VoIP: A Simple Guide to What it Is, How it Works and the Advantages and Disadvantages You'll Encounter When Deploying the Technology Within Your Company

Seems like everytime you turn around these days a new "technology" is unveiled that will revolutionize the way we live and work. Oftentimes it's hard to tell just what technologies are true beacons of innovation or just plain old Hollywood "hype".

VoIP (Voice Over Internet Protocol) is the buzzword these days and for good reason. Let's take a closer look at what it is, how it works and how it could help your company drastically lower telecom costs should you decide to make the transition from traditional analog communication to VoIP.

What Exactly Is "Voice Over IP"?

Voice Over Internet Protocol (VoIP) is a technology that allows for telephone calls to be made over a high-speed internet connection rather than traditional analog telephone systems.

Calls may originate from either from a standard phone or from a desktop or personal computing device. After traveling through a modem or adaptor, the voice signal is then converted into digital "packets" for transmission over the internet.

When the digital information reaches its destination, it is converted back to voice audio. Since the data packets need to move as fast as possible to be reassembled in an orderly fashion, high-speed internet access is a requirement. The following diagram illustrates the path of a phone call using VoIP (courtesy of the FCC)

Although this concept is simple to understand in theory, the implementation of the technology in practice can be tricky. Until just recently, the quality of voice transmission over the internet has lagged behind that of traditional voice networks.

However, the constant and continuing demand for high-speed internet connections is making VoIP more of a main-stream proposition for both business and residential use in the very near future and for many years to come.

The Advantages of VoIP For Business

In a recent Information Week survey of over 300 business-technology executives cost savings were cited as the main reason for deploying the relatively unproven VoIP technology.

Because the transmission of voice data packets is digital, VoIP may offer features and services that are not available with a traditional phone. With a single broadband internet connection, voice and data can be transported over the same platform thereby eliminating the need (and cost!) for an additional line(s) just to make telephone calls.

Another major advantage to VoIP is the ability to make calls across the world for a fraction of what traditional long distance carriers would charge for the same calls.

Other advantages to your business may include:

Some Disadvantages of VoIP

Although your company may reap tremendous overall and future savings through the deployment of a VoIP network, be prepared to spend some money to implement it.

In the fall of 2000, business-technology managers at the Minnesota Department of Labor and Industry had to replace a patchwork of five phone systems in the agency's headquarters.

After deciding to go ahead, the department deployed 300 Cisco IP telephones and additional software, hardware, and services at a cost of $435,000.

Three years later the department has cut its monthly phone bill in half, from $21,700 to less than $10,000. Even considering the drastic savings, the actual return on investment will take years to recoup.

Security and reliability are also viable concerns that you will need to address prior to implementing an VoIP strategy. Since VoIP combines both voice and data onto one platform, any problems that arise will affect computers as well as telephone services. Viruses, worms and hackers are also problems that could arise when working in a VoIP environment.

The Future of VoIP

Ironically, the future and staying power of widespread VoIP usage could be in the hands of government regulators.

The Federal Communications Commission has recently ruled that some forms of computer-to-computer voice-over-IP calls are information services and are not subject to the fees and taxes imposed on regular phone service.

The thought of unregulated and untaxed VoIP calls rattles state and local governments because of the loss of substantial tax revenue. Many states are already looking into ways to regulate the technology against the wishes of most vendors and users.

Like it or not, the internet will continue to define the way we work, play and especially the way we communicate.

In the left column of this newsletter, you'll find a list of excellent books covering just about anything and everything you would ever want to know about VoIP and its applications for your business.

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