VoIP Isn’t Cheaper

Business decision makers who opt to switch to newer technology often think  that continued innovation means technology is getting more reliable and less expensive. In the case of VoIP technology though, the benefits aren’t as straightforward. The advantage with VoIP isn’t that it’s necessarily cheaper or more reliable. VoIP is more flexible and adaptable to changing business needs. It allows easy integration with all kinds of business software.

Let’s take a closer look at VoIP from the end user prospective. The traditional TDM network we all used to rely upon in 80-s and 90-s boasted plenty of features and was highly reliable. It  was also expensive for the phone companies to operate and grow. It was particularly costly to deliver large amounts of bandwidth for newer Internet technologies. Not having been designed to carry high volumes of data, TDM couldn’t efficiently accommodate the exponential surge in demand for extra bandwidth.

In order to meet this demand, telephone companies turned to much cheaper Ethernet-based technologies specifically designed to carry data traffic. Ethernet is significantly less expensive to deploy but it is only capable of transporting data across the network. This is where Voice over IP comes in. Instead of voice running on a separate dedicated network, Voice over IP protocol allows for running voice as part of data traffic, emulating many of the TDM features.

So this must be a great way for phone companies to make more money and get rid of costly TDM right? Right! This, however, does not translate into cost savings for the end user.

Sharing both data and voice information over Internet protocol means that your voice data is competing with other data for the fixed amount of bandwidth available to the end user. But voice data is far more sensitive to network congestion than typical web data such as browsing. Prioritization of traffic and QoS can help, but these aren’t always capable of supporting rapidly-changing bandwidth demands on data networks. This can have a huge impact on call quality and reliability, in comparison to the older TDM network. Here, each call was guaranteed its own bandwidth channel. This meant a highest possible degree of reliability; if your call got completed, you never had to worry about quality during the call.

The network upgrades needed to properly accommodate voice data aren’t simple either. Responsibility for making the network compatible with VoIP lays not just with the telecom operator, but also with the end user. Thus by getting rid of their “Phone guy” along with the TDM phone system and wiring, a business now had to give more responsibilities to their “IT guy”. This person was now responsible for ensuring the network was also able to support QoS (Quality of Service) and PoE (power over Ethernet). This obviously doesn’t make it less expensive for the end user to deploy.

Naturally, telecom operators realized that they now only needed to maintain their data network rather than the more expensive voice network. This allowed for savings on maintenance. As their customers began to invest in upgrading their data networks to support VoIP, telcos started to quietly raise their prices (often by as much as 400%). The average cost of a traditional business phone line in Illinois is now over $70/month.

Unfortunately in the midst of the marketing push for global VoIP adoption, phone companies and VoIP service providers often omit these details. They instead focus on the multiple benefits of VoIP technology and potential cost savings.

So what is the real benefit of transitioning to VoIP? VoIP offers customers amazing ease of integration with other business Internet applications. Various protocols including fax, voicemail to email, online real-time chat and others have made Unified Communications features easier than ever to implement. With no network congestion, wideband codecs offer extremely clear voice call quality. This is invaluable in a verbal communication-heavy business, and is of much better quality than the traditional encoding used by standard POTS lines.

In short, VoIP offers multiple benefits to businesses. These include cost effectiveness of scaling, better call quality when correctly provisioned and maintained, integrated communications features and more. However that doesn’t mean that the initial cost outlay to switch from a traditional line is low, or that reliability is necessarily better. VoIP offers advantages in many other ways.


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