The main advantage of VoIP is that it bypasses traditional circuit switched networks, thereby avoiding the costs of traditional telephone communications. The results of a 2004 survey conducted by the Small Business Administration, provides a reference point for the use of VoIP by small businesses. Of 418 small businesses, 3.3% said that they do use VoIP service in their business. This does not mean that these small businesses have eliminated traditional voice service, but it does mean that VoIP is beginning to find its way into small businesses and, if it continues to grow, it may soon become a significant competitive threat to traditional telephony providers.



Perhaps as a result of this, recently, major companies have reported increases in quality of VOIP technology and announced their intention to provide these services to the mass market. (Matt Stump MSOs, AT&T Set Table For VoIP Roll outs, Multichannel News, Dec. 15, 2003; and Ben Charny Cox Communications Dives into VoIP, CNET News.com, Dec. 15, 2003.) This means that you can now get VOIP service from many of the companies that you already know and trust.

How Does it Work?

You pick up the phone and dial any number just as you would do with the regular phone service. The signal from your phone is being sent to the VoIP adapter where it's being converted to a digital signal, then sent to your router, then your high-speed modem and finally, to the internet network, where it will be routed to the traditional telephone network, and finally, to the destination number you dialed. As far as the service quality, in most cases you will barely notice any difference.

In the past, the technique was to try to make data look like voice communications. This would allow data to be sent using the same circuitry. This would explain the annoying sound you would get when using your favorite dial up service. This was referred to as circuit switching.

Today's approach is to try to make voice look like data. Both voice and data can now reside in packetized form on the same network. This technique is referred to as packet switching.

These changes allow telecommunication companies to take advantage of the idle spaces in voice communication. It is estimated that only about 10-25% of the circuit is actually utilized to carry the voice during a typical phone conversation. The rest of the time is taken up with listening for a response, thinking of a response or just breathing between words. This idle capacity encouraged companies to compress voice transmissions, thus using less of the circuit. We know that this approach is more efficient because we have been using it for years with our data networks.

The use of packet switching technology allows us to interleave voice data and even video packets wherever idle spaces occur. This allows for a more efficient and cost effective use of bandwidth. It is this reduced cost and increased efficiency that has driven the VOIP market.

It has been estimated that carriers can get an 11 fold increase of traffic, not to mention revenues, from the lines already existing in their network. This has resulted in a number of companies rushing to market this service to the consumer. The increased competition and reduced cost have resulted in a perfect storm of sorts. In the past few years we have seen long distance rates drop from $.50-$.60 a minute a few years ago to $.05-$.07 today.

So, how do you take advantage of the VOIP phenomena? It's fairly simple. Basically, if you have high-speed internet, you can save a lot of money on your local and long distance telephone service by simply ordering the broadband phone. In most cases, it's an adapter that you need to plug into your high-speed modem, and then plug your phone into that adapter and you should be ready to go (of course, you need to have a monthly service subscription). Many of the features for which your local company charges you extra, such as caller ID, call waiting, voice mail, etc., come at no additional charge with broadband phone.

The above option is great for the very small business person. The firm that has 1-3 employees will find the above option to be adequate. For those firms that have a larger work force this type of service may not adequately fulfill your needs.

Many Business Voice Over IP Providers typically need a minimum of 24 voice channels, which calls for a full T1. Your total monthly price will be the cost of the loop ($500 - $1000 depending on distance from the POP) and LDU (Long Distance Usage). Intrastate, interstate, and international rates vary according to carrier, length of contract, and average call volume. The guidelines below are those that we use at AmtecDigital.com to determine just what type of high speed internet connection is needed to support VOIP applications for a small business. These can be used as a general reference point for your particular application.

For Small Office Calling with less than 8 lines, we recommend you stay with regular switched telephone lines. Though you'll pay your local telephone company $15 to $25 per line, you won't realize any savings using a T1 unless you have 8 lines or more, as T1 loop (fixed) monthly charges are never less than $600/month. This is where the plug and play type of system, in conjunction with a good DSL Service, may best benefit your business.

For Small Offices with 8 to 18 lines, we recommend you install a T1 and use it for BOTH your telephone lines (local and long distance) and your high-speed internet connection. With integrated T1 service, you can mix and match between 24 56k channels, dedicating some of them to handle your voice traffic and the remaining channels for your internet connection.

For Small Offices with 18 to 24 lines, we recommend you install a T1 and use it for your telephone lines only. With a Full-T1 Voice line, you'll be able to support 24 simultaneous phone conversations at once. When considering how many possible extensions a Full-T1 can support, a typical rule of thumb is 4 extensions per channel, yeilding 104 possible extensions.

Typically, once a phone system is set up with more than two or three lines, it will require some type of switching system. Traditionally small businesses have used either a PBX or keyed system to perform this function. When it comes to VOIP phone systems, the system that would perform this type of function is the IP PBX or internet protocol PBX. This is a PBX sytem that is designed to specifically deal with the voice over internet protocol application.