What is VoIP?

Popular VoIP technology enables you to make and receive phone calls over the internet. Find out what VoIP stands for, what a VoIP phone is, how the tech works, and its pros and cons

Our experts

We are a team of writers, experimenters and researchers providing you with the best advice with zero bias or partiality.
Written and reviewed by:

Startups.co.uk is reader supported – we may earn a commission from our recommendations, at no extra cost to you and without impacting our editorial impartiality.

Enabling you to make and receive phone calls over the internet rather than traditional phone lines, VoIP is a popular technology among businesses big and small, with some brilliant value VoIP providers to choose between..

VoIP is cheap, easy to use, and also makes for great call quality – if you’ve ever noticed that the calls you make using FaceTime Audio, WhatsApp, or Facebook Messenger are better than the calls you make in the traditional way, then you’ll understand the appeal.

But what exactly does VoIP mean? How does it work? And most importantly, is it right for your small business?

We’ll guide you through some of the main things to consider for startups that are mulling over VoIP, and show you how it could be used in your business.

In this article, we’ll cover:

What is VoIP and what does it stand for?

VoIP stands for Voice over Internet Protocol. It refers to the process of making phone calls via the internet, instead of via traditional phone lines (the legacy public switched telephone network, or PSTN).

In more technical terms, during a VoIP call, your analogue voice signals are converted into digital signals. These can then be sent over the internet using your broadband line.

Likewise, the incoming digital signals – sent via the internet from the person you’re calling (or the person who’s called you) – are converted to standard telephone audio.

Think of it as you’d think of an email. When you press send, your message is sent over the internet as digital data, to land almost instantly in your recipient’s inbox. Similarly, during a VoIP call, voice signals travel over the internet instantaneously as digital data.

How does VoIP work?

Hardware-based VoIP phones

A hardware-based VoIP phone transmits calls over the internet by connecting to a VoIP server. They can do this in one of three ways:

  • Using an Ethernet connector. These VoIP phones plug into the Ethernet port on a router, enabling them to connect directly to a VoIP server. This is the most popular and widely-used type of hardware-based VoIP phone.
  • Using a built-in modem. These phones have a built-in modem that can connect to a VoIP server remotely – meaning they don’t require a broadband connection.
  • Using wifi. These phones have built-in wifi transceivers which can connect to a wifi access point, and in turn the internet. Some of these phones also come with Ethernet ports.

Software-based VoIP phones

All that’s needed to get a softphone up and running is the correct software.

There’s plenty of dedicated VoIP software out there, such as:

If you’re installing your softphone onto your computer, you can make calls using the computer’s built-in microphone and speakers.

However, if you’d prefer better sound quality and more privacy – which is especially important if you’re looking to kit out your small business’ office with multiple softphones for your staff to use – you should look to get headsets with microphones.

If you’re interested in VoIP for personal use, or would like your staff to remain on the ball while on the go, it’s worth knowing that plenty of common smartphone apps can also act as softphones.

Alongside their instant messaging and/or video chatting capabilities, the following apps all have an internet-based calling function:

  • Skype
  • WhatsApp
  • Facebook Messenger
  • Apple’s FaceTime
  • Viber
  • Line

Usually, you’ll only be able to VoIP call someone who also has the app you’re using. Some apps do enable you to call a normal landline or mobile number, although this may cost you extra.

It’s worth noting that some landline providers have also created apps that allow you to make VoIP calls, such as BT’s SmartTalk and TalkTalk’s Talk2Go.

The key thing to remember here is that while using these apps to make VoIP calls, it’s a good idea to be connected to wifi – unless you don’t mind them eating into your data allowance.


Instead of getting VoIP phones themselves, it’s possible to keep your conventional phones and use an ATA – or analogue telephone adapter – to transform them into VoIP phones.

ATAs take the analogue signal from your phone and convert it into digital data. The ATA also connects your phone to the internet, so the digital data can be transmitted over it.

Instead of plugging your phone into a wall socket, simply plug it into your ATA and you’re good to go.

Why use VoIP?

Some of the main benefits of using VoIP were outlined at the beginning of this article, but here, we go into more depth about the positive impact that using these systems could have on your business.

VoIP calls are cheaper

As they use the internet instead of traditional phone lines, it tends to be that your broadband bill will cover your VoIP calls – as opposed to traditional calls, which are charged separately and by the minute.

The result of this is that VoIP calling can save your business a fair amount of money – especially if your staff tend to make long phone calls, or regularly need to contact people overseas.

VoIP eliminates the need for multiple phone lines

With VoIP, your staff will be able to make calls at the same time, in the same office, without the need to install multiple phone lines – which might otherwise be a huge drain on your money and time.

VoIP call quality depends on your internet connection

If you’ve got a reliable internet connection, the quality of the calls you partake in will be a lot better – think clearer sound quality and fewer interruptions or failures – than it would be if you were calling in the traditional way.

Who is VoIP suitable for?

