What to Know about Internet Phone Systems for Startups and Small Businesses

February 08, 2022
internet phone systems for small businesses - feature image

Traditional telephone service providers that offer one-dimensional phone services have been around for a long while. But in the mid-2000s, internet phone service systems started to emerge. 

Multiple service providers started offering many different ways to connect over the phone. These services include but are not limited to, traditional landline service, cellular mobile service, and internet phone service.

In this article, we will talk about internet phone systems for small businesses.


What Is An Internet Phone System?

The acronym VoIP stands for Voice over Internet Protocol. This term describes the process of placing and receiving calls over the internet. VoIP is considered an alternative to local telephone companies. If you have a computer, you might be familiar with the term ‘IP Address’. IP addresses are used by computers to communicate with each other over the internet.

VoIP has existed since the late 90s. It’s a cost-efficient way to handle an unlimited number of calls. All you need to have in order to call anyone is an internet connection and a VoIP phone. VoIP can run on just about any computer because it is made through an open standard. VoIP service providers not only establish calls but also route outgoing and incoming calls on their existing telephone networks.

Landlines and cell phones use a public switched network (PSTN). Traditional landlines use analog systems to transmit voice signals. If you want to make calls, you are must have this extra wiring installed.

Many businesses use specific hardware for their telephony system. The equipment involved is commonly known as a Private Branch Exchange (PBX). This equipment allows the connection of internal phone extensions to public telephone networks. PBXs are very costly and hard to maintain.

Here’s a better alternative.

Subscribe to a trusted VoIP service instead. All you need to do is plug in your IP phone and voila! you’re done. Through the use of high-speed internet connections, these phones can connect and establish calls. According to FCC and Microsoft, high-speed internet is available to 93.5% of all people in the United States. This makes VoIP service accessible to most of the US.

Depending on how strong your internet connection is, you can use Ethernet cables or, if you have a robust connection, you can skip the cables and just use your WiFi instead. This system is very effective and has a much lower cost, too. VoIP services have many advantages over traditional phone services. These will be discussed more as we dig deeper.

Related:  How to Connect Phone to Ethernet


What are the Pros and Cons of Internet Phone Systems for Small Businesses?

When considering which internet phone systems for small businesses to get, you might want to look into the benefits and drawbacks of VoIP.

Benefits of VoIP

  • Cost-effective– Internet home phone plans usually start at $6/month. Providers usually offer packages that include an internet or TV plan.
  • More advanced features– Internet calling retains standard phone features but adds advanced features such as call forwarding to mobile phones, telemarketing blocking, Caller ID on TV, voicemail transcription, and more.
  • Competitive international rate– Some VoIP providers offer affordable calls to other countries, costing around a penny per minute.
  • High-quality sound– Provides better audio quality so the audio isn’t muffled or fuzzy.
  • Advanced features– Business service plans often include premium features like auto attendants, call recording, and calling queues. These features give your company the professional edge it needs.
  • Remote-ready– This means your phone set-up is ready to use wherever you work. There’s no additional technical set-up necessary even if you work from home.
  • Call anyone worldwide– By using VoIP phones, you can make long-distance calls to countries like Mexico or the United Kingdom for as low as $0.04 per minute.

Read more: Customer Service Process Flow

Downsides of VoIP

  • Power outages– Since VoIP phones don’t use designated copper lines as a traditional landline does, they will get disconnected during a power outage along with your modem.
  • Varying 911 support– Calls made through VoIP are routed differently, so it isn’t guaranteed that your address and name will be correctly displayed when making emergency calls. Make sure your provider offers 911 support.
  • Emergency services limitation– If ever you do need to contact 911 using your VoIP phone, you have to give your actual location to the operator. Usually, VoIP systems default to sending your mailing address to public safety operators.
  • Makes analog phones obsolete– VoIP doesn’t rely on analog signals. This means you have to upgrade outdated phone handsets.

Discover: Parts of a Call Flow


What is the difference between an internet phone system and a landline?

When discussing internet phone systems for small businesses, it is important to determine whether an internet phone system is really for you. To properly compare VoIP vs landline phone systems, we need to look at four key areas: features, technology, reliability, and cost.


Landline phones are limited to the most basic features. On the other hand, VoIP phones have a wide range of features like a virtual receptionist, automated answering services, automatic call forwarding, three-digit dialing, voice-to-email, call recording, ACD, and many more. If features such as being available on multiple platforms (e.g., mobile devices, laptops) and on the cloud are important to your business then opting for a VoIP service is your only way to get them.


