The Basics: VoIP

VoIP (Voice over Internet Protocol) is the leading alternative to traditional telephone service. Two primary qualities differentiate VoIP from more conventional service. First, VoIP is available independent of your existing phone service. Your local phone company may offer VoIP service, but so do many other companies, which means there's real competition for customers. This translates into lower-cost services; in fact, some VoIP services are available for free. Second, VoIP is a digital technology that lends itself to more add-on services and features than could possibly be available for standard phone systems. Features range from the familiar (Caller ID, voice mail, call screening) to the more unorthodox (video calling, multiple phone numbers with different area codes). 

The reason that VoIP can be offered by so many companies -- and so inexpensively -- is due to the way that it works. VoIP uses digital technology to break conversations into bite-size packets of data; a call is made up of thousands of packets. Because these packets are sent over the Internet, VoIP providers don't have to spend money creating or maintaining a network of cables, wires, satellites, microwave towers, and other associated equipment that telephone companies have spent years building up. Instead, VoIP providers can focus on selling software (and occasionally hardware) that uses your existing Internet service to provide a telephone system.

VoIP systems aren't perfect and may not be the best choice for everyone. The main drawback is their reliance on the quality of service that an Internet service provider (ISP) offers. VoIP requires a high-speed Internet connection, sometimes referred to as a broadband connection. If you don't have a high-speed connection -- typically DSL, fiber or high-speed wireless -- then you probably won't want to consider a VoIP service. Even with a high-speed connection, you're still dependent on the quality of your ISP. If you lose your Internet connection often or it slows down for long periods, then a VoIP-based phone service will likely be unreliable.

VoIP service is available in two primary forms, which in some cases can be used together. The first is software-based, which is also called a soft phone system. Soft phone systems use your computer to place and receive calls. They require external audio (be it speakers or headphones) and a microphone, which serve as the equivalent of a telephone. Your computer must be on and the VoIP software running for the phone service to work. Most soft phone systems offer very inexpensive or free computer-to-computer calls.

The second type of VoIP service is hardware-based. It doesn't require a computer, although a computer can be helpful during the initial setup. These systems provide a piece of hardware called an Analog Telephone Adapter (ATA). The ATA connects to your high-speed Internet connection, while a standard analog phone plugs into the ATA. This allows you use a conventional phone to place and receive calls, with no need to leave a computer turned on.

Two important factors to consider when shopping for a VoIP service are the ability to operate during a power outage and the ability to place emergency 911 calls. During a power outage, most of us take for granted that we can still pick up the phone and make a call. VoIP systems do not inherently have this capability. When your power goes out, so does your VoIP system, unless you've tied it to an Uninterruptible Power Supply.

Unlike a landline phone, which is physically tied to a street address, a VoIP system is tied to an Internet address; thus, it cannot provide location information to a 911 emergency operator. Most VoIP systems now provide a service called Enhanced 911 (E911). Similar in function to conventional 911 services, E911 uses the information you provided when you signed up for the VoIP service to provide information about your location. This is a multi-step process, however, and in an emergency, seconds can make a difference. The E911 service operator must look up your information and then forward it, along with your call, to your local emergency services coordinator. This is usually your local police department, which may not be the service you need. If you're considering VoIP as a complete replacement for your phone system, be sure to carefully research how prospective providers handle E911 calls.

How to Shop

Once you decide whether to go with a soft phone or hardware-based VoIP system, you must choose a VoIP service provider, which can be a tough decision. VoIP services are available from telephone companies and cable services. Both may offer plans with attractive rates based on combining services -- getting your VoIP, Internet and cable service from a single source, for example. These rates can be appealing, but you will generally have fewer choices when it comes to plan features and services. Most phone and cable providers offer hardware-based VoIP services, although they may also offer the option to use your computer as a soft phone.

VoIP services are also available from many independent, VoIP-only service providers. You won't find the combination deals that phone and cable companies offer, but you will generally find a larger selection of rate plans and features. Independent VoIP providers offer both hardware-based and soft phone services.

The last type of VoIP service provider is VoIM (Voice over Instant Messaging). These well-known instant messaging providers include Yahoo! and AOL. In these cases, VoIP is an add-on to an existing messaging product. Messaging-based VoIP services tend to be soft phone based; they also tend to offer the lowest rates, at least for in-plan or computer-to-computer calling.