Voice over IP (VoIP) is a dream concept that has been a while in the making. The idea of conducting all your telephone calls over the Internet—and avoiding high long distance charges from Telcos in the process—is an attractive one for any budget-conscious CIO. However, quality and reliability have been big problems for IP phone services in the past, and the need for compatible software on both ends of the conversation kept many from investing in the products for a long time.

Today, better VoIP products are addressing and solving these problems. This article discusses some of the more popular VoIP products and services and how the technology can save money for your business.

What is VoIP and why should you care?
The Internet protocol (IP) was originally designed for sending data packets. VoIP involves sending spoken conversations, in real time, over an IP network. A regular phone line transmits voice as analog signals, but to be sent over the Internet (or a TCP/IP-based private network), an extra step is added. Sound is converted to analog signals, then digitized(converted from analog to digital) and then transmitted over the network. At the receiving end, the conversion process is done in reverse.

IP telephony

VoIP is part of a larger technology category, IP telephony, which encompasses transmission of FAX, video, and any other form of data traditionally transmitted over the public switched telephone network (PSTN). The idea of IP telephony is itself part of a larger trend toward convergence of computer, telephone, television, security monitoring, lighting automation, and related technologies.

Advantages of VoIP over public telephone service
PSTN has worked fine for transmitting voice for many decades—so if it’s not broken, why fix it? The compelling factor behind VoIP is a practical one: cost. Long distance charges can cost businesses hundreds or thousands of dollars per month. If the business has a fixed cost (unlimited access connection to the Internet) calls transmitted over that connection can be effectively free. Some VoIP services do charge a monthly fee, but it is typically far less than Telco charges for long distance.

Disadvantages of VoIP
Given the cost advantage, why haven’t all businesses rushed to abandon the public telephone network? Why aren’t all long distance calls being made over IP? As with any business decision, there are tradeoffs. Some of the disadvantages of using Internet technology for all of your voice calls include:

  • Initial setup cost: Although there are low cost and even no-cost ways to transmit voice over IP, an enterprise level company serious about VoIP will have to invest heavily in one or more VoIP devices (such as one of Cisco’s voice gateways).
  • Quality issues: Although it is getting better all the time, the quality of most VoIP services and products can’t yet match that of PSTN. There are inherent challenges in sending a voice stream over a packet network.
  • Incompatibility issues: Some services require that both the caller and the called party be subscribers to their service, and some software programs require that both parties have the same software installed. However, there are other services/programs that allow you to call anyone, including calling from your computer to a regular telephone, or even calling from phone to phone with packets routed over IP in between.

Weighing the pros and cons
Despite these disadvantages, VoIP can still be a viable alternative to PSTN—if you do your homework before committing to a particular product and service. I recommend that you run a pilot program first, testing VoIP with a small group of users, before rolling out a VoIP solution to the entire company. You may want to test several different products and/or services before making a decision. You should also evaluate your workers’ telephony needs. You may find that the best solution is to switch some departments or selected users to VoIP while others continue to rely on PSTN for their telephonic needs.

VoIP in a nutshell
Voice over IP can be hardware or software-based. The earliest products worked exclusively via software, and users at both ends of the connection needed a computer running the software, an Internet connection, a sound card, and microphone. The connection was often only half duplex, making the conversational experience more like talking on a two-way radio than on a telephone.

There are still many software-based VoIP products in use, and these tend to be less expensive than other VoIP solutions. VoIP can also be implemented using gateway devices. These are dedicated hardware devices that create a bridge between analog telephony equipment (phones, fax machines) and the IP network using one or more of the VoIP protocols. A third option is to subscribe to a VoIP service offered by an IP service provider.

VoIP protocols and standards
Standards and protocols are necessary for devices to communicate with one another. The protocols used by VoIP include:

  • H.323
  • Session Initiation Protocol (SIP)

H.323 is a standard that was developed by the International Telecommunication Union (ITU), which includes a group of protocols used for VoIP, video conferencing, and sharing data. These include protocols that manage call setup and termination, negotiate channel usage, and handle authentication and security. Most major VoIP product vendors, such as Alcatel and Cisco, make products that rely on H.323. For more information about H.323 check the IMTC Web site.

