Channel Explained: Voice over Internet Protocol (VoIP)

VoIP has emerged as a convenient, reliable and cost-effective network option for businesses of all sizes. In this Channel Explained you'll learn how VoIP works, what to consider before deploying it in a company, and how to take advantage of the multitude of channel opportunities available for this technology.

By Stephen J. Bigelow, Senior Technology Writer

Businesses have traditionally grappled with two networks -- one for carrying data, and another (far older) network that carries voice. Voice and data existed side by side, usually adding substantial cost and complexity for the customer. Yet the idea of "voice as data" is hardly new. Telco carriers have spent decades digitizing voice for transport over long-haul optical fiber between hubs. It was only the distance from the central office to the home or business (that "last mile" of copper telco wiring) that remained fully analog. But as network bandwidth and digital voice technologies improved, Voice over Internet Protocol (VoIP) has emerged as a viable and cost-effective technology suited for businesses of all sizes. This article explains the important issues of VoIP, highlights the principal deployment considerations and examines opportunities for network solution providers.

What is VoIP, and how does it work?

VoIP hardware/system vendors

Cisco Systems Inc.
Voice systems

Nortel Networks
IP phones

ShoreTel Inc.
IP unified communications  

Siemens AG
HiPath OpenOffice  

Avaya Inc.
IP telephony  

3Com Corporation Convergence/IP telephony

M5 Networks

Mitel Networks Corporation
IP communication systems  

NEC Sphere Communications
Sphericall IP PBX


Xpander Communications

Technology vendors: Learn how to get your company listed in our Partner Program Directories for solution providers.

VoIP is the technology that allows voice traffic to be processed and passed over IP networks such as Ethernet LANs and the Internet. The easiest way to understand VoIP is to consider the elements involved. A VoIP system typically involves handsets, a network appliance, the existing LAN/WAN, the VoIP provider and possibly an everyday telco provider.

Voice is first converted to a digital data stream and encapsulated into network packets. Larger businesses may opt to perform this conversion in the telephone device itself using specially designed Internet handsets that attach directly to the IP network and pass data to a VoIP network appliance often located within the LAN at the firewall before the router. In many smaller businesses, analog signals from conventional telephones are sent through existing telephone wiring to a network appliance that handles the conversion. The VoIP network appliance also manages the communication channel, handles signaling, supports advanced services (like caller ID or call waiting) and establishes the connection through the router to the WAN, which carries data to the VoIP provider.

The VoIP provider offers and supports the VoIP services. Most large traditional telco providers like AT&T or Verizon and major ISPs like Comcast or Charter Communications offer VoIP services. While the features, costs and service levels of VoIP providers can vary dramatically, all providers receive the VoIP data and forward that data on to the recipient as required.

For example, if the recipient of a VoIP call also uses a VoIP system, voice data and signaling is passed to their network where a corresponding appliance is set up on the recipient side of the call. If the recipient uses conventional handsets, the voice packets are first converted back to analog voice before being passed to the recipient's phone. When the recipient uses an Internet handset, the voice data is forwarded to the phone itself for conversion back into voice. If the recipient does not use VoIP at all, the VoIP provider passes the data through soft switches to a telco provider, which completes the call to the recipient's traditional analog phone.

Why is VoIP important? What features does VoIP offer?

The appeal of VoIP is simplicity and reduced costs for clients. "By leveraging an existing IP network, companies, particularly SMBs, can gain an economy of scale by processing and passing voice traffic over their network and the Internet," said Allen Zuk, an independent IT risk management consultant formerly with GlassHouse Technologies.

One source of cost saving is the infrastructure. Rather than cabling, equipping and maintaining separate networks for data and voice, VoIP allows data and voice to reside on a single client network infrastructure. There are potentially fewer cable drops to contend with. "If you can bring all your services into one switch across the Internet, then you're definitely saving a ton of money," said Mike Wagoner, vice president of engineering with CLC Networks, a solution provider specializing in converged network services for the hospitality industry. "It comes back to converged services -- there's one bill to pay and one piece of equipment on-site."

Clients can also realize savings in the phone service itself. The monthly cost of VoIP service from a VoIP provider is often less (sometimes far less) than the cost of conventional plain old telephone service (POTS) from a local telco. This is usually attributed to bandwidth. There is far more network (Internet) bandwidth than voice bandwidth available, and network bandwidth is proliferating far faster than voice bandwidth. This makes VoIP voice channels cheaper than conventional voice.

VoIP also promises features that are costly or even technically impossible with POTS. "You can be at your [conventional] phone from different locations," said Dave Sobel, CEO of Evolve Technologies, a solution provider located in Fairfax, Va. Sobel noted that his VoIP softphone allows communication with staff and access to voicemail, routes voice calls to other locations, and handles other features that would simply not be possible with conventional telephones. While VoIP systems provide most of the features found standard in current phone technology, such as call waiting and caller ID, experts like Zuk cite several other advanced VoIP capabilities like messaging and calendaring (e.g., Outlook) integration, custom call routing, integrated voice response capabilities, security and account management.

What are the challenges of VoIP?

