What is a VoIP phone system?

A VoIP (Voice over Internet Protocol) phone system is an internet-based telephony system that delivers voice calls, video calls, and multimedia using internet connectivity. Unlike analog phone systems, VoIP phone systems do not require any dedicated phone hardware. It allows the user to call any landline, mobile or even computer-to-computer with an internet-connected laptop, PC, mobile or tablet. 

VoIP is also known by several other alternative names like: internet calling, internet telephony, IP telephony, voice over network, broadband telephony, broadband phone service among many others. 

Knowing everything about VoIP in a day is not possible. But, you can definitely get an in-depth understanding about VoIP phone systems in the sections below:

Types of VoIP systems

The three types of VoIP phone systems

VoIP is an extremely versatile internet telephony system. Depending on the usage, VoIP phone systems can be classified into the following types:

Analog Telephone Adapter (ATA)

What if you want to use your age-old telephone system to make VoIP calls? An Analog Telephone Adapter (ATA) can help with that. The phone will have an Ethernet port which would be connected to a network line to enable a VoIP connection. Some devices may also come with foreign exchange station (FXS) and more foreign exchange office (FXO) ports which providing access to traditional telephone service.


Computer-to-phone VoIP phone systems are similar to ATA, except that they are connected to a computer or its router for connection. They are largely used in call centers where the users have to use both the phone device for telephony and computers for information retrieval.


VoIP phone systems that take the form of computer software or mobile applications. Users can make and take calls by dialing from the interface of the software. These VoIP systems can also be integrated with third-party ERP systems or other tools for information retrieval. Take for instance, a CRM software.

How VoIP works

How does a VoIP phone system work?

A VoIP telephone works with the might of internet connectivity. It does not always require phone hardware like handsets or telephone wires. Here is a detailed take on its working model.

  • Breaking down analog phones
  • Deatiled look at VoIP
  • Packet swtiching, explained 

Breaking down analog phones

To better understand the working of a VoIP phone system, you first need to understand how an analog phone system works. An analog phone system is connected by wires. It converts voice signals into electrical signals which travel distances before reaching the other end of the line.

Analog systems are capable of bidirectional communication which makes it possible to talk and also listen to what the person on the other end of the line has to say. If either of the users do not have an active telephone connection, the conversation cannot take place.



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Detailed look at VoIP

A VoIP phone system also works on the same principle as a traditional phone, except that phone wires and related hardware do not form part of the machinery. Also, instead of a telephone connection, you need an internet connection which can be provided by any ISP (Internet Service Provider). In fact, mobile devices with LTE, 4G, 5G network capabilities can also transmit voice over data networks.

In VoIP, the voice signals are converted into digital signals. These digital signals are broken down into hundreds of data packets which are dispatched over the internet.

To simplify the data transfer, they are scrambled into data packets and distributed in a random manner. These distributed data packets are again reassembled to their original form on reaching their intended destination. 

Compared to circuit switching in traditional phone systems, VoIP's packet switching ensures higher voice clarity and also efficient use of network. It also makes it possible to make long distance calls without any glitches.

You can call any landline, mobile or IP number from a VoIP phone system. It is not necessary for the recipient to have a VoIP connection. They can receive calls on their analog phone devices just like any ordinary call.

For example, you can make a VoIP call to your friend who uses a landline or a mobile. Your friend can also call back to your VoIP number from their landline or mobile.


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Packet switching, explained

VoIP phone systems use packet switching - a smart way of routing the data packets through the most efficient route. In fact, packet switching is the backbone of VoIP technology. Packet switching enables voice data be sent across geographically spread networks in a matter of milliseconds. It also prevents the data packets from breaking down or getting lost in transmission.

Since the size of these data packets is in the range of kilobytes, even an ordinary broadband internet connection can give superior voice quality.

