What is VoIP?


Voice over Internet Protocol (better known as VoIP) is a technology that allows users to make and receive phone calls over the internet. Thanks to the widespread availability of broadband, VoIP is becoming the go-to option for small business owners, privacy-conscious consumers and anyone else who needs an affordable second number.

Whether you’re looking to set up a VoIP number for your business, curious about the advanced features VoIP can offer, or just wondering how it all works—you’ll find the answers in this guide.

Benefits of VoIP

VoIP makes it possible to have phone conversations (and send and receive texts) using a broadband connection rather than cellular networks or traditional phone lines. By simply signing up with a VoIP provider, anyone with an internet-connected device can have a fully working phone.

In a nutshell, VoIP technology works by transmitting audio over the internet as small packets of data—but more on that later. Here are 5 perks of using a VoIP number.

1. Any device goes.
VoIP is device-flexible. You can stay connected at all times with your smartphone, tablet, computer, or even a dedicated VoIP handset.

2. Unlimited calling is standard.
Internet-based phone service typically includes unlimited nationwide calling. There’s no need to track minutes, and your only cost is a flat monthly payment.

3. Your area code is up to you.
Most VoIP numbers are 10-digit “local” numbers that aren’t assigned to a specific location—which means you can live and work in Florida and still have a New York area code.

4. It’s like any other number.
Your VoIP phone number will look like a regular cell or landline to the people you call. You can use this number to send and receive texts, check your voicemail and more.

5. It’s also unlike any other number.
Voicemail-to-text, call recording, and auto-attendant are just a few of the high-tech features you can expect with cloud-based phone service.

To sum up, a VoIP number is a (geographically-flexible) local number you can put to use on your existing smartphone—or any other device. You can expect unlimited domestic calling, standard features like text and voicemail, and advanced tools to help streamline your communications. But you’ll need good internet to make it all work.

Our Top Pick: VoIP Phone Service by Northwest

How Does VoIP Work?

If you’ve ever had a video chat on Facetime or Messenger, you’ve used VoIP. These communication platforms (and many others) rely on Voice over IP technology to transmit voice and video data over the internet.

Here’s a quick look at how VoIP works behind the scenes.

Packet Switching – The Basis of VoIP Technology

Voice over Internet Protocol technology (sometimes referred to as internet telephony) was initially developed to help users avoid long-distance charges. The goal was to bypass the old telephone system altogether, using the internet and a technology called “packet switching.”

The Old

Traditional telephone networks carry analog sound signals over copper lines via circuit switching—a process that dates back to the telephone’s earliest days. A dedicated two-way physical connection is established when one party calls another, which must be maintained throughout the call.

Legacy phone companies pass on the costs of building and maintaining circuit-switched networks to their customers through higher service fees. The more you talk—and the greater the distance—the more you pay.

The New

Packet switching allows VoIP phone systems to send sound signals over the internet, much like any other data.

Analog audio signals are digitized, compressed, and separated into data packets that seek the fastest path across a network as circuits become available. Each packet has an IP header that tells it where to go (and how to reassemble once there). By taking numerous paths, the message avoids network congestion.

Packet switching is the foundation of online data sharing—and it’s what gives VoIP systems their speed and clarity.

Making a VoIP Call (Behind the Scenes)

While VoIP is an internet-based technology, call recipients do not need to be online. Your VoIP provider can route data from your device’s IP address to any public or private phone network.

Your service provider will use a communications protocol (also known as a signaling protocol) to connect you. Session Initiation Protocol, or SIP, is the most common. SIP allows VoIP providers to set up and terminate VoIP calls and transmit messages from one device to another.

Here’s what happens when you make a VoIP call:

  1. You dial a number with your smartphone, desktop computer, laptop, tablet, or IP desk phone.
  2. Your VoIP provider establishes the connection using SIP (or another communications protocol).
  3. Packet switching time! Audio signals travel as digitized, compressed data packets from one user to another.
  4. When the data packets reach their destination, they’re reassembled into analog audio messages by the receiving device.

The entire process is instantaneous: every step happens in real-time. As long you have a good internet connection, you shouldn’t experience any audio delays.

All this talk of packets and protocols may sound complexbut the main takeaway is that VoIP harnesses the internet’s power to make phone calls much more energy-efficient. 

Why Would Someone Use a VoIP Number?

