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Why is VOIP So Cheap Compared to Traditional Calls?

|  4 min
In this article

Advancements in technology have made VoIP an increasingly popular choice when it comes to communication, both within society at large and for businesses. It’s a multi-purpose, cost-effective technology that is set to rapidly supersede traditional telephones. So, how does VoIP beat them in terms of cost?

VoIP (Voice over Internet Protocol) is, essentially, the delivery of voice services using the internet. The last 10 years have seen dramatic improvements in the effectiveness and popularity of VoIP, although the technology actually dates back to experiments by the US Department of Defence in the 1970s.

Traditional phones versus VoIP

Put simply, traditional telephones use circuit switching to connect two phones through a series of exchanges. Once the circuit is established, the route remains the same for the duration of the call. VoIP, in contrast, connects phones or other portable technology via an internet connection, thereby exploiting the inherent IP routing optimisation.

The PSTN (public switched telephone network) is the combined set of networks operated over the world by regional, local and national providers. This approach has proven to be remarkably resilient since its inception in the late 19th Century and has evolved to exploit digital technology in elements of the process. However, it has significant limitations in terms of telephony features, maintenance costs and the commercial attitudes of inherently monopolistic providers.

VoIP, on the other hand, uses packet switching over the internet. Data is split into packets, which are assigned identifying information as they are sent across the network. At the receiving end, the packets are delivered in sequence to reform the data to be communicated. In early iterations, packet reassembly would significantly impair the quality of the call, but advances in technology have resulted in call quality comparable to (and in many cases better than) a traditional telephone.

Types of VoIP services

There are different types of VoIP services. Consumer-level computer to computer calls are often handled via a headset, with Skype being a common example. Telephone network to telephone network services, of which BT Broadband Voice is an example, require the caller to use an adapter. PC to telephone network calls, as with CallServe, see the caller using a headset. Importantly, with 4G now widely available, mobile devices are also viable for use with VoIP technology. Corporate solutions such as those provided by IDT, harness a variety of channels in providing cost-effective unified communication solutions for businesses.

Why are costs lower?

Traditional telephone services tend to be under the control of either governments or firms with a complete or near monopoly. They depend upon charges for their revenue and the pursuit of dominance in their domestic market. As a result, VoIP can be 40-80 percent cheaper than using a traditional service, with some providers offering free calls. There are numerous ways in which VoIP services are cheaper, and some key reasons as to how this is possible.

Calling long-distance with a traditional telephone can be very expensive. Not only do more circuits have to open, the greater the distance the call travels, but the circuits must be kept open for the duration of the call. However, high-quality VoIP will depend upon the presence of a good quality internet connection for the vast majority of the distance involved. The only additional costs will be those associated with voice termination as the call breaks out into the destination PSTN.

In an office environment, multiple landlines necessitate the need for a private branch exchange (PBX). This hardware needs physical space and can cost tens of thousands of pounds, in addition to maintenance costs.

No additional infrastructure or physical hardware is required for VoIP; it simply requires the pre-existing internet connection. Businesses can, therefore, improve communication while saving money, all made possible by providers such as IDT which offer termination services and DIDs wholesale to provide comprehensive business VoIP solutions.

Users can communicate from anywhere since the phone number isn’t limited to a physical location and any compatible device can be used to access the service. This dramatically reduces cabling costs, for example, in contrast with traditional phone lines which must be moved or installed in different offices or locations as the business evolves or relocates.

With VoIP, users require only one network for voice services and data, including sending data files, videos, instant messages and email. VoIP offers flexible, multi-functional communication, including the potential for multi-media conferencing on a world-wide basis. In addition to the dramatic reduction in call costs, the organisation can evolve towards agile working practices in line with the socio-economic pressures of the 21st century.

Unified communication can improve customer acquisition rates, enhance a firm’s employer branding, staff morale, retention rates, efficiency and productivity.

With so many benefits on offer, it is unsurprising that VoIP adoption is continuing to accelerate.

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