Although VoIP is a well-developed protocol, and numerous services and equipment manufacturers are readily available, a solution provider must consider several important factors for a VoIP project, including bandwidth, Quality of Service (QoS) and resilience.

VoIP service providers
AIM Call Out  


AT&T CallVantage (defunct - reference only)  


Blue Ridge Communications (small regional)  


Charter Communications  

Clearwire Corporation


Covad Communications Group  

Cox Communications

Deltathree Inc.  


Jajah Inc.  

Lingo Inc.  

MediaCom Worldwide  

Modern Telegraph  

Net2Phone Inc.  

ooma Inc.  

Packet8 (8x8) Inc.  

Qwest Communications

International Inc.

Skype Ltd.  


Suddenlink Communications  





Vocal Pulse  




Windows Live Call  

WOW (WideOpenWest)  

Xpander Communications  

Yahoo! Voice

Any client assessment of VoIP should start with bandwidth capacity planning. This is particularly important because VoIP voice quality degrades quickly with contention from other applications. The goal is to gauge the total bandwidth on the client's network, estimate the current bandwidth utilization of applications, decide if there is enough remaining (unused) bandwidth to sustain the maximum number of planned voice channels (roughly 64 kbps per channel), and try to predict the amount of bandwidth needed by applications or users into the foreseeable future.

"Network capacity becomes more a measure of how many simultaneous calls the network can process," Zuk said. "This concept of peak load -- the maximum assumed volume that the network should be able to handle -- will be the basis of VoIP capacity planning." If you determine that your client's network has adequate bandwidth now and into the future, you can plan and implement VoIP. If there isn't enough available network bandwidth (or you suspect a near-term bandwidth shortage), you'll need to recommend suitable network upgrades for the client before VoIP can be deployed.

But sheer network bandwidth capacity isn't enough. Bandwidth demands are coupled closely with Quality of Service (QoS) considerations and the potential performance impact on other applications. Any disruptions to VoIP data will manifest as delayed or "broken" speech. QoS ensures that VoIP traffic receives priority over data packets from other applications. "Quality of Service is a significant area that needs to be invested in -- it's a challenge," Sobel said, noting that QoS is a vital element of consistent voice quality, so solution providers will need to implement and enforce QoS controls across the client network while preventing adverse affects on other time-sensitive applications in the enterprise such as transactional databases or streaming media applications.

Another challenge is in the convergence of voice and data, placing more business services onto the same single network. Wagoner points out that a failure on the client's network disrupts not only data but voice as well. Even the largest organization may choose to retain several analog lines for emergency services (such as 9-1-1 responses) in the wake of network failures, implement backup battery/generator facilities to keep network equipment running in the event of a power outage and so on.

While reduced cabling is often touted as a benefit for VoIP, it can sometimes work against a client by prohibiting future changes. For example, if a client isn't satisfied with the performance or reliability of their VoIP deployment, or other problems arise that interfere with VoIP operation, a client with only a single cable drop per user may simply be unable to use conventional telephone service. "Two to four cable drops per workstation is standard now," Wagoner said.

Finally, a solution provider cannot ignore the VoIP service provider's service-level agreement (SLA). "Ensure you're working with providers that can deliver the level of service that you need," Sobel said. Understand their downtime requirements, obligations to the client, remediation processes and other service issues that can impact the client's VoIP service.

What are the channel opportunities and trends in VoIP?

VoIP offers numerous revenue opportunities for channel service providers, usually starting with VoIP network readiness assessments (a.k.a. consulting) to evaluate current network performance and application loads. From there, a solution provider may be able to justify network upgrades to accommodate additional network bandwidth or implement QoS controls so vital for VoIP and other time-sensitive applications. Client assessments may also reveal opportunities to consolidate network hardware and simplify the infrastructure.

"Let's face it -- the voice, video and data networks now are all IP," Wagoner said. "Instead of having three separate networks and three separate switches in each IDF [intermediate distribution frame] closet, I can converge all of those into one network infrastructure and one core switch architecture." This can lower costs and ease management.

With a suitable client network in place, a solution provider can offer VoIP planning and design services. This isn't simply a consideration of VoIP deployment, but can also include plans to integrate other messaging features like email, messaging, incident response and so on. Once plans are finalized, a solution provider can generate revenue through VoIP product sales and deployment services. Completed VoIP installations are often managed by the client themselves, but there may be some potential revenue derived from remote maintenance or support of the VoIP system -- possibly rolled into support agreements for the greater network.

Looking to the future, experts point to greater levels of system integration which tie VoIP to email, messaging, CRM, ERP and other business applications. "Imagine working with email and having complete records of all the phone calls done regarding that user, and you can listen to all of them," Sobel said. "A call comes in, it's logged and you get all of the customer information." The eventual goal is to provide clients with more business awareness and real-time decision-making ability by integrating voice with back-end customer management systems in unified communications.

Voice over wireless LAN is another area making inroads, allowing clients to make VoIP calls from any wireless hot spot. The line between computers and telephones will continue to blur as more network features are added to VoIP handsets. Wagoner points to integrated hotel control systems where users can see who is outside by watching hall video from the VoIP handset, controlling the lights and room environment from the handset and so on.

Dig Deeper on MSP technology services

Cloud Computing
Data Management
Business Analytics