The use of digital phone lines has been quietly, steadily increasing across the country (and the rest of the world). Here are a few reasons why people are choosing VoIP.


With phone hacking on the rise, many of us want to improve our security. VoIP makes it simple to add a second line to your cell phone—and stop giving your personal number to strangers. Small business owners wishing to protect their privacy can set up a VoIP line for their customers in minutes.

Better Tech.

VoIP has come a long way, and its sound quality is now often superior to that of traditional circuit-switched phone lines. VoIP services and features have grown as well, giving users advanced, productivity-boosting options like voicemail-to-text, call forwarding, conference calling and auto attendant.


The VoIP phone number’s adaptability has helped it gain traction in a wide range of settings, from home-based Etsy businesses to trucking firms. With a virtual phone line, remote employees can communicate from any device, full-time travelers can stay in touch from the road, and business owners can scale up or down with minimal fuss.

Value for Money.

Cloud-based numbers run on your existing internet and don’t require any hardware, as most providers allow you to bring your own device (BYOD). Calling is unlimited, set-up costs are minimal, and the cost savings for business owners are dramatic—especially when compared to a traditional phone system or on-premises PBX.

Are There Any Downsides?

Although VoIP technology has been around a while, it has only recently advanced enough to make it a viable alternative to landline or cell service. Today, VoIP is a tried-and-true corporate solution—and it’s more affordable than ever.

But how can you make sure that VoIP is right for you and your business? While we’ve explored the benefits, there are a few drawbacks to consider too.

You’ll need a fast internet connection.
On dial-up or satellite internet connections, VoIP doesn’t work very effectively. Each phone line must have a minimum of 100 kbps (0.1 Mbps).

VoIP isn’t ideal in an emergency.
When you call 911, you’ll need to give them your address—emergency services won’t be able to locate you using your VoIP number. Because an unexpected internet outage (caused by something as simple as bad weather) can disable your VoIP phone connection, you should not rely on it for your or your employees’ safety.

You’ll have to retire your analog phones.
If your company has a legacy phone system, you’ll need to add adapters to your existing analog phones—or, more likely, buy VoIP handsets to use with your VoIP system (which will add to your setup costs). If you’re not attached to desk phones, however, you can use a softphone app on your existing smart devices.

These disadvantages aren’t necessarily deal-breakers—but they should be considered before you commit. For most business owners, the advantages of VoIP, such as easy scalability and the ability to work from any device, outweigh any potential drawbacks.

What to Look For in a Provider

  • Reliability

    Because VoIP relies on the internet for calls, you'll want to ensure your VoIP provider's network is capable of handling them. This will help you avoid poor call quality—issues like jitter, latency and packet loss (dropped words or calls). The best VoIP providers have a solid network infrastructure, with minimal downtime. Consider customer feedback, check for an online "status" page that informs customers of system maintenance, and request documentation of average uptime (99.999% is the gold standard).

  • Ease-of-Use

    Reliability is crucial, but so is simplicity. Your VoIP provider should allow you to easily call, text and check voicemail with an app on your computer or mobile device. Advanced features like auto-attendant should be easy to configure within the client portal. Ask if you can test your VoIP number—and make sure it's simple enough that anyone with a laptop can use it after a few minutes of practice.

  • Reasonable Pricing

    Most reputable VoIP companies offer pricing based on monthly subscriptions. You likely won't get any one-time installation charges or hidden fees, but there may be built-in limits that don’t fit your business needs. Look for a provider that charges a flat monthly rate per line—around $20 per month—for unlimited calls, texts, voicemail, and call forwarding.

  • Customer Service

    Your phone system is a crucial component of how you do business, which means it needs to be operational at all times. A good provider will recognize this and provide you with a phone number to call for immediate assistance (from a live person).

  • Once you've determined the provider delivers a decent value on the essentials, ask about additional features that might be important to you—such as hold music, custom caller ID, visual voicemail, and the option to scale up as your company grows.

    No matter who you choose, test your VoIP service before printing your business cards. As most services are month-to-month, there’s no need to commit until you’re happy.

Frequently Asked Questions


1. Will talking on my VoIP phone slow down my internet?

It’s not likely. VoIP calls are extremely small (in terms of the bandwidth they consume), and in most cases making a call won’t affect your internet speed. In other words, you can talk on the phone while you click between 10 open tabs on your laptop browser.

