Voice over Internet Protocol (VoIP)

What is VoIP?

VoIP stands for Voice over Internet Protocol (sometimes referred to as "Internet telephony," "Voice over IP," or "IP telephony"). Enterprise VoIP technology allows voice signals to be transmitted over the Internet rather than how traditional telephone systems did it, through landlines.

Instead of working off the Public Switched Telephone Network (PSTN) and using landlines, VoIP only needs a reliable broadband internet connection. Because it’s cloud-based, VoIP systems aren’t impacted by traditional phone line outages, but they do depend on your Internet connection’s stability and power availability.

And instead of being limited to a physical deskphone (which was the case with old-school Private Branch Exchange or PBX phone systems), you’ll be able to make calls from any Internet-enabled device including smartphones, computers, headsets, and modern Internet-enabled desk phones. (Read more on VoIP vs. PBX here.)

VoIP phone numbers work like traditional phone numbers too, except they're usually much easier to acquire and set up since everything is done over the Internet.

How does VoIP work?

At its core, a VoIP system transforms your voice into digital information so it can travel across the Internet instead of through traditional phone lines. When you speak into a VoIP telephone system, your voice is converted into data packets that are transmitted almost instantly to the person on the other end of the call. Each packet finds the fastest route across the network, is reassembled in the right order, and then converted back into sound, so the conversation feels as natural as a standard phone call.

Because VoIP uses your existing Internet connection, it eliminates the need for separate phone infrastructure while enabling flexible calling from computers, desk phones, or mobile devices. This makes system phone VoIP solutions ideal for modern, hybrid workplaces that rely on reliable, high-quality communication anywhere in the world.

How a VoIP system processes a call

• Convert voice to a digital signal: When you speak into a VoIP-enabled device, like a computer, softphone app, or IP desk phone, the system captures your analog voice and converts it into a digital signal. This conversion allows your words to be represented as binary data that computers and networks can understand.

• Break audio into data packets: The digital signal is divided into small, manageable pieces called data packets. Each packet contains a snippet of your voice plus routing information. Splitting the audio into packets ensures smooth transmission and prevents delays or data loss across the internet.

• Send packets over the internet: These data packets are transmitted using Internet Protocol (IP), traveling through your local network and out to the internet. They follow the most efficient route available at that moment, similar to how GPS chooses the quickest path to a destination.

• Direct packets to the right destination: Each packet carries addressing data that tells the network exactly where it should go. The VoIP system and its associated protocols, like SIP (Session Initiation Protocol) and RTP (Real-time Transport Protocol), ensure packets are delivered to the correct recipient and manage call setup, control, and termination.

• Reassemble the packets: Once the packets reach the recipient’s device, they’re reassembled in the correct order. Even though the packets might have traveled different routes, the VoIP system ensures they’re synchronized for accurate playback.

• Play the audio back: Finally, the receiving device converts the digital packets back into an audible sound wave. The listener hears your voice in real time, with minimal delay, just as they would during a traditional phone call.

What equipment do you need to make VoIP calls?

To make a VoIP call, you need just a few key pieces of equipment and a reliable reliable broadband connection. At its core, a VoIP system converts your voice into digital data and sends it over the internet to another device. Broadband is the high-speed connection that links your local network to the wider Internet, providing the bandwidth needed to transmit those digital voice packets in real time.

Most people can make VoIP calls using equipment they already have, like a computer or smartphone. However, businesses often add hardware such as routers, dedicated VoIP phones, or ATA adapters to support multiple users and maintain call quality across a VoIP phone system.

Modem

A modem connects your local network to your internet service provider (ISP). It’s the entry point that allows your VoIP telephone system to send and receive data over the internet. Without a modem, your devices wouldn’t be able to communicate beyond your local network, meaning no VoIP calls could go through.

Router

The router distributes internet access from your modem to multiple devices, whether through Ethernet cables or Wi-Fi. For VoIP, a high-quality router ensures smooth call quality by managing bandwidth and minimizing latency. Some routers even include built-in Quality of Service (QoS) settings designed specifically for VoIP traffic.

Internet connection

Every VoIP system relies on a stable broadband connection. Broadband refers to high-speed Internet access, such as fiber, cable, or DSL, that provides the bandwidth needed for smooth, real-time communication. In simple terms, broadband is the connection that links your devices to the internet, while the internet is the global network that carries your voice data to its destination.

A strong broadband connection ensures clear, uninterrupted audio and minimizes latency or dropped calls. For the best experience with VoIP telephone systems, a wired Ethernet or fiber connection is often preferred over Wi-Fi, especially in business environments that handle multiple simultaneous calls.

Calling devices

A VoIP system enables employees to make calls using a variety of different devices depending on business needs. Some of these include:

Computer

A computer can act as your VoIP calling device when paired with VoIP software or a browser-based platform. This setup is common for remote teams or hybrid workers who rely on softphones and headsets instead of traditional desk phones. Most VoIP telephone systems today offer apps compatible with Windows, macOS, and Chrome browsers.