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VoIP phone systems vs Analog phone system vs Cloud PBX - A quick comparison

Traditional phone systems used a circuit-switched network to connected callers to recipients. With the penetration of VoIP, such calls started getting transmitted through IP packets over a packet-switched network. Here are the striking features between a VoIP, analog phone system and Cloud PBX:

Feature VoIP phone system Analog phone Cloud PBX
Connectivity Broadband internet Copper wires Broadband internet, 5G, LTE, etc.
Server system Cloud or hosted PBX On-premises PBX Cloud server
Bandwidth requirement 10 kbps 64 kbps 10 kbps
Multimedia support Supports voice, audio, video and any other media support on the internet Voice only Supports voice, audio, video and any other media support on the internet
Capabilities Voicemail, software integrations, mobile apps, etc. Incapable of handling voicemail or integrations Used as the medium for VoIP calling, virtual number set up, call flows, etc.
System updates Over-the-air or software upgrades Manual installation and maintenance Over-the-air software upgrades
Installation Using a PC, laptop or smartphone PBX, circuit boxes, handsets, line connections and copper wires. Usually signed up for as a SaaS product.
Best suited for All scale and types of enterprises.  Best for closely located and always physically available teams. All scale and types of enterprises. 

Features of VoIP

Features of a VoIP phone system for business usage

As a cloud-based phone system, VoIP has a well-equipped arsenal of features that can help business manage their phone systems better. What follows is a list of basic features that most VoIP phone system providers provide for their users. 

Real-time dashboard

A VoIP phone system for business will have a centralized control panel that resembles a software dashboard. VoIP administrators can add/remove phone number, users, teams and other customizations required through the real-time dashboard.

Call queue management

VoIP cloud phone system enables its users to perform a wide variety of call queue management functions like call waiting, call forwarding, call barging, call conferencing, auto-attendant, on-hold music, voicemail, and much more.

Call routing

One of the primary benefits of a VoIP phone system is that enables calls to be routed based on various parameters. Inbound calls can be segregated based on location, business hours, skills required to resolve the call, and so on.

Call masking

VoIP allows you to protect your business contact number by masking outgoing calls. Call masking works by showing a proxy number instead of the actual number from which the call is originating. For instance, if your business is located in Texas and your customers are in England, you can buy a number in England and have all calls appear as though they are originating from your UK office number.

Virtual phone numbers

A VoIP phone system allows businesses to buy virtual phone numbers of all types including domestic and international numbers. Since it is an internet-based technology, VoIP gives total freedom to choose between local, international, and toll-free numbers for mobile, landline, and virtual phone systems.

Performance monitoring

VoIP phone systems enable business owners, especially call center administrators to track the performance of their VoIP phone system in terms of call duration, quality of service, resolutions provided, and so on. Advanced analytics also help in optimizing the call menus to deliver enriched customer service.

The feature list of a VoIP system does not end with that. Check out more VoIP phone system features.

Benefits for small businesses

Why small businesses should opt for a VoIP phone system

Voice calls form the spine of any business communication, the more for small businesses. A VoIP phone system for small business can make a world of a difference for the business to maintain its connection with the external and internal phone network.

Here are some benefits a VoIP phone system can bring to small businesses:

Reduced IT workload

VoIP is a lightweight telephony tool that runs on the cloud. In fact, as a user you will be seeing any zero phone hardware relating to it. That reduce the IT workload to a bare minimum. There is no need to buy phone equipment like PBX, circuit switch boxes, telephone handsets, line connections, etc.

21st century technology

The copper wire-based landline system is slowly declining in popularity. VoIP is hailed to be the replacement for legacy phone systems. The poised growth of 5G and LTE networks will also boost VoIP adoption. Above all, VoIP is hosted on the cloud which can be easily updated over-the-air with bug fixes and improvements.

Global telephony access

This is the age of enterprise mobility and BYOD. Organizations are faced with the challenge of keeping their global workforce together while maintaining consistency in telephone operations. VoIP enables a business to empower its employees to work together from remote locations. It eliminates the need to be chained to a physical desktop and phone device to run the telephone machinery.

