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How VoIP Works



VoIP is a digital phone service that uses the Internet to send telephone calls.

VoIP is a great choice for your residential or business phone service because it is much cheaper than traditional telephone service. However, you use VoIP in pretty much the same way you use your phone now: pick up the phone and dial. The only real difference is the technology behind the call.


Business VoIP Providers 
Provider Plan Details Monthly Rate*
  • Includes 100+ Premium Features
  • Unlimited Calling, Faxing, SMS, Conferencing
  • Trusted by over 350,000 Businesses


142 Reviews

ooma The #1 VoIP solution for remote teams.
  • Work from anywhere with mobile & desktop apps
  • Stay connected with video meetings
  • Manage users easily with intuitive admin portal


46 Reviews

Clarity Tel Business VoIP Made Clear and Simple
  • Unlimited Calling - Flat Rate Billing
  • No Contracts - Quick & Simple Set-Up
  • 40+ Enterprise Class Calling Features

* Price based on multi-user hosted PBX solution


2 Reviews

Phone Service for Business Alliance Phone Service
  • Simple Control Panel
  • Easy 25-minute setup
  • Daily call reports

* 12% discount for subscribing and paying for a year upfront


13 Reviews

Residential VoIP Providers 
Provider Plan Details Monthly Rate*
Home VoIP Residential VoIP
  • Unlimited calling
  • Tons of features
  • 1 hour free of international calling

* $15.00/mo. or $6.21/mo. with 2 year contract


48 Reviews

  • Special: Save on hardware & low monthly rates!
  • No annual contracts, 30-day money back guarantee
  • Unlimited nationwide calling

* Not including taxes/fees + One-time hardware cost of $99.99


199 Reviews

  • Unlimited Calling and Free Adapter Included
  • No Contract or Cancellation Fee
  • Over 40 Included Features

* $8.97 is monthly cost with 1-year prepay


4 Reviews

Axvoice Home Phone Service
  • Unlimited calling for US and Canada
  • No activation fee and Free hardware
  • Complete money back guarantee

* $6.25/mo. 1-year prepay equals $75.00/year


63 Reviews

Community Phone Traditional Landline Service
  • No internet required, works even during power outages.
  • Setup is as easy as connecting a charger to a phone, anyone can do it.
  • Unlimited local and long-distance calling.

* Device contains a backup battery and is not designed to be run without electricity indefinitely.


7 Reviews

VoIP vs. Traditional Telephone Service

The biggest difference between how VoIP works and how a traditional telephone service works is that VoIP uses digital data while traditional telephone service uses analog data. Digital data is binary composed of 1s and 0s, while analog data is composed of electronic waves.

How Traditional Telephone Providers Work

It’s easy to send analog data over a short distance, but it’s hard to send it over a longer distance without losing a lot of sound quality and clarity. The result is that the infrastructure of an analog system has to have a lot of stopovers so that an analog call can retain quality and clarity. This means that the infrastructure of the analog system, which is called the PSTN or public switched telephone network, has to be very intricate and complex.

Much of the analog system has been converted to digital technology, but the basic structure of the system has not changed much.

How VoIP Works

VoIP uses a very simple digital system to send calls. Basically, you make a call using your computer or IP (Internet protocol) phone. Your computer or IP phone is connected to a modem to access the Internet. The call is processed into data and sent over the Internet - from any location that has an Internet connection.

If you are calling another VoIP user, your call stays on the Internet the whole time. If you are calling a number that is on the traditional phone service, your call will eventually leave the Internet to be processed by the PSTN.

What you need to use VoIP

The requirements for Internet telephoning are minimal. Basically, you will need

  • an Internet service
  • a modem
  • a computer and/or IP phone

If you don’t want to replace the phone you have now with an IP phone, you may be able to use it with an adapter. If you don’t already have an IP digital phone then your old phone is an analog phone which can’t process digital data.

Once everything is connected, you make a call in the same way you’re used to. Either you dial a number on your phone, or you can use your VoIP softphone on your computer to make a call. This is one of the best things about Internet telephoning: the difference in how VoIP works doesn’t affect the user interface that you are used to.

How does the way VoIP works determine cost?

Because of how VoIP works, there is effectively no difference between a local VoIP call and a long distance VoIP call. Unlike analog calls which have to travel from location to location to complete a call, VoIP calls can go to the nearest drop off point and be distributed locally.

With an analog call, there is a certain route that a call must take to reach a certain destination. The nearest stopping point for the analog call may be out of the way, or may involve backtracking. This contributes to the cost of the analog call.

On the other hand, if you are using a VoIP service, your call can use the quickest route to get anywhere. For example, if you are making a call from New York to Texas, your VoIP service provider may have the option to transfer your phone through a location in California and a location in Tennessee. Even though the location in Tennessee seems to be on the way to Texas, it may be that there is less traffic with the route through California (so a quicker and better quality VoIP call), so the service provider will use the California route to save you money and increase call quality.