The cord-cutting movement isn't limited to consumer cable and Netflix. As Voice over Internet Protocol communication matures and as high-speed Internet becomes cheap and ubiquitous, an increasing number of businesses are ditching conventional landlines and jumping to VoIP.

VoIP sounds almost magical: The hype makes it sound more flexible, more full-featured, and best of all, significantly cheaper than placing your calls through traditional telephone service providers.

But is VoIP really all it's cracked up to be? Are the potential pitfalls worth the potential monetary payoffs? I'll walk you through the basics, discuss the pros and cons, and take a look at three commercial VoIP services of varying complexity.

How Does VoIP Work?

Generally, things are pretty simple if you're looking for a hosted service. Many of the top VoIP providers handle all the heavy lifting offsite, delivering calls to your phones and software clients without much hassle, especially if you use phones that are plug-and-play certified for the service in question. The majority require no additional on-site hardware aside from those phones; at most, you might need to find a space for a small box of hardware somewhere on-site.

In contrast, maintaining a self-hosted, on-site VoIP system requires a bit more work. You need an IP-based private branch exchange--a VoIP-friendly version of the PBX phone systems that many offices use--to route your calls to the appropriate phones on your network, as well as a device called a PSTN gateway. The PSTN gateway sits between the IP-PBX software and the analog signals of the public switched telephone network, converting calls to and from digital signals as necessary.

No matter which option you choose, typically you can handle the basic settings for your phone lines or extensions over the phone, while tweaking more advanced options requires diving into your provider's online account interface.

What Do You Need to Implement VoIP?

Depending on the size of your company and the infrastructure you already have in place, jumping on the VoIP bandwagon could cost your company next to nothing, or it could entail significant up-front costs.

VoIP requires a broadband connection--and the more simultaneous users you have, the more bandwidth you'll need. If you work alone out of a home office, or if you have only a few employees, you won't have much to worry about; for example, on my setup, running RingCentral's Connection Capacity utility shows that my 15-mbps home Comcast connection could handle 11 calls simultaneously even if I had Netflix, Spotify, and an instant-messaging client running on the network at the same time.

Make sure that your internal network--including your routers and switches--can handle the load, too. Most providers suggest using a router with configurable Quality of Service settings and assigning VoIP traffic high priority to maximize quality.

If your Internet service provider has a bandwidth cap in place, you should take that into consideration as well. Most VoIP service providers use the high-quality G.711 codec for VoIP communications, which consumes 64kb of data every second you talk. In reality, even a large number of people should be able to chat it up on VoIP without having to worry about hitting bandwidth caps, but you'll want to keep close tabs on your data usage to avoid exceeding that cap.

Finally, even if you subscribe to a cloud-based hosted VoIP service, you'll need to make sure your phones can communicate over VoIP. Most VoIP systems use session-initiation protocol technology to assign each phone or VoIP software client a specific address; that's how the IP-PBX routes calls to specific lines. As such, you'll need a SIP-enabled phone to make VoIP calls. (Some VoIP systems use H.323 technology rather than SIP, but those are rare.) If you want to keep your old analog touch-tone phones or fax machines, you can plug them into an analog telephone adapter (ATA), but they won't be able to use many of the advanced features that SIP-based VoIP phones provide.

Next Page: The Upside and Downside of VoIP

VoIP Positives

What makes VoIP so attractive for businesses?

The low cost of VoIP is its biggest attraction. Business VoIP services are significantly less expensive than traditional phone services. You have much less hardware to buy or lease; in fact, many hosted services require no new hardware investment at all. If you do need hardware, it's typically based on standardized technologies such as SIP, as opposed to proprietary products that tie you to a particular service provider. Monthly subscription fees are lower, as well. Verizon Small Business plans with unlimited nationwide calling, for example, start at just $63.50 per line, while Vocalocity offers the same unlimited calling with even more features for $40 per line. VoIP services also tend to be contract-free.

VoIP is cheaper than a traditional landline if you have staff in far-flung locations. Since in-network calls travel exclusively over data networks and don't need to hit the public phone lines, most VoIP providers let you make calls to your coworkers for free, even if you're in New York and they're in San Francisco. Don't worry, do-it-yourselfers: IP-PBX servers can handle remote employees as well.

Many hosted VoIP providers offer mobile apps that let you make and receive calls from the road using your data connection. Usually you can adjust the apps to ring simultaneously with your office phone or to act as a stand-alone extension.