Multi device support

According to GlobalWebIndex, on an average, the typical digital consumer now owns at least 3 connected devices. As a result, they expect all digital services to be available uniformly across the web, mobile and desktop systems. A VoIP phone system for business can bring in device interoperability making it easily accessible for customers from any device that they are using. 

Phone portability

You can carry a phone number anywhere with you and use it without incurring heavy roaming or carrier charges. The number would continue to work as long as it has IP connectivity. It is this feature that makes VoIP phone system a perfect choice for small business executives who have to be on the road frequently.

Business continuity

VoIP phone systems run on software and internet and hence have zero phone hardware requirements. The only downtime is when there is no internet. They remain insulated from wire circuitry problems that often disrupt analog phone services. As a result, VoIP systems offer better business continuity that was hard to come by in traditional phone systems. 

Dynamic capacity expansion

Small businesses have uncertain call traffic volumes. As a result, they have a desperate need for quickly scalable solutions that don’t bog them down with upfront costs. VoIP being a cloud-based telephony system is easy to scale and also offers the convenience of pay-per-use or the subscription-based costing model.

Reduced telephony costs

The average cost for a basic VoIP phone system for small business is in the range of $15 to $40. Whereas, for a traditional business phone system the cost range would begin from $40 to $50 excluding device and line connection costs. Also, a small business VoIP phone system delivers several cost savings by avoiding line rentals, maintenance charges, extension charges, internal calls, handset rentals, service charges among many others. 

How to set up a VoIP phone system

The whole process of setting up a VoIP phone system could resemble the process of setting up a newly purchased software. Here is how it can be done.

Set up a dedicated internet connection for the VoIP system

The internet connection is like the nervous system of your VoIP phone system. It will handle the sole responsibility of carrying the voice signals to and fro between callers and recipients. As a result, even a minute of Internet downtime or low bandwidth can affect your voice quality significantly. 

Now, as a small business that wants to optimize resource usage, you might be tempted to use an existing business internet connection for the VoIP system. But, it is recommended to have a dedicated internet connection for your VoIP office phone system. It will ensure seamless availability of connectivity and also abundant bandwidth for the signals to move freely.

Host your VoIP on a virtual PBX

Old school telephone systems had their networks housed in a physical PBX. Hosted VoIP phone systems have their PBX systems hosted on the cloud. They do not require any telephony hardware. It connects with your VoIP over the internet and can be configured using a web application or a mobile app.

Most virtual PBX systems take the form of SaaS products which can be easily upscaled or downscaled in tune with business requirements. They also give the benefit of the pay-as-you-use pricing model, which is ideal for small businesses. 

Implement QoS (Quality of Service)

QoS or Quality of Service is a common challenge in every VoIP business phone system implementation. QoS deals with ensuring that the packet traffic is not affected due to lower priority traffic. Too much of traffic in the network can cause delays or jitters in the data packet transmission which affects the voice quality. Implementing QoS can help set priorities for data traffic thus ensuring high voice quality at all times.

Implement security protocols

VoIP shares the same amount of cyber security threat like any other internet-based application. A handful of security protocols can help thwart the most commonly experienced security threats. While implementing a VoIP system make sure you setup SIP proxies or Virtual Private Networks to prevent unauthorized access.

Setting up a VoIP system from scratch can be an uphill task. Or should it be? In the age of cloud computing anything and everything including VoIP system for a small business is available ready off the shelf. Here is a buyer’s guide that will take you through the process of finding the right one for your business. 

Buyer’s guide to VoIP

A buyer’s guide to VoIP phone systems

Buying a VoIP phone system for a modern business need not be difficult. You don’t need an expert or any consultant to assist you in the decision-making process either. It is possible to make a good choice on your own. 

Here are some pointers that will help you make the right choice of a VoIP system that will give your investment its money’s worth.

buyer s guide illustration buyer s guide illustration
International calls

International calls at costs lower than local calls. This is the biggest benefit that you must look for while narrowing your options for a VoIP phone system. If you are not able to get the cost advantage on international calls or even domestic calls, then you need to keep looking for better VoIP system providers. 


