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VoIP Telephone Service Vs. Traditional Phone Service: Understanding How It Works

  • Posted December 3, 2006
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  • in category VOIP

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Over the past 6 years I have been watching the growth of the Internet Based Telephone Industry. With the bursting popularity of Broadband or High Speed Internet like DSL, Cable Modem, or Satellite, telephone service has become a natural addition of applications to run over the Internet.

Many people are not aware that most of the major telephone companies use the Internet to route their long distance calls already and have been for years. They use a protocol called SIP (Session Initiation Protocol) to offer Voice Over IP (VoIP). This same protocol is available in many of the leading messaging programs like Skype, MSN, AOL, etc … For many years people have been using this protocol to talk over long distances on their computers using programs called “Softphones”. Softphones are basically computer programs that run on computers and use the sound card in a computer to convert analogue sound, like a voice, to digital packets that can be carried over the Internet. Then some program or device on the other end can decode the packets and play them back. Of course it goes in both directions. Thus you can use it like a telephone.

This same softphone technology is being embedded in small devices called Analog Telephone Adapters or ATAs. These devices have really become popular in the past few years and the quality of the devices have greatly increased. ATAs basically connect to a normal telephone in your house on one side and to the internet on the other. The ATA acts as a gateway translating the sound from the telephone into SIP that goes over the internet and eventually to the phone system where it is decoded and passed on to regular telephones.

Many companies over the past 5 years have tried to make a business plan using ATA devices. The most popular is Vonage. Vonage has spent literally 10s of millions of dollars on advertising and have established a good market. Their latest adds say they are a million customers strong. I can remember when they were just in a few local markets. Many companies have followed their lead like USP Connect, Packet8, Sun Rocket, etc … All these companies have worked out agreements with national and international carriers like ATT, MCI, WorldCom, etc… to pass to them SIP traffic and vice versa. This allows them to offer full residential telephone service over the Internet. The dirty little secret that telephone companies will not tell you is that, it is whole lot cheaper to route with SIP than normal analogue phone systems. Therefore, since these new companies do not have to pay for copper telephone wire in the ground like most telephone companies, or for big analogue based switches, their prices are a lot cheaper. Also, Internet based telephone systems are not taxed like local telephone companies. It is not uncommon to get telephone service from $9.99 for 500 minutes a month to $24.99 for unlimited long distance and local calls. You may have to pay a federal excise tax of $2.00 or so, but not all of the crazy taxes and fees like a company like Qwest would charge. It is impossible to understand the bill most of time with Qwest. Qwest, Verizon, SBC, Sprint and other local traditional telephone companies can charge more than $20 a month in taxes and fees. They advertise a $20.00 a month special but then add $20.00 in taxes and fees which are never explained to you. They also have a nasty habit of selling your telephone numbers to telemarketers that inundate you until you can get on the National Do Not Call List. On top of that they will charge you extra for Long Distance. I am always amazed the way people are brainwashed to think they are getting a good deal at $20.00 a month when in reality it is more like $55-$75 a month with taxes, fees, and extra packages.

The other thing you get with SIP based phones are all the new bells and whistles like Call Waiting, Call Forwarding, Voice Mail, and 3 Way calling without additional cost. It is just included in their base packages. International calls are also significantly less expensive as well. It is not uncommon to be able to call Asia for 2 or 3 cents a minute or Europe of 1.5 cents a minute.

Additionally, now it is possible to take an ATA anywhere in the world and call another ATA anywhere in the world on the same network for no long distance cost at all. All you need is a high speed internet access and just plug it in and connect it to a phone. You can get your local calls anywhere. You also can have virtual telephone numbers anywhere. If you live in one state, but would like people in another area to call you at no charge or with a local call, you can get a telephone number from that area and have it virtually routed to you ATA where ever you are. So you can have numbers in CA, NY, FL and WY all ringing the same ATA. You can get virtual 800 numbers. Never have anyone call you collect again. Give you children an 800 number to call you from college or from a payphones where ever they may be. This is really an exciting industry and growing quickly.

Now there are some Cons to this type service. If the power goes out, the ATA turns off. So does your TV, refrigerator, air conditioner and all of your cordless phones in the house anyway. However, since you are not connecting to a computer, it can break without any repercussion on your service. The use of 911 is becoming more available with the advent of E911. Congress has mandated that all VoIP providers now support E911 that acts the same as regular 911. However there are some older areas in the world that are not equipped to receive E911 so the best the provider can do is give you the general emergency assistance number there. If you live in areas like this, use a cell phone for emergencies or keep a local land line for emergencies and dial long distance over SIP. It will still save you hundreds of dollars a year. You also may need a little assistance setting it up if you are technically challenged. However, be rest assured it is a one time setup of plugging the right wires where they go and you are off and going. So don’t be scared if you are over 60 years old. Your generation can benefit too from this technology.

The best thing is that this industry is very competitive. Because of the low cost of the service, companies can do some attractive marketing plans. I personally use USPConnect because they offer a very aggressive referral program and have a very high quality of service. If you would like more information go to

So don’t believe the hit pieces placed by local telephone companies bashing VoIP based phones. They are running scared. It is becoming very apparent that in the future traditional telephone service will become obsolete. They are all moving to VoIP, so you should too and take advantage of the great savings! I personally believe that telephone service should be free and I can use the money I save to go golfing or something.

This ain’t your Daddy’s old land line Telco anymore! Times are a changin’.

Wilford Lee
Technology Consultant


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  • Posted On December 3, 2006
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