoIP has become an essential part of business communications since its inception. 82% of businesses have experienced savings from VoIP Services and revenues for the industry are expected to soar to $194.5 billion by the end of 2024.

So, what is VoIP? VoIP, or Voice over Internet Protocol, allows users to make phone calls via the internet. The technology converts the audio from calls into ‘digital data’ packets and sends them over the internet in real-time.

In this article, we are going to explore everything you need to know about VoIP and how it can add value to your company.

History of VoIP

VoIP use and adoption have expanded over the years. The table below summarizes the history of VoIP.

Year Milestone
19731st ARPANET conversation
1977UDP Introduced
1988The First Wideband Audio Codec
1991First commercial VoIP service established in the USA
1994FCC regulations / Free World dial up
1995Standardizing of VoIP services (by Microsoft, Intel & Radvision)
1996The First Hosted PBX Solution/ SIP Development
1999The first IP-PBX was Developed
2003 – 2004Skype and Vonage/ FCC comes in
2005 – 2006Mobile VoIP introduced
2010+VoIP goes mainstream

How does VoIP Work

The traditional phone system uses ‘circuit switching’ technology to connect calls. As such, when a call is made, phone lines transmit voice signals between both parties over physical wires. This circuit is maintained during the duration of the call and closed once the call ends.

VoIP, on the other hand, uses a ‘packet switching’ method. When a call is made, the voice signals are converted into ‘digital packets’ and transmitted over the internet from one end to the other. These digital packets are then reassembled at the destination.

The diagram below shows how VoIP works

Can VoIP be used easily

It is possible to call any phone number using VoIP as it is an affordable alternative for making local and international calls. The person you call won’t notice any major difference (if any) in call quality.

VoIP requires very little technical knowledge to set up. Most providers have online portals and apps that enable users to configure their settings and devices. These providers also have customer service teams that can assist with troubleshooting.

VoIP and softphones

Softphones are software programs that enable devices to make and receive calls over the internet. VoIP providers, like YOOTOK, have softphone apps that can be used on desktop computers, laptops, tablets, and smartphones. Softphone app interfaces look like those on traditional telephones with dial pads and call handling features.

Softphones apps are favoured by businesses and individuals because of their portability, ease of use as well as lower costs for local and international calls.

See the examples shown below:

SIP trunking and VoIP

What if your business already has a traditional Private Branch Exchange (PBX)? Can your business use VoIP without incurring significant setup costs?

Thankfully, yes.

Your business can enjoy the benefits and cost savings associated with VoIP by using a SIP trunk. You will need get a VoIP gateway to connect your PBX to a SIP trunk provider. Staff will be able to make calls over the internet using the SIP provider’s network. Businessowners can purchase additional numbers and SIP channels from their provider when required.

The diagram below shows how a SIP trunk works.

How does a sip trunk work

Equipment required for VoIP

If you have a PBX already you will need:

You will need the following:

  • A good internet connection with enough bandwidth
  • A modem and a router
  • A VoIP Gateway
  • A subscription for a SIP trunking service

If you don’t have a PBX system

You will need the following:

  • A good internet connection with enough bandwidth.
  • A modem and a router
  • A subscription with a Hosted VoIP provider
  • A device that you can use the VoIP provider’s softphone apps on. This could be;
    • A desktop
    • A laptop
    • A Tablet
    • Or Smartphone
  • PC Headsets (if you are using a desktop or laptop)

If you don’t mind investing in VoIP Phones

You’ll need the following:

  • A good internet connection with enough bandwidth.
  • Modem and router
  • VoIP Phones
  • A subscription with a Hosted VoIP provider

Benefits of VoIP

VoIP has many benefits for large and small businesses, including:

Cost savings

  • Low setup costs
  • Low rates for local calls
  • Low rates for international calls


Business can:

  • Add (or reduce) the number of extensions as when required. 
  • Purchase more virtual numbers (for specific departments or to ease congestion)


  • Staff can access the phone system whether they are in the office or working remotely.

Great features

VoIP service providers offer more features than the standard call handling features. Some of these are:

  • Call forwarding
  • IVR
  • Simultaneous Ringing & Hunt Groups
  • Call history and Analytics
  • Integrations with other business apps.

Good call quality

  • Advancements in broadband technology has greatly improved call quality.

How to choose a VoIP Provider

  • Know you needs beforehand.
    • How many extensions you require?
    • Do you need to port your existing numbers?
    • Do you need more numbers? For different locations and/or countries?
    • Do you have staff that work remotely that need to use the phone system?
    • What are the features that you need in a phone system? 
  • Assess your current situation
    • What do you dislike about your current system?
    • How good is your current internet connection? How much bandwidth do you have? 
    • What infrastructure do you have already? Do you need to upgrade or get additional components?
    • How much are you paying for your monthly phone bills?
    • Do you need to make local and international calls? or just local calls?
    • What are the exit clauses in your current contracts? How steep are the penalties for early termination?
    • How much would you like to spend per month for your phone system?
  • Decide which pricing model suits you needs
    • There are two pricing options available for a cloud based phone system, per user and usage based billing. Each option has its own implications regarding the cost of adding new users and prices paid for calls. Take some times to review both options and choose the one best suited to your needs.
  • Evaluate Suppliers
    • Pricing
    • Setup up costs and fees
    • Features offered
    • Support offered
    • Security
    • Onboarding and training
    • Mobility (web and mobile apps)
    • Call quality
    • Calling rates
    • Online reviews

You can read our VoIP Buyers Guide for more information.  

What is the cost of VoIP

The cost of using VoIP is largely determined by the billing method chosen. The table below shows some of the main differences.

Per User Billing Usage-based Billing
What do you pay forAccess for users, in the form of ‘licenses’
(Some packages have minutes already included)
Minutes and features required
Price Range $20- $50 per user ‘license’No individual ‘licenses’ required for users. Packages are structured around the minutes and features required.
Cost of adding additional users $20 – $50 Free
Number of users Limited by the number of licenses purchased Unlimited
Local calling costs From $0.01 per minute (depending on which country the user is in)From $0.01 per minute (depending on which country the user is in)
International calling costs From $0.01 per minute (depending on which country the user calling) From $0.01 per minute (depending on which country the user calling)

Other costs to consider include:
• VoIP Adapter: $40 – $120
• VoIP Phone: $50 – $220


VoIP phone systems offer many benefits for large and small businesses. The reduced rates for calls, added features and integrations with other business apps, make VoIP a preferred choice for communication. Choose Yootok for your business.