An ideal VoIP phone system should be easily installable. You should be able to do it on your own without having to bring any team of experts or technicians. Further, the system should also be easily customizable to make it tuned to business needs.


Taking your VoIP system from ten agents to hundred or more should be hassle-free. Especially for small businesses that are on the fast lane of growth there is a serious need for scalable solutions that are agile and do not demand heavy working capital requirements.

Reviews & ratings

Search for online reviews of the VoIP system and see what their existing customers have to tell about the call experience on popular software review and discussion portals. If your choice has managed to garner an average four star up on major product review forums, then it is a wise choice to make. 

Customer service 

Like any other software product, VoIP systems are also bound to run into technical problems. Their frequency will be less compared to telephone systems, still, when things go wrong, you need customer service available on all channels and at all times to reset things back to normal.

Freshdesk Contact Center VoIP phone system

Freshdesk (Formerly Freshcaller) Contact Center Vs other VoIP System providers

Freshdesk Contact Center is a launch-ready VoIP phone system for business usage. It runs on the cloud and can give your business the power to scale capacity on the go. Also, you can buy virtual phone numbers from as many as 100+ countries irrespective of your actual physical location. 

Compared to several other VoIP system providers, Freshdesk Contact Center has some extra features which gives it an upper hand in cloud telephony.

Sign up for a free trial today.

laptop freshcaller laptop freshcaller

Why choose Freshdesk Contact Center (Formerly Freshcaller) as your VoIP provider

multi level ivr or phone trees multi level ivr or phone trees
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Why choose Freshdesk Contact Center (Formerly Freshcaller) as your VoIP provider

Multi-level IVR or Phone Trees

Manage a multi-level interlinked IVR system.

multi level ivr or phone trees multi level ivr or phone trees
Smart Escalations

Create custom escalation rules for incoming calls.

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Call Barging

Barge into calls real-time.

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FAQs about Freshdesk Contact Center (Formerly Freshcaller)

Is my business eligible for voip phone system?

Every business that uses telephony is eligible to use VoIP.  However, certain countries have legal restrictions in using VoIP services. Please write to us at support@freshcaller.com to see if your business domicile qualifies to use VoIP. 

Can I keep my old phone number?

Yup. Freshdesk Contact Center lets you port-in or carry forward your existing phone numbers from your legacy phone system, another cloud telephony service or any other telephony service. Learn more about number porting.

How much does a VoIP system cost?

Freshdesk Contact Center pricing works in three ways. First, you will have to buy agent licenses. Depending on the plan you choose, the agent license fees will vary. Second, you have to buy phone numbers. You may also port-in phone numbers from your existing system. Third, you have to buy phone credits to be able to make calls. Inbound and outbound call charges will be debited to your phone credits. 

Please visit our agent licensing pricing page and call rates pricing page to get a complete picture of agent license cost and call rates. 

Should I get rid of my landline?

Not necessary. You can still handle inbound and outbound calls with your existing phones while using Freshdesk Contact Center dashboard for managing call flows, teams, and so on.

What equipment do I need?

The laptop, mobile, tablet or personal computer that you are already using would suffice. What you need is a device that can connect to the internet will suffice as an equipment to use Freshdesk Contact Center. You do not need any extra telephony equipment.

What is the quality of the call like?

By default, the use of VoIP for call transmission ensures that the call quality is superior to analog-based PSTN connections. Ensure that you use a broadband internet connection that doesn’t have speed issues. You do NOT need a dedicated internet connection for high quality calling. 

Is a cloud-based VoIP phone system secure?

Yes. Freshdesk Contact Center in specific is a GDPR compliant VoIP phone system. Specific features like call recording require you as a business to seek consent from the caller before initiating recording. You can find our Freshworks GDPR policy here

Freshdesk Contact Center: The preferred VoIP phone system

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