Due to its flexibility and efficiency, VoIP is an ideal choice for many businesses. However, it’s likely to be a particularly suitable solution for businesses with the following requirements:

International calls

Whether it’s using the same network to make essentially free calls across the internet, or signing up to a package which includes a set amount of international minutes, VoIP offers a cost-effective and easy solution for startups who make a lot of overseas calls.

Limited space

VoIP phones offer a virtual service, meaning there’s no need to worry about the space required to install and house traditional, physical phone lines.


If you predict that your business will grow beyond its current phone service requirements, VoIP offers an easily changeable service. Or, if you know your startup experiences more (or less) demand on its phone services at certain times of the year, it’s easy to increase or decrease the number of lines virtually.

VoIP is becoming an increasingly popular service across the world, with more and more people opting to use it.

By 2025, the VoIP market is expected to have a global market share of $55bn+. This would signify an increase from its $20bn+ global market share as of 2018, according to data published by Global Market Insights.

Top things to know before selecting your VoIP provider

How do you find a provider that’s right for your business, specifically? With that in mind, here we outline some of the key points to consider to make your selection.


It’s important to assess why your business needs VoIP, and what you’re expecting from a provider. This can help you to streamline your search and focus on finding providers that match your requirements.


Read reviews and testimonials from other small businesses that are currently using a provider’s service. Explore what the common strengths are, as well as which issues seem to keep popping up.


As VoIP is an internet-based service, you’ll need to ensure that it’s suitably protected, and won’t leave your business open to potential online threats.

Other services

Whether it’s customisable features, call management functions, the option to add other communications services, or the ability to integrate other systems entirely, it can be useful to know what else a VoIP provider can offer, in addition to its phone connection service.

Who are the best VoIP providers?

With many different providers out there, it can be difficult to know which one is best for your business. Here, we profile some of the top providers to help you refine your search, highlighting what each is best for and how they’re priced.

ProviderBest forPrice range
Datatel NetworksSupportPrices available on request
Gradwell CommunicationsAffordabilityFrom £12 per user per month
Lily CommunicationsEase of usePrices available on request

Visit our best VoIP phone and providers page for more detailed information. Or, fill in the form at the top of the page to compare quotes for telephone systems.

Top things to know before selecting your VoIP phone

As you’d expect, VoIP phones enable users to make calls via the internet. They come in two main varieties:

  • Hardware-based: Also known as IP phones, these VoIP phones look much the same as ordinary telephones, complete with a handset, cradle, caller ID display, and keypad.
  • Software-based: Also known as softphones, these aren’t really phones as we know them – rather, a softphone is software that can be installed on a computer or mobile device to enable it to be used as a VoIP phone.

VoIP’s benefits are many, but it does come with one or two drawbacks as well.

Read on to find out what these are, so you can make an informed decision about whether VoIP is the right communications solution for your business…

Your VoIP call quality will be pretty poor if your broadband is slow or unreliable – so if you’re not prepared to upgrade to a better connection, VoIP may not be the best fit for your business.

Of course, the way to make VoIP’s reliance on the internet work in your favour is to ensure you’ve got a great broadband connection, such as a high-speed fibre optic line.

Also, it’s worth knowing that VoIP doesn’t always come with features such as call waiting services or voicemail capabilities – functions that can prove crucial for businesses who can’t afford to miss any leads.

It also has to be said that some numbers, such as direct inquiries, can’t be called over VoIP.

The key here is to find a VoIP provider that can offer everything your startup needs from a communications service.

What are the best VoIP phones?

Each business has its own particular needs, and not all VoIP phones are the same. Whether you’re looking for high capacity, custom features, or hardware functions, use our guide to the best VoIP phones to help you find the best match for your business’ needs.

PhoneBest forPrice range
Cisco 7940GHigh call volumesFrom £25
Avaya 1608Manageable featuresFrom £100
Bria 5Software-only VoIP servicesFrom $49.99

For more in-depth information about these phones and others, read our guide to the best VoIP phone and providers. Or, simply complete the form at the top of the page to compare quotes for telephone systems.

How much does VoIP cost?

VoIP costs can be broken down into the following elements:

  • Services – the provider who makes the VoIP connection possible, which is likely to be a hosted service for small businesses
  • Call charges – the cost of making calls using a VoIP service; often free, especially if within the same network, or if included as part of a package. However, calls outside of these parameters can often incur charges
  • Hardware – the physical devices required for using VoIP to make calls, e.g. phones, adapters, headsets etc.

Here, we outline an approximate guide to prices for each element:

What?How much?
VoIP phone£25-£100+
Hosted service£10-£30+ per month
Call costsVariable

Next steps

From reading this article, you’ve learned more about VoIP technology and how it works, as well as its suitability and popularity. We’ve also offered top tips on how to select VoIP providers and phones.

Next, visit our best VoIP phone and providers page for more detailed information regarding specific systems and products.

Alternatively, if you’ve decided that VoIP is well-suited to your small business’ operations – or if you’re unsure, and would like to compare other systems – now’s the time to investigate phone system providers and find the best telephone systems for your business.

Written by:
Back to Top