What Is VoIP and How Does It Work?
VoIP stands for Voice over Internet Protocol, and at its core it is a straightforward concept: instead of transmitting voice calls over traditional copper telephone lines, VoIP converts your voice into digital data packets and sends them over your internet connection. The technology has been around for decades, but in recent years it has matured to the point where call quality consistently matches or exceeds traditional phone systems, costs are significantly lower, and the range of features available goes far beyond what a conventional phone line can offer.
A modern VoIP system works by converting analogue voice signals into digital data using a codec (compression and decompression algorithm). These data packets are transmitted across your network and the internet to the receiving end, where they are converted back into audio. The entire process happens in milliseconds, and with a properly configured network, the call quality is indistinguishable from a traditional landline - often better, in fact, if you are using HD voice codecs that support wideband audio.
For businesses, VoIP can take several forms. You might use physical IP desk phones that look and feel like traditional handsets but connect to your network instead of a phone line. You might use softphone applications on your computer or mobile phone. Or you might use a platform like Microsoft Teams that combines voice calling with chat, video conferencing, and collaboration tools in a single application. Many businesses use a combination of all three, depending on the role and preferences of each user.
The UK PSTN Switch-Off - Why This Matters Now
If you are a UK business still running traditional analogue phone lines or ISDN circuits, there is a deadline you need to be aware of. BT Openreach and other UK network providers are in the process of switching off the Public Switched Telephone Network (PSTN) and ISDN services entirely by January 2027. After this date, traditional phone lines will simply stop working.
This is not a gradual deprecation - it is a hard switch-off. Openreach has already stopped selling new ISDN and analogue line products in many exchange areas, and the migration of existing customers is well underway. The replacement for all traditional voice services is VoIP, delivered over broadband or dedicated internet connections.
For businesses that have not yet made the transition, time is running short. While a VoIP migration is not particularly complex, it does require planning - particularly around number porting, network readiness, and choosing the right platform. Leaving it to the last minute risks service disruption, limited availability from providers during a rush period, and less time to train your staff on the new system.
Even if the switch-off were not happening, there are compelling reasons to move to VoIP voluntarily. The technology is superior in almost every respect, and the cost savings are genuine. The PSTN switch-off simply adds urgency to a decision that already makes strong business sense. Our VoIP and phone systems team can help you plan your transition well ahead of the deadline.
Cost Savings Compared to Traditional Phone Systems
One of the most immediate and tangible benefits of VoIP is cost reduction. The savings come from multiple areas, and for most businesses they add up to a significant reduction in overall telephony expenditure.
Lower Call Costs
VoIP call charges are typically a fraction of traditional line rental and call costs. Calls between users on the same VoIP platform are usually free, regardless of location. Calls to external UK landlines and mobiles are charged at very low per-minute rates or included in bundled plans. International calls, which can be extremely expensive on traditional lines, are dramatically cheaper over VoIP. For businesses that make a high volume of calls - particularly international calls - the savings can be substantial.
Reduced Infrastructure Costs
Traditional phone systems, particularly PBX (Private Branch Exchange) systems, require expensive on-premises hardware - the PBX unit itself, phone line cards, patch panels, and specialist cabling. This equipment needs maintenance, has a limited lifespan, and requires specialist engineers for configuration changes. With a hosted VoIP solution, all of this is replaced by software running in the cloud. Your handsets connect to your existing data network, so there is no need for separate telephone cabling. Adds, moves, and changes that might have required an engineer visit can be made through a web portal in minutes.
Simplified Billing
Traditional telephony billing is notoriously opaque - line rentals, call charges, maintenance contracts, ISDN channel fees, and various add-ons that accumulate over time. VoIP billing is typically straightforward: a per-user monthly fee that includes all features and a generous calling allowance. This makes costs predictable and budgeting simple.
When you factor in the elimination of line rental charges, reduced call costs, lower maintenance expenses, and the removal of capital expenditure on PBX hardware, most businesses see a total cost of ownership reduction of 30 to 50 percent compared to their traditional phone system.
Key VoIP Features for Business
Beyond cost savings, VoIP unlocks a range of features that are either impossible or prohibitively expensive with traditional phone systems. These features can genuinely improve how your business communicates, both internally and with customers.
Auto-attendant - An automated greeting and menu system that routes callers to the right department or person without a human receptionist. "Press 1 for sales, press 2 for support" is a simple example, but modern auto-attendants can be configured with time-based routing (different menus during and outside business hours), multi-level menus, and direct dial-by-name directories.
Call queuing - Manage inbound call volumes by placing callers in a queue with hold music and position announcements, then distributing calls to available agents. This is essential for businesses with customer service or sales teams handling a high volume of incoming calls.
Voicemail to email - Voicemail messages are automatically transcribed and delivered to the user's email inbox, often with an audio file attached. This means you never miss a message and can read voicemails at a glance without dialling in to a voicemail system.