Even though copper wire and exchange infrastructure of landline phone systems will likely be around for a while, it’s important to know that this type of system is a ‘legacy system’. This means companies are no longer upgrading this system. Since digital communications have become the new standard in business and consumer technology, many companies have adopted a digital infrastructure.


When it comes to reliability, traditional landlines have a slight edge over VoIP phone systems. However, since internet service providers also aim to improve offers, this small gap in reliability will likely close. If a secure connection is pivotal to your VoIP vs landline evaluation then it helps to speak to your internet service provider or to the VoIP service providers you’re considering first.


VoIP services are usually 40%-80% less expensive than traditional landline services. A traditional landline phone system requires the use of a private branch exchange (PBX). A PBX is a physical piece of hardware used on the premises and is usually very costly. Through the use of VoIP, the need for this equipment is eliminated.  Thus, VoIP offers a significantly less expensive option that is ideal for small businesses and startups.

Old vs New

Comparing landline phones to VoIP phones is like comparing the old and the new. Just as people gradually moved from using typewriters, paperbacks, and cassette tapes to computers, Kindles, and iTunes- the future of telephony is digital as well. Businesses that choose to offer VoIP services instead of landline phone services see a significant reduction of costs and better communication options. They also put themselves in the front row of emerging digital VoIP products.

Read more: Why is Call Flow Important?


What’s the difference between SIP and VoIP?

Comparing SIP and VoIP isn’t very straightforward. VoIP is a broad term used to describe any internet-based telephony system; Session Initiation Protocol (SIP) is a specific type of VoIP deployment.

VoIP- refers to any call made through the internet. It depends on data connectivity that can transmit packets of voice information rather than the public switched telephone network (PTSN).

SIP is a protocol used in VoIP applications to initiate, maintain or terminate multimedia system communication sessions. It supports the signaling and the handling of video, voice, and messaging applications. SIP can be used to support VoIP features like video conferencing, instant messaging, and text messaging. It is the most used VoIP protocol.

Although SIP can be used to improve the features of VoIP phone systems, not all VoIP systems use SIP technology. SIP is simply a protocol that may or may not be used in a VoIP system.


How does an internet phone system work?

Internet Protocol, or IP for short, is an essential part of the internet. Voice over IP takes an innovative spin on the century-old traditional telephone system. By using small data packets, data can be sent in less than a second anywhere in the world. These data packets are exchanged between one client and another during a phone call. On the other hand, in internet telephony, these packets of data travel between your phone and the VoIP provider.

A part of a VoIP phone system’s function is facilitating calls between your phone and other phones or over another telephone company’s network. It could also employ functions such as voice mailing, call forwarding, call recording, and many more.

Here’s how VoIP works in four steps:

  1.     Your phone connects to your Local Area Network (LAN) through your switch or router.
  2.     When dialing a telephone number, your IP phone is essentially telling your VoIP service provider to call that number for you.
  3.     After your VoIP service establishes the call it exchanges packets of data from your IP phone.
  4.     These digital data are then converted into a sound that you can hear by your VoIP phone.

Using VoIP sidesteps telephone companies. Considering that VoIP can be used wherever you have a broadband internet connection, it is leagues away from your usual analog system. Gone are the days when VoIP required the use of expensive proprietary equipment. Today, VoIP phone systems use open standards like SIP. Using SIP, VoIP can be accessed on desk phones, conference phones, and even VoIP apps.

Features such as voicemail, conferencing, and call routing are done through Cloud-based PBXs. Compared to an independent entity that could act on its own, Cloud-based PBX offers users a full-service phone experience that they could manipulate to fit their needs. All they need is a broadband internet connection (cable, DSL, or fiber) and they’re good to go!


How are companies using internet phone systems?

As mentioned before, more businesses are now opting to use VoIP over traditional telephone systems. This growth is predicted to continue in the future.

Using a VoIP phone means that a company can have a virtual number. By using virtual numbers, companies can receive calls on whatever device they choose.  From mobile phones to home landlines, and even laptop computers. Companies are not tied to one specific phone number. VoIP also allows organizations to choose the type of number depending on how they plan to use it. A toll-free number could give international exposure that can be beneficial to companies that hope to increase the size of their business. In contrast, a local number can create a virtual presence and give a sense of connection to local communities.

