What is VoIP and how does it work for business?

VoIP stands for Voice over Internet Protocol. It means making and receiving phone calls over your broadband connection instead of over the old copper phone network. If you are thinking about moving your office phones to VoIP, this guide explains how it works, what you need, what it costs you in practice, and what to watch out for. It is written for business owners, not engineers.

The timing matters. Openreach is retiring the UK's copper phone network, with the switch-off due to complete by 31 January 2027. Traditional landlines and ISDN lines are being phased out, so most UK businesses will end up on VoIP of some kind whether they plan to or not.

Key takeaways

• VoIP turns your voice into data and sends it over the internet, so the same number can ring on a desk phone, a laptop and a mobile app.
• You do not need a phone engineer or a server cupboard. A hosted VoIP system runs in the provider's data centre.
• Call quality depends mostly on your broadband, so check your connection before you switch.
• You can keep your existing number. The provider arranges the transfer, which is called porting.
• Plan for what happens if your internet or power fails, and check how 999 calls work on your system.
• Call recordings are personal data, so UK GDPR applies if you record calls.

What is VoIP?

VoIP converts spoken audio into small digital packets, sends them across the internet and rebuilds them at the other end. Because the call is just data, you are no longer tied to a physical phone line or a phone socket on the wall. The same business number can ring on a desk handset, a computer app or a mobile.

How VoIP differs from a traditional phone line

A traditional line (the public switched telephone network, or PSTN) reserves a dedicated circuit for every call and charges for line rental on every number. VoIP shares your broadband with the rest of your internet traffic. That is why it is easier to scale up and down, and why it can include features that copper lines cannot, such as video calling, call queues and voicemail sent to email.

How does VoIP work?

Behind a simple call there are a few moving parts.

1. Your voice is digitised. The handset or app captures your voice and turns it into digital data. Modern devices also remove echo and background noise.
2. The data is split into packets. Each packet carries a small slice of the conversation and is sent across the internet by the fastest available route.
3. A codec compresses it. Codecs such as Opus or G.711 decide how much bandwidth a call uses. Higher quality uses a little more data.
4. The call is set up with SIP. Session Initiation Protocol is the standard that makes phones ring, connects the call and ends it.
5. The packets are rebuilt in order. At the other end they are reassembled in milliseconds, so the other person hears you in real time.

A good router can give call traffic priority (known as quality of service, or QoS), so a large download or video stream does not break up your calls.

What equipment do you need?

Most small businesses already own most of what they need.

• IP desk phones. These plug into your network and talk to the system directly. Many businesses also keep their existing handsets by using an adapter (an ATA).
• Softphone apps. An app on a laptop or mobile turns that device into a full extension. Staff plug in a headset and work from anywhere.
• A decent router and network. A business-grade router that supports QoS, and a switch that can power the handsets over the network cable (Power over Ethernet), keep things simple.
• Reliable broadband. As a rule of thumb, budget around 100 kbps per active call, and keep latency low. Full fibre broadband is ideal where it is available. See our guide to FTTP broadband.

What are the advantages of VoIP?

• Lower and more predictable costs. Most hosted systems charge per user, with UK calls usually included, instead of line rental on every number plus call charges. Compare your current bills with a quote rather than relying on headline savings.
• Work from anywhere. Your extension lives in the cloud, so you can take calls in the office, at home or on the road using the same business number.
• More features. Call menus ("press 1 for sales"), call groups, out-of-hours routing, voicemail to email, call reporting and recording are normally available.
• Easy to change. Adding a new starter or removing a leaver is a few clicks in a web portal, not a visit from an engineer.
• No equipment to maintain. With hosted VoIP the phone system runs in the provider's data centre, so there is no box in your office to patch or back up.

What are the disadvantages and risks?

VoIP is not perfect, and a good provider will be upfront about the trade-offs.

• It depends on your internet. If your broadband goes down, your phones go with it unless you have a plan. A 4G or 5G backup connection, or automatic forwarding to mobiles, keeps calls flowing.
• Power cuts. Internet equipment needs power, so a power cut can stop calls unless you have battery backup or mobile forwarding.
• Emergency calls. Make sure your provider supports 999 calls and that the registered address for each number is correct and kept up to date. Staff who work remotely should know how to call 999 from a mobile.
• Security. Phone systems are attacked like any other internet service. Use strong passwords, multi-factor authentication on the admin portal, encrypted calls and regular updates, and watch for unusual overseas call activity.
• Call recording rules. A recording of a call is personal data. See our guide to GDPR and recording business calls.

How do you set up a VoIP system?

You can be up and running quickly, but planning the move properly avoids missed calls.

1. Choose a provider. Compare contract length, support, uptime commitments, what is included and who you will speak to when something goes wrong.
2. Check your broadband. Fix any weak spots before you move phones over.
3. List your numbers. Include every number you use, plus alarm lines, card machines and fax numbers.
4. Build the system in parallel. Users, call groups, menus and voicemail are set up before any number moves.
5. Port your numbers. The new provider requests the transfer. It normally takes a week or two, and on the day calls switch over in minutes.
6. Test, train and cancel. Test inbound and outbound calls, show staff how the apps work, then cancel the old lines you no longer need.

If your team uses Microsoft Teams, ask whether the provider supports Teams calling through Operator Connect or Direct Routing, so you can keep one interface for chat, meetings and calls.

What is VoIP used for today?

VoIP powers far more than office desk phones. Businesses use it for call queues and reception cover, mobile and hybrid working, international numbers without a local office, customer service with CRM screen pop-ups, and video meetings. Apps such as WhatsApp and Zoom use the same packet-based voice technology.

How PurpleBox can help

PurpleBox sets up hosted phone systems for UK businesses, together with the broadband, devices and security they depend on. We handle the audit, number porting, call flows and handsets, and we stay on as your single point of contact afterwards.

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