Scalability is another boon. Rather than having to invest in costly new hardware, adding new extensions to a VoIP network is typically as easy as connecting your SIP-enabled phone to the network and tinkering with some software settings--and if you use a phone that's certified for use with your provider or software, it could be as simple as plug and play.

Most VoIP providers and IP-PBX software packages deliver a much more robust feature set than traditional phone providers do. All the basics you'd expect are present--including conference calling, voicemail, Internet faxing, and caller ID--but VoIP services also often supply virtual receptionists and greeting functionality, customizable advanced call screening and forwarding rules, integration with office software, and the ability to forward voicemail to your email or your mobile phone. Many providers offer these advanced features as part of a subscription; even when you must pay extra, the cost is usually less than you would pay a traditional phone provider for the same services.

If you need only a single line and want cheap calling, but don't require all the bells and whistles associated with a business line, you might be able to get by with a residential VoIP plan, which you can find for as little as $5 per month for unlimited nationwide calling. Be aware, however, that the terms of use for consumer-focused plans typically forbid using the line for commercial activities. Most providers also have stringent fair-use policies, so you might run into trouble if your residential line rings off the hook day in and day out.

VoIP Negatives

VoIP's most significant drawback is that if your Internet service or your power goes out, so does your VoIP service. Hosted services skirt around this issue by bumping incoming calls to voicemail automatically, or by rerouting calls to your mobile phone, in the event of a service disruption; but that doesn't change the fact that you won't be able to make or receive calls from your office phones in such a situation.

Another disadvantage involves emergency calling: Many VoIP providers don't offer 911 service, and the ones that do tend to charge extra for it or impose high base-subscription fees. This problem and the risk of a service disruption are the two main reasons why most providers suggest retaining a basic, traditional phone line to augment your VoIP service.

Most VoIP services offer unlimited calling in the United States and Canada, but connecting to mobile phones or special lines (such as free conference-call services) might incur an extra charge. Reaching foreign locales can be iffy at times, especially if you're calling a less-prominent country. On the plus side, the per-minute rates tend to be very competitive. If you make international calls on a frequent basis, you should read the fine print before subscribing to any service.

Finally, although VoIP voice quality typically rivals that of a landline or a good mobile phone connection, your network quality can seriously affect call quality. If you have a slow, spotty, or crowded network, audio quality can suffer greatly--or even drop out in a worst-case scenario.

Next Page: VoIP Service Comparisons

VoIP Service Comparisons

Let's take a brief look at three of the dozens of VoIP services available, starting with a relatively straightforward offering and ramping up the complexity (and flexibility) from there.

A Basic Service

RingCentral Office, RingCentral's flagship business product, provides a good example of a basic VoIP service tailored to the needs of a small business. The company's reputation for reliability is top-notch, but the most notable aspect of RingCentral Office is just how simple it is to get up and running; the service plans are straightforward and require almost no new hardware.

Hardware: RingCentral handles all routing and VoIP-to-PSTN conversions in the cloud, so all you need are SIP-enabled phones. Any SIP-enabled phone or any analog phone with an adapter will work with RingCentral, but the IP phones the company sells directly are plug-and-play, while third-party phones require configuring to use the RingCentral software. RingCentral sells the Cisco-Linksys SPA-2102 analog telephone adapter for $69; phones start at $99 and go all the way up to $600 for a high-end conference phone.

Price per user: The service costs $40 per month for a single user, $30 per month per user for 2 to 20 users, $22 per month per user for 20 to 99 users, and $20 per month per user for 100 or more users. Note that "users" means each individual SIP endpoint, not employees. For example, if you have an office phone, a mobile phone, a dedicated fax machine, and a "softphone" (software client) installed on your PC, that counts as four separate users.

Standard features: All features come standard for every user, with no à la carte options available except for the option to buy additional fax lines for $5 per month each. Special "vanity" local or toll-free numbers are available, but you need to pay a $30 one-time fee and $5 per month for each separate vanity line.

  • Unlimited calling to the United States and Canada, Internet fax lines, and extensions
  • 1000 toll-free minutes per month for your company
  • Three-way calling; ten-way calling via Call Controller softphone
  • Caller ID
  • Voicemail, with a "Visual Voicemail" graphical user interface for checking messages on phones and computers
  • Virtual receptionist with dial-by-name, music-on-hold, and departmental support; optional custom prerecorded greetings start at $50
  • Advanced call forwarding, screening, and recording rules; transfer calls between phones in real time
  • Microsoft Office and Box integration
  • Mobile apps for Android, BlackBerry, and iOS smartphones

A Midrange Service

Vocalocity is a good example of a VoIP service designed for the needs of larger small businesses. Services at this level are more expensive than the types of plans that RingCentral has to offer, but Vocalocity's plans include additional features such as 911 emergency-response support, as well as even more powerful options.