Companies use VoIP not only as a means for their customers to contact them. It is also used to support communications like audio and video conferencing within the company. VoIP is often used as the foundation for telephony. Through the use of servers, call management is run by performing routing functions. This process is what we call a VoIP phone system.


What do I need to know about VoIP?

Using a VoIP phone means that you either have to upgrade your existing phones or replace them with IP phones. The good thing about VoIP desk phones is that they’re relatively cheap and depending on your service provider, you can even get them for free. If you always have your cell phone or you’re always on your computer, you can also just skip getting one.

When deciding whether to upgrade to an internet phone system, here are the most important factors to consider:

Is it easy to use VoIP?

The reality is, yes, VoIP is easy to set up and easy to use for everyday personal use or for professional business calls. Using the internet, you can continue making calls to any phone number. Compare this to proprietary calling apps like Skype or WhatsApp. With VoIP, you can call anyone using telephone companies like AT&T, Vodafone, Verizon, and T-Mobile. The only difference they will ever notice is better audio quality.

VoIP setup usually goes without a hitch because you don’t need to do anything technical. All you need to do is plug a power cord into the wall and connect a network cable to your phone. The connection process is even simpler if you’re using an iPhone or an Android. Just download a free VoIP app, sign in and you can start making VoIP calls.

How much does a VoIP phone system cost?

On average, a VoIP phone system can cost anywhere between $20 to $40 per month per line. The cost could be mitigated based on the number of users, commitment, and features you choose to have on your VoIP subscription. Decent IP phones usually start at about $70 and can be leased for a few dollars each month. When computing the total cost you have to spend on a VoIP system, you should include phones, accessories, service, and any one-time setup costs. Some service providers don’t charge any setup or activation fees and include free porting and setup of your business phone number.

Do you work from home?

Teleworking has been adopted by many companies. Although remote work can be favorable for people who live far from their company, it also means having a variety of Local Area Network configurations.

Desk phones, on the other hand, are very straightforward. It is a familiar device to people who use voice calls. It’s intuitive and comes with no unnecessary configurations. A desk phone isn’t exactly necessary for the short term. However, for essential employees, it should be a desk staple.

If you have a knowledgeable team familiar with software apps, they can easily transition into using softphones. Just don’t forget to give them a username and password.

Are there any must-have analog phones?

Traditional phones can be easily replaced by affordable IP phones. In addition, you can retrofit your existing analog phones to send digital data over the internet. This upgrade is done by using an Analog Telephone Adapter (ATA). They are very straightforward and easy to use.

Further reading: Analog Phone System


Is VoIP Reliable?

When VoIP was still an emerging technology, the call quality wasn’t consistent. Delays in calls were common and often the call would just drop. However, as internet bandwidth increased, the quality of VoIP calls drastically improved. Depending on whether or not your internet service provider will allow the use of correction protocols like TCP or UDP, VoIP calls can sound more clear and crisp compared to calls made through a traditional landline phone.

Tip: Did you know? You can have your PBX provider forward calls to your cellphone when you are out of reach. This feature could be a means to stay online during power outages.

Reaching emergency services

When dialing 911, public safety operators might not be able to get your actual location. You have to tell them your location yourself to ensure they get to the right location. In addition, a VoIP phone cannot make a call when the internet connection is disrupted.

Due to this point, the FCC provided some tips when using VoIP to contact emergency services in the United States. When updating each user’s E911 location, it is possible to add an office or, if working from home, a home address. This additional information is stored on a database to enhance user safety.


What is needed for a VoIP phone system?

Are you considering getting an internet phone system for your small business? How can you determine if your business is ready?

Network Bandwidth

By subscribing to an Internet Service Provider (ISP), you can access the internet via DSL, cable or fiber networks. The standard VoIP usually only requires 100kbps of bandwidth per device. If you want to access more features, you might need more bandwidth than the standard amount.

Phones & Devices

Making sure you have the right devices set up is a major factor in a VoIP phone system. The following devices are used to complete calls over VoIP:

  • SIP Phones– SIP phones are the same as VoIP phones. Both use a VoIP service provider to make calls
  • Softphones– By using a VoIP application that you can download to your cell phone, laptop, or desktop you can ditch traditional telephones. In these VoIP applications, your caller ID is separate because your VoIP service provider directly handles your voice data.
  • Analog Telephone Adapters– By using an ATA, you can upgrade your analog phones so they can be used over VoIP. Although this upgrade won’t give you access to all available VoIP features, it is still a reliable option.

Related: How Does VoLTE Work


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