However, the quality of your VoIP calls is related to your internet speed and quality. If your broadband connection isn’t strong or fast enough, you may experience audio loss in the form of jitter, latency or other types of audio distortion.

Will your internet connection will be shared by several users making concurrent VoIP calls? If so, your broadband will need to be more robust to ensure call clarity.

You should also be aware that using your VoIP line on your cell (when not connected to wifi) will consume data. An unlimited data plan from your cell phone carrier will give you the most flexibility if you intend to make a lot of VoIP calls while out-and-about.

2. What it’s like to use a VoIP service? (How’s the user experience?)

For the most part, it’s easy.

You’ll use a mobile or desktop phone app (a softphone) to call and text from your smartphone, computer, laptop or tablet. If you’re using an everyday desk phone that’s connected to a VoIP network, you’ll simply pick up your phone, wait for the tone, and start dialing.

The experience is almost identical to making an ordinary phone call—with the exception that softphone users will need to first open the app. The user platform will include a dial pad and call log, as well as one inbox for texts, and another for voicemail.

If you have notifications enabled on your phone, an incoming call to your VoIP line should pop up like any other call (whether or not you have the app open). Look for a provider that also offers unlimited call forwarding, so you can route calls to your cell or landline as needed.

Most VoIP phone systems are designed to be user-friendly—but before signing up you should double-check that you can:

  • make and receive calls using either your desktop browser or mobile phone
  • forward calls to any cell or landline
  • switch between devices as needed
  • modify basic settings (like call forwarding) within the app

The final piece of the user experience puzzle is choosing a provider with a live, US-based customer service line for onboarding, troubleshooting, and any other questions that might arise.

3. Do I need to sign a contract?

No. With most VoIP providers, month-to-month service is standard, and there’s no need to sign a contract to get started.

However, some providers may require payment in advance or charge cancellation fees. Whether you’re going with a monthly or annual VoIP service, you’ll want to confirm your provider offers unlimited essentials (call, text, voicemail and call forwarding) at a flat monthly rate—with no mandatory contract or add-on fees.

4. Will I be able to make VoIP phone calls if the power goes out?

Probably not. All of the equipment that keeps your phone system running relies on power. Without electricity, your modem and router will not function, which means you won’t have an internet connection.

In the case of a brief power outage, a battery backup can kick in to keep your modem and router running for a short time. This is ideal for folks who rely extensively on their phones for business. For extended blackouts, you’ll need a generator to keep your VoIP system working.

If your VoIP service includes call forwarding, you’ll still be able to receive calls during a blackout—by redirecting them to your cell phone.

5. Can I make calls without a phone?

Yes. Even if you don’t have (or want to use) your actual phone, you’ll have your business line on hand with VoIP service. To make calls from your laptop, desktop computer or tablet, you’ll need the following:

  • A microphone. A headset or computer mic will do the trick.
  • An internet connection. Make sure you’re in an area with a connection fast enough to handle VoIP calls.
  • VoIP software. Look for a provider that offers both desktop and mobile apps for maximum versatility.

This flexibility is one of the key advantages of cloud-based phone services. Being able to access your phone line from anywhere will allow you (and your staff) to communicate with clients however is most convenient.

6. What is a virtual phone number?

A virtual phone number is a phone number that’s connected to a user, but not a specific device or location. It’s a cloud-based number that works on any internet-connected phone, including a VoIP desk phone, mobile phone or softphone app.

When you sign up with a VoIP provider, your number will be a virtual one—assigned to you, but otherwise completely portable. You can choose any area code you need, and if your service allows it, you can set up one VoIP phone line to ring several different virtual numbers (extensions).

7. Can I scale my VoIP phone system as my company grows?

Yes—because VoIP phone systems are hosted in the cloud, it’s easy to upgrade as your company grows. And there’s no need to spend money on costly infrastructure upgrades.

  • If you want a classic office phone system (desk phones), you can set up an IP PBX on your own server. This will save you thousands of dollars over a copper wire PBX system.
  • Using softphones is considerably easier, as no hardware is required. Your provider can add any number of phone lines and extensions, and employees can use their own devices.

Either way, VoIP was built to grow with your business.

8. Do I need to have an existing phone number?

No, you don’t need an existing phone number to start using VoIP. Most providers will let you sign up with an email address—and they’ll provide you with a local (virtual) number that you can use just like an ordinary number.

However, if you want to use VoIP on your phone, you’ll need a data plan to ensure you have internet access wherever you go.