Hardware: Other than SIP-enabled phones, no hardware is required. The company strongly suggests using the plug-and-play certified IP phones that it sells directly, which start at $75 each, but you'll find unofficial support for a number of other SIP-enabled phones, too.

Price per user: Vocalocity offers a trio of plans, which you can mix and match for your various extensions. An unlimited extension costs $40 per month for unlimited U.S and Canadian calling. A metered extension costs $15 per month plus $0.03 per minute, and is intended for infrequently used lines. Finally, a $15 virtual extension with unlimited minutes is available for people who need VoIP only on their mobile phones, versus a landline or softphone.

Standard features:

  • Unlimited U.S. and Canadian calling
  • 411/911 calling
  • Voicemail, available via Web interface or sent to email as an MP3 file
  • Caller ID
  • Three-way calling
  • Virtual receptionist for each extension, with support for music on hold and dial by name
  • Free mobile apps and a desktop client with plug-in-based integration for several services and programs, including Outlook, Microsoft Dynamics, SugarCRM, and LinkedIn
  • Advanced call forwarding, screening, logging, transferring, and parking options

The optional add-on features are too numerous to outline here, but you can find the entire list on Vocalocity's site. Highlights include the ability to add a paperless fax line ($15 per month), call bridging for 30-person conference calls ($15 per month plus $0.03 per minute), voicemail transcription, call recording, and call group and queue support.

A Complex Product

If you want the highest level of control and security for your business's telecommunications, consider a self-hosted VoIP product using an IP-PBX. Here's a look at one example, the Snom One Mini.

Hardware: The newly released Snom One Mini ($599) is a small-office/home-office IP-PBX server that draws just 60 kWh of power per year. If you want a completely in-house VoIP setup, you'll need to buy a PSTN gateway to connect VoIP calls to the public telephone network; such devices cost about $250 and up, and require an active landline. The Snom One Mini, however, was designed around the idea of using an external VoIP provider that provides "SIP trunking" services to handle the analog-to-digital signal conversion. Using one of those services would allow you to skip the PSTN gateway.

Finally, you'll need SIP phones. As with the other services discussed here, the phones that Snom sells directly--priced at $70 to $100 each--work best with this system due to their plug-and-play support. Other SIP phones or analog phones with adapters will also work, but they'll require manual configuration with Snom's server software.

Price: Hardware pricing aside, the cost of this kind of VoIP service will vary according to the provider you choose. Skype Connect, for example, costs $7 per channel per month, plus 0.8 cent per minute on outgoing calls. The number of channels you purchase determines how many simultaneous calls the service will support. 8x8 is another popular business-oriented VoIP service provider, but you'll need to request a quote from the company to get pricing information.

Features: The Snom One Mini supports Power over Ethernet, so you don't need an AC outlet to set it up. It supports SIP-enabled devices, and it has no moving parts. In addition, you can configure the Linux-based IP-PBX to include VPN, DHCP, VLAN, and other services.

As for software, the Snom One Mini IP-PBX includes:

  • Support for up to 20 extensions making ten calls simultaneously
  • Mobile phone support with advanced functionality, including simultaneous ringing with your office phone, automatic transfers to mobile when you don't answer your office phone, and calling schedules that route calls to your mobile phone at specific times
  • Voicemail, optionally sent to email as an audio attachement
  • Caller ID
  • Customizable call routing and screening
  • Customizable trunking and dial plans
  • Multiple virtual receptionists
  • Music on hold, dial by name, and customizable time-based greetings
  • Email notifications for specific events
  • Personal greetings for each extension
  • Outlook integration
  • Conference calling with administrative controls, PIN codes, email notification for scheduled conference calls, multiple conference "rooms," and ad-hoc three-way calling
  • Fax machine support via ATA connections

Most small businesses will lean toward hosted VoIP services, but self-hosted VoIP arrangements offer more flexibility, security, and--if you're going the PSTN gateway route--a monthly cost of next to nothing in exchange for larger up-front costs (and a few more configuration headaches). Snom offers a one-year warranty that includes free setup support by phone or email, too.

Your Turn

As you can see, businesses have a wide array of options when it comes to switching from PSTN communications over to VoIP. Have you made the leap? Share your thoughts and experiences in the comments, and help your fellow readers decide whether VoIP is right for them.