Mobile integration - Use your business phone number on your mobile device through a softphone app. Make and receive calls on your business number from anywhere, without giving out your personal mobile number. This is transformative for hybrid and remote workers who need to remain contactable on their business line regardless of location.
Call recording - Automatically or on-demand record calls for training, compliance, or dispute resolution purposes. Recordings are stored digitally and can be searched, tagged, and archived.
Presence and status - See at a glance whether colleagues are available, on a call, in a meeting, or away. This reduces the frustration of calling someone only to find they are unavailable and helps teams coordinate more effectively.
Call analytics and reporting - Detailed reporting on call volumes, wait times, missed calls, peak periods, and individual user statistics. This data helps you make informed decisions about staffing, training, and service levels.
Microsoft Teams Phone as a VoIP Solution
For businesses already using Microsoft 365, Microsoft Teams Phone (formerly Teams Calling) is an increasingly popular choice for VoIP. Teams Phone integrates voice calling directly into the Teams application that your staff are likely already using for chat, video meetings, and file sharing. This means a single application handles all of your communication needs - no switching between a phone system and a collaboration platform.
Key advantages of Teams Phone include:
Unified communications - Voice calling, video conferencing, chat, voicemail, and presence all in one application. Users can seamlessly move between a chat conversation and a voice or video call.
Familiar interface - If your staff already use Teams, the phone functionality is an extension of a tool they know. Training requirements are minimal compared to introducing a completely new system.
Cloud-native - No on-premises hardware is needed. Microsoft manages the infrastructure, and you manage your users and policies through the Teams admin centre and Microsoft 365 management tools.
Auto-attendant and call queues - Teams Phone includes built-in auto-attendant and call queue functionality, configurable through the admin centre without third-party add-ons.
Flexible device options - Use the Teams desktop app, mobile app, certified IP desk phones, or conference room devices. Users can switch between devices mid-call without interruption.
Teams Phone requires a Microsoft Teams Phone licence (available as an add-on to most Microsoft 365 plans, or included in Microsoft 365 E5) and a calling plan or direct routing connection for external calls. Microsoft Calling Plans provide a simple all-in-one package, while direct routing through a Session Border Controller (SBC) offers more flexibility and can be more cost-effective for businesses with higher call volumes or specific routing requirements.
Hosted VoIP vs On-Premise VoIP
When choosing a VoIP solution, one of the first decisions is whether to use a hosted (cloud) service or an on-premise system.
Hosted VoIP is the most common choice for UK SMBs and increasingly for larger organisations. The service provider hosts the phone system infrastructure in their data centres, and you access it over the internet. There is no PBX hardware to buy or maintain, updates are handled by the provider, and you pay a predictable monthly per-user fee. Hosted VoIP is highly scalable - adding or removing users takes minutes - and inherently supports remote and hybrid working because the system is accessible from anywhere with an internet connection.
On-premise VoIP involves installing an IP PBX system on your own premises. This gives you greater control over the system and can be cost-effective at larger scales, but it requires capital investment in hardware, ongoing maintenance, and in-house or contracted expertise to manage. On-premise systems are typically chosen by organisations with very specific requirements around call handling, integration with proprietary systems, or regulatory obligations that mandate keeping voice data within their own infrastructure.
For the majority of UK businesses, hosted VoIP (including Teams Phone) offers the best balance of cost, features, flexibility, and simplicity. On-premise VoIP still has its place, but it is becoming a niche choice rather than the default. Your network infrastructure provider can help you evaluate which approach is right for your specific requirements.
Network Requirements for Quality VoIP
VoIP call quality is entirely dependent on your network. A poorly configured or insufficient network will result in choppy audio, dropped calls, delays, and echo - all of which create a terrible impression for customers and frustrate your staff. Getting your network right before deploying VoIP is not optional; it is essential.
Bandwidth
Each concurrent VoIP call requires approximately 80 to 100 kbps of bandwidth in each direction, depending on the codec used. For a small business with 10 concurrent calls, that is roughly 1 Mbps of dedicated bandwidth. This sounds modest, but the critical word is "dedicated" - VoIP traffic needs guaranteed bandwidth, not best-effort sharing with file downloads, video streaming, and cloud application traffic. If your internet connection is already running near capacity during busy periods, adding VoIP without upgrading your bandwidth will cause problems.
Quality of Service (QoS)
QoS is a network configuration that prioritises VoIP traffic over less time-sensitive data. When your network is busy, QoS ensures that voice packets are transmitted first, ahead of email, web browsing, and file transfers. Without QoS, a large file upload by one user could cause call quality issues for everyone else in the office. Your switches, routers, and firewall all need to be configured to support and enforce QoS policies for VoIP traffic.