SIP is a newer, less complicated protocol that was designed specifically for VoIP. The Internet Engineering Task Force (IETF) developed SIP as an alternative to H.323. Microsoft includes a SIP stack in Windows XP that is used for real time voice communications by Windows Messenger. Many vendors, including Cisco, market SIP-based phones. Click here for more information about SIP.

Some vendors use proprietary VoIP protocols for their devices. In addition to its SIP products, Cisco developed a protocol of its own called Skinny, which it licensed to other vendors. Protocols can be (and often are) used in combination; for instance, SIP can be used between the phone and the gateway while H.323 is used between the gateway and the PSTN. Another protocol, the Media Gateway Control Protocol (MGCP) can be used by SIP to create a gateway to the PSTN.


In selecting which VoIP product to use, you need to consider compatibility with your firewall or NAT product. For example, Microsoft’s ISA Server 2000 supports the H.323 gateway, but does not support SIP.

VoIP products and services
There are a large number of VoIP software programs, VoIP-enabled hardware devices, and VoIP services available. Which type of VoIP solution you choose depends on the call quality you need, the amount of VoIP traffic, and how much control you want to have over the technology.

VoIP software products
VoIP software programs range from free to very expensive. NetMeeting, which is included with Windows 2000 and XP, is an H.323-based voice and video conferencing program. Windows XP also includes SIP-based Windows Messenger. Both come with the operating systems.

Medium-priced software phone products include eStara’s SIP-based SoftPhone or Smith Micro’s H.323-based VideoLink Pro. PocketGphone is VoIP software for your Pocket PC2002 PDA. Enterprise-level products include VocalTec’s Essentra SIP Server.


NetMeeting is “hidden” in Windows XP; you won’t find it in the Start program menus. To open it for the first time, you must type conf at the Run box. When you set it up, you’ll be given the option to put an icon on the desktop or in the Quick Launch bar.

Software solutions are generally less costly than dedicated hardware solutions, and many are available in free trial versions, so you can evaluate them before incurring any cost.

VoIP services
Services, like software, run the gamut when it comes to cost. Free services, such as PhoneFree, which allows you to make free PC-to-PC audio or video calls, are geared toward consumers and often don’t work behind a firewall.

There are a large number of companies offering business-grade VoIP services, such as ICG’s VoicePipe. Another player, Vonage, offers both residential and small business plans with unlimited domestic long distance for $39.99 per month and low per-minute international rates. You will typically need special software and/or hardware, provided by the service provider, to use these services.

A VoIP service generally allows you to forego the steep upfront cost of investing in professional-grade software or hardware products, and since some services are available on a free trial basis, you can try them without risk. Using a service might be preferable if you don’t have the onsite technical personnel to maintain hardware or troubleshoot software problems.

VoIP hardware devices
Hardware solutions tend to be the most costly way to implement VoIP, but they are often easier to configure than software solutions, and owning the hardware allows you more control than subscribing to an outside service. VoIP hardware devices generally include:

Some hardware devices may also require that special software be installed on the network (for example, many of Cisco’s VoIP products require that Cisco’s Call Manager software be installed). Many of the hardware devices are compatible with various VoIP services.


In addition to dedicated VoIP devices, some routers—such as the Cisco 3600 series—can be configured to transmit voice over the IP network.

Some devices do not require a computer on either end. For example, D-Link’s i2eye video phone transmits both voice and video over a DSL or cable connection when you plug the device into a standard telephone and TV, using the H.323 standards (you need the same setup on both ends).

More improvements to come
Voice over IP is finally coming into its own. As transmission quality and reliability improve, CIOs should recognize the significant cost savings of using their Internet connections and IP-based LANs for voice communication instead of paying high Telco charges. The future promises more improvements, with newer, easier-to-use protocols such as SIP and wireless VoIP already gaining ground.

However, it’s not easy to choose from all the VoIP solutions that are available—and the situation promises to only get more difficult in the future as more and more software companies, hardware vendors, and service providers jump into the game.