What is VoIP and How Can it Save You Money?

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VoIP, or Voice over Internet Protocol, is a family of technologies that allows you to make telephone calls over the internet. The marketplace for VoIP hardware, software, and services is extremely large and growing rapidly due to increasing demand, especially among residential consumers.

The growth in this market can be directly attributed to the low cost of VoIP services in comparison to traditional services, and has created a lot of competition, resulting in more choices and better prices for the consumers.

How Does VoIP Work?

VoIP encodes and compresses the voice signal, and then carries the transmission as packets of data over the internet and decodes it on the other end. With VoIP you can make calls using your existing phones, you can make phone calls directly from your PC, or you can make calls with your Smartphone over the cellular data network.

Is it Hard to Setup VoIP?

Broadband providers like AT&T (Uverse) and Verizon (FiOS) and cable companies like Comcast and Time Warner provide VoIP services over their broadband networks. They do a full-service installation, so if you are not technically inclined, this may be your best option.

Some of the more popular carriers like Skype, Vonage, and Lingo require you to have a broadband connection (cable modem, DSL, or fiber). Skype uses software on your PC to make voice and video calls to other PCs.

If you want to make long distance calls or call traditional telephone numbers, you need to buy Skype credits on their Web site. Vonage and Lingo provide routers that you connect to your existing broadband connection (cable modem, DSL, or fiber).

Once you set up the router, it’s as easy as plugging in a traditional telephone, but these services require basic networking knowledge to set up.

How Much Can I Save Using VoIP?

Since VoIP costs providers less to deploy and maintain, the prices are generally much lower than traditional services. Vonage and Lingo have unlimited calling packages including international long distance for less than $25 month with advanced features (three-way calling, caller ID, call forwarding, etc.).

A calling package with similar features from a traditional provider would cost more than $25 without long distance. You can also set them up on your own, which means you don’t have to pay an installation fee. The providers that only provide full-service installations generally do not charge for them.

Are There Any Disadvantages to VoIP?

There are two major drawbacks to VoIP telephone services:

  1. If you lose power, you also lose telephone service. Traditional phone services carry power over the copper lines, so a simple corded phone can still operate when the power is out.
  2. If your broadband connection goes down, you also lose your telephone service.

VoIP services have come a long way in a very short period of time. The prices continue to drop as demand increases, and the services and equipment will become even more user friendly over time.

VoIP is great for the budget conscious and people with family and friends scattered over the globe. In the near future we may see VoIP services completely replace traditional phone services.

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LAST UPDATED 1/28/2010