Understanding VOIP

If you are a small business owner you don't need to know everything about VOIP, just a few key points so you can decide whether or not VOIP is something that is going to benefit your business. There are many advantages of using VOIP but not all of them will apply to your business. Here is some information that should help you make that choice.

VOIP requires internet

To use VOIP you need an internet connection. No problem you say, because you already have a fast ADSL connection in your office. This is where people get confused. You are probably paying around $100 a month for a small business internet connection. Your service provider factors in that you are not going to be using your internet at full speed all the time and so they put you in a pool of about 200 other people and share the bandwidth between you. This is why pricing for proper business grade internet is so much more expensive because you can control how many other people share your bandwidth. This called the contention ratio. Having a high contention ratio is bad because it means that at busy times, the network can become congested and your phone call might take the back seat while someone else is watching YouTube. So if reliable phone calls are a must for you then you need to have a decent internet service provider. Understand that if you have a normal internet connection with high contention ratio that 99.9% of the time, your phone calls will be flawless. It is only during short infrequent bursts of high traffic that the quality of your phone calls would be affected. Normal phone lines are not perfect but they are still more reliable than VOIP so if you cannot afford to have a call drop out don't use VOIP to save money.

Not only do VOIP calls get affected by external traffic outside your office, internal traffic on your local area network can also have an effect. This is actually one of the major causes of VOIP drop outs, echo and delays. It happens because your computers are designed to download information off the internet using 100% of the available bandwidth. Because all of the computers in your office share the same internet connection it means that any person on any computer can basically bomb out the connection if they are downloading a large file. There are 2 solutions to this problem. No1 buy a very expensive router that can decide what type of traffic deserves priority. This is called QOS or Quality of Service. Only the more expensive routers are capable of QOS and only the very expensive routers are capable of doing it well. No2 is to connect a new, dedicated internet connection especially for VOIP. This will ensure that nothing on your internal network can affect the quality of your phone calls.

VOIP call rates

About 75% of a typical business call spend is made up of calls to mobiles with the rest being a combination of local, national, international and 13/1300 calls. One thing you should understand is that all VOIP providers have to pay the same wholesale rate for calls to mobiles as the non VOIP providers. This has a profound impact on the actual savings you can make if you were to switch to VOIP as you should be able to find a non VOIP provider who can offer you the same or similar rates for calls to mobiles without going to the trouble of changing your hardware or risking lower quality calls.

VOIP providers tend to have cheaper call rates for local, National and especially International calls. The VOIP rates for these calls tend to be about 20% lower than the equivalent non VOIP rates. In the last few years since VOIP became popular with programs like Skype, the wholesale rates for international calls have dropped significantly to compensate. Calls to major destinations such as the UK, US and China have actually become cheaper than calling someone in another state in Australia and this is without using VOIP. VOIP still has the upper hand in places such as India, South America, Africa and some parts of Europe. In short, the overall savings on the phone rates are minimal and would not provide a return on investment for 99% of small to medium businesses.

Line Rental

This is where VOIP can make a significant dent in your phone bill. Line rental is the fixed monthly charge that you receive on your phone bill for each of the phone lines you have connected in your office. The average phone line costs about $35 a month and the average small business has between 4 and 20 lines connected to their PBX. A VOIP provider can give you unlimited phone lines (simultaneous calls) for as low as $5 a month - all you need is an internet connection.

Other Benefits

VOIP Extensions: VOIP can be used to connect remote workers to your office phone system and have them work as if they were actually in the office. VOIP has enabled millions of people all over the world to work from home reducing cost, emissions and improving productivity.

Interconnecting Offices: If you have more than one office, VOIP can be used to connect your PBX systems together so that your staff can communicate as if they were in one premises. Modern phone systems can connect to any other brand of system that supports the standard SIP VOIP protocols.


There are certainly many benefits of using VOIP but many of them are not applicable to small business. The savings that come from using VOIP usually attribute a reduction in quality of service and reliability. For this reason the question "is VOIP right for my business" is something that only you can answer. Do the math and work out whether the extra money you are paying for normal fixed lines is justified by the increased reliability and always remember that you get what you pay for.

For more information on VOIP call us on 1300 730 950

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