Smartphone

Modern smartphones are powerful endpoints in a VoIP system, giving users the flexibility to make and receive calls from virtually anywhere with an internet connection. When equipped with a VoIP or unified communications app, a smartphone essentially becomes a mobile extension of your VoIP phone system, complete with features like call transfer, voicemail, and also video meetings.

Because smartphones can use broadband data or Wi-Fi instead of traditional cellular networks for calling, they enable seamless business communication on the go. This makes them ideal for remote or hybrid teams who need full access to their company’s VoIP telephone system without being tied to a physical office or desk phone.

Dedicated VoIP phone

A dedicated VoIP or IP phone looks like a traditional office phone but connects directly to your network instead of a phone jack. It’s ideal for businesses that still want a physical handset while benefiting from modern VoIP features. These phones often include programmable buttons, HD audio, and easy integration with your VoIP system.

ATA adapter

Analog Telephone Adapters (ATAs) bridge the gap between old and new technology. They allow you to use standard analog phones with a VoIP system by converting analog signals into digital packets that can be transmitted over the internet. This is a cost-effective way to transition from a traditional PBX setup to a modern VoIP telephone system.

Features to look for in a VoIP phone system

A VoIP phone system does much more than transmit voice calls over the internet—it brings together a range of tools that make business communication more efficient and flexible. While every provider’s offering is slightly different, most VoIP telephone systems include features that help teams manage calls, collaborate across devices, and maintain reliable connections from anywhere. Understanding these common features will help you evaluate which VoIP system best fits your organization’s needs.

Call forwarding

Call forwarding automatically redirects incoming calls to another number or device so you never miss an important conversation. Businesses often use this feature to send calls to a colleague, mobile device, or after-hours line to maintain responsiveness.

Call routing

Call routing organizes incoming calls based on preset rules, such as department, location, or time of day. This ensures that callers reach the right person or team quickly, improving customer experience and saving employee time.

Caller ID

Caller ID displays the name and number of the person calling you, or lets you choose which number appears when you make a call. It helps maintain professionalism, especially for employees working remotely or using personal devices for business calls.

Voicemail

Voicemail lets callers leave a message when you’re unavailable and stores it digitally for easy access. Many modern VoIP systems also offer voicemail-to-email or voicemail transcription features, so users can read or listen to messages from any device.

Multi-device support (desktop + mobile)

Most VoIP phone systems allow you to use the same business number across multiple devices, including desktop computers, laptops, and mobile phones. This multi-device access ensures seamless communication whether you’re at your desk, traveling, or working from home.

Video calling

Video calling adds a face-to-face element to communication within a VoIP phone system. It enables more personal interactions, supports remote collaboration, and is often integrated directly alongside voice, chat, and file-sharing tools in unified communications platforms.

Together, these features form the foundation of a modern VoIP system, giving businesses a flexible, reliable way to communicate and collaborate across any device or location.

The benefits of switching from on-prem to VoIP

Switching from an on-premise phone setup to a VoIP system offers businesses greater flexibility, typically lower costs, and simplified management. Because VoIP telephone systems operate over the internet instead of relying on physical phone lines, they eliminate much of the hardware, maintenance, and IT overhead associated with traditional setups. For growing organizations and distributed teams, a VoIP phone system provides the scalability and mobility that legacy solutions often lack.

Here are some of the key benefits businesses experience when moving to VoIP:

• Lower upfront costs: Traditional phone systems require expensive on-site equipment and installation. With VoIP, most of the infrastructure is cloud-based, meaning you only need compatible devices and a stable internet connection to start making calls. Small businesses especially benefit from this reduced barrier to entry.

• Minimal ongoing maintenance: On-prem systems typically need regular upkeep, updates, and troubleshooting from IT staff. A VoIP system removes this burden by shifting maintenance and updates to the provider’s cloud infrastructure, freeing up internal teams to focus on other priorities.

• Flexibility for remote teams: Because VoIP runs on broadband internet, employees can make and receive business calls from virtually anywhere, whether they’re in the office, at home, or traveling. This flexibility is essential for supporting distributed and global work environments.

• Scalability as businesses grow: Expanding an on-premise phone system often means buying new hardware and scheduling installations. With a VoIP phone system, new users or locations can be added instantly through an online dashboard, making it easy to scale as your organization grows or changes.

AI Agents built on enterprise-grade communications

As enterprises adopt voice AI agents for roles ranging from AI receptionists and appointment schedulers to customer support and sales qualification, performance depends on the platform beneath them. 

Built on native cloud telephony (not bolted-on voice APIs), Dialpad AI Agents operate directly within Dialpad’s enterprise communications platform, delivering:

• Lower-latency conversations

• Higher transcription accuracy

• Real-time decisioning

• Seamless human handoffs

• Full call control (hold, warm transfer, escalation)

Voice AI agents perform best when integrated into communications infrastructure.