Latency and Jitter
Latency is the time it takes for voice data to travel from sender to receiver. For acceptable call quality, one-way latency should be below 150 milliseconds. Jitter is the variation in latency between packets - if packets arrive at irregular intervals, the audio becomes choppy even if overall bandwidth is adequate. A well-configured network with QoS, appropriate switching, and a reliable internet connection will keep latency and jitter within acceptable limits.
Before deploying VoIP, a thorough network assessment should evaluate your current bandwidth usage, switch and router capabilities, internet connection quality (including latency and jitter testing), and WiFi coverage if wireless handsets or softphones will be used. Making targeted improvements to your network infrastructure before deployment is far more cost-effective than troubleshooting quality issues after the fact.
Implementation and Number Porting
Migrating to VoIP does not mean losing your existing phone numbers. Number porting allows you to transfer your current business numbers from your existing provider to your new VoIP platform. The process is straightforward but requires some planning:
Porting timescales - Number porting in the UK typically takes 7 to 10 working days for geographic numbers and up to 30 days for non-geographic numbers. Plan your go-live date around these timescales.
Temporary numbers - Your VoIP provider can issue temporary numbers immediately so you can set up and test the system while the port is in progress.
Existing contracts - Check the terms of your current phone line contracts. There may be early termination fees if you are within a minimum contract period. Factor these into your cost analysis.
Call routing during transition - A good VoIP provider will help you manage the transition so there is no gap in service. Calls can be forwarded from old lines to new numbers during the porting period.
The implementation itself should include system configuration (auto-attendant menus, call queues, user extensions, voicemail settings), device provisioning (setting up desk phones or softphone applications), user training, and thorough testing before going live. A phased rollout - starting with a pilot group before migrating the whole organisation - helps identify and resolve any issues before they affect the entire business.
Integration with CRM and Business Tools
One of the less obvious but highly valuable benefits of VoIP is the ability to integrate your phone system with other business applications. Traditional phone systems operate in isolation - your phone calls and your business data exist in separate worlds. VoIP systems can bridge this gap.
Common integrations include:
CRM integration - When a customer calls, their record automatically appears on the screen. Call logs, notes, and recordings can be attached to the customer record. Click-to-call from within the CRM eliminates manual dialling. This saves time and ensures your team has full context for every customer interaction.
Helpdesk and ticketing systems - Inbound calls can automatically create support tickets, and call recordings can be linked to ticket records for reference.
Microsoft 365 integration - With Teams Phone in particular, your phone system is natively integrated with Outlook calendars (for presence and availability), SharePoint, OneDrive, and the rest of the Microsoft 365 suite.
Workflow automation - Connect your phone system to automation tools like Power Automate to trigger workflows based on call events - for example, sending a follow-up email after a sales call or notifying a manager when a call queue exceeds a certain wait time.
These integrations turn your phone system from a standalone communication tool into a connected part of your business technology ecosystem, improving productivity and the quality of your customer interactions.
Scalability and Future-Proofing Your Communications
One of the fundamental advantages of VoIP over traditional phone systems is scalability. With a traditional PBX, adding new users means purchasing additional line cards, handsets, and potentially upgrading the PBX unit itself. If you outgrow your PBX capacity, you face a significant and disruptive upgrade or replacement. Scaling down is equally inflexible - you are stuck paying for capacity you no longer need.
With hosted VoIP, scaling is as simple as adding or removing user licences. Opening a new office, hiring temporary staff for a busy period, or consolidating locations can all be accommodated through software configuration rather than hardware changes. This flexibility is particularly valuable for growing businesses where communication needs are evolving.
VoIP also positions your business for future communication trends. AI-powered features like real-time transcription, sentiment analysis, and intelligent call routing are already being integrated into leading VoIP platforms. As these capabilities mature, businesses on modern VoIP systems will be able to adopt them through software updates rather than hardware replacements.
Moving to VoIP is not just about replacing your phone system - it is about building a communication platform that can grow and evolve with your business for years to come.
Getting Started with VoIP
Whether you are motivated by the PSTN switch-off deadline, the potential cost savings, or the desire for a more flexible and feature-rich phone system, moving to VoIP is a decision that pays dividends. The key is to approach it as a planned project rather than a last-minute scramble.
Start with an assessment of your current phone system - what it costs, what it does, and what it does not do that you wish it did. Evaluate your network readiness and address any gaps before deployment. Choose a platform that fits your business requirements and integrates well with your existing tools. Plan the implementation carefully, including number porting, user training, and a phased rollout.
At Coffee Cup Solutions, we design, implement, and support VoIP and phone systems for businesses across the UK. From initial assessment and network preparation through to deployment, number porting, and ongoing managed support, we handle the entire process. We work with leading VoIP platforms including Microsoft Teams Phone and can advise on the best solution for your specific requirements.
Get in touch today to discuss your business phone system. Whether you need to replace an ageing PBX, prepare for the PSTN switch-off, or explore how Teams Phone could unify your communications, our network infrastructure team is here to help.