How Does an IP Phone Work?: A Complete Beginner’s Guide

How Does an IP Phone Work

Did you know that, according to Global Market Insights, the market size of the VoIP industry was $30 billion in 2020? Additionally, this industry is expected to grow with a compounded annual growth rate of 15% between 2021 and 2027.

If you’ve been thinking of getting an IP system for your business, then you might be wondering: “How does an IP phone work?

You might also be wondering how it’s different from a landline system and what the benefits of VoIP are.

If you don’t have any of this information, then you might not be sure about making the switch. After all, there are so many office phone systems out there. It can be overwhelming to try to decide which one is best for your business.

That’s why we’ve put together this article. In it, we’ll cover everything you need to know about voice-over IP systems.  That way, you can decide if a VoIP system is right for your business.

Finally, you can have a communications system that serves all your needs, improving your business communications so that your business grows faster than ever. Read on to learn more.

How Does an IP Phone Work

How Does an IP Phone Work?

If you’re wondering, “What is VoIP, and how does it work?” we’ll answer that question here. First of all, it helps to define what VoIP means. “VoIP” is short for “Voice over Internet Protocol.” So the short answer is that an IP phone works on the Internet.

When you’re using a traditional landline phone communications service, you’re hearing the other person on the phone through analog signals.

With VoIP systems, the difference is that these signals are made into digital data. So you don’t need a phone connection anymore because this data can be carried online.

This means that your communications can now be done with computers, laptops, tablets, and other devices. With so many people having data on their phones, you can do these calls from phones, too.

You can even have an IP phone that looks like a normal phone but that’s actually Internet-based.

So if you prefer to have a receptionist out front sitting next to a phone, you can still have that traditional phone with all the benefits of VoIP technology.

How It Works on the Micro-Level

In this section, we’ll answer the question, “How does a VoIP phone system work on the micro-level?” First of all, the analog information that is usually carried on a traditional phone line is turned into data packets.

Then, the data packets travel through the online network. It arrives at the device of the person on the other end of the “line” the same way a social media notification or email might arrive on any Internet-enabled device.

The Different VoIP Options

If you’re wondering, “How do VoIP phones work?” the answer is that it depends on what VoIP option you’ve chosen for your business. There are three different types, including analog telephone adapters, computer-to-computer, and IP phones.

Analog Telephone Adapters

The most popular and easiest-to-install VoIP system is one that uses analog telephone adapters, also known as ATA. When you’re using ATA business VoIP solutions, all you have to do is receive an analog telephone adapter.

Then, you connect your phone to the ATA, which turns the analog signals you ordinarily create when speaking into the phone into the data packets we mentioned above.

Then, you’ll connect the phone to the Internet instead of to a traditional landline. This way, the data packets can travel to the person on the other end of the “line.”

When it comes to answering the question, “How does VoIP work with ATA technology?” the answer is that it’s as simple as can be.

If you don’t want to do a huge overhaul of your communications, this can be a good VoIP phone service for your small business.


Another one of the best office phone systems is the computer-to-computer VoIP type. With this type, you aren’t bothering with phones at all. Instead, you’re doing everything through your computer. When is it most useful?

If you have a team that works fully remotely, this can be a useful form of technology to have.

This way, everyone can be connected in the same communications system without you having to invest in special phones or wiring for everyone.

It can also be helpful if you want to be able to have people connected to the phone system while at their computers.

For example, if you have a sales team that needs to have their sales options open while speaking with customers about them, you can simplify communications by having them do everything online.

To install the computer-to-computer VoIP solutions for your small business, you only need a few extra pieces of hardware and software.

These include a microphone and speakers (or a headset), a soundcard, an Internet connection, and software from a VoIP provider.

IP Phones

If you’ve been wondering, “What is a VoIP phone?” we’ll answer that question in this section. Basically, when you have an IP phone, it looks and works during everyday use like a traditional phone. The only difference? It’s all based online.

Instead of being connected to a phone line, an IP phone is connected to an ethernet cable. For this reason, what you’re hearing when using them are data packets that sound like analog signals.

If you’re wondering, “How does VoIP work with IP phones,” it’s that it works as easily as possible. This is a great solution if you want to switch to VoIP but your employees prefer a traditional communication service.

You can also have mobile IP phones. These will be on your VoIP system but can be taken anywhere, which is useful if you have a remote team or want to be able to take calls when you’re out of the office.

The Advantages of VoIP

Now that we’ve answered the question, “What does VoIP do?”, explained what VoIP meaning is, we’ll review what the advantages of VoIP are. These include low cost, more flexibility and mobility, good call quality, text messaging integration, and more.

Low Cost

When you have a traditional phone system, the information carried through the analog signals takes up a large amount of space in a limited connected telephone wires system. For this reason, it’s more expensive than a VoIP phone system.

When you have a VoIP phone system, the data carried through it takes up less space. The Internet has far more availability. The cost is nearly minimal.

Where you can really see the cost difference is when you’re making long-distance or international calls.

When you make these types of calls on a traditional phone line, rates are exorbitant and old-fashioned.

This is why so many companies prefer to do calls over Internet-based software solutions when calling partners internationally or in another state.

By switching your entire communications online, you can save money with a VoIP phone service.

More Flexibility and Mobility

One of the big reasons why many businesses choose to switch to VoIP phone systems is because it offers them flexibility and mobility. For example, let’s say that you’re waiting for an important call at your office, but you need to leave for lunch.

With a VoIP phone system, the call can be forwarded to your cell phone after it has gone through a few rings in your office.

You also have more flexibility, since you can have endless call forward options with a VoIP system instead of having to have multiple lines installed in your office.

It’s also a more mobile system that can be used for a team that’s based remotely or has offices throughout the country.

Because it can be used on any number of devices in any number of places, you can access your business communications from nearly anywhere.

If you’ve recently turned your business into one where your employees work from home, this is a great solution.

Good Call Quality

To avoid many of the call quality issues that are associated with long-distance or international phone calls, you can use a VoIP service. It’s also far better than connecting with people who are in an area where there might not be great reception.

Because you’re connected to the Internet, the call quality is stronger than it is with a traditional phone line.

Text Messaging Integration

If you really want a high-tech communications solution that allows you to send texts to your customers, then a VoIP phone solution is for you. If you set up an appointment online, then a text can immediately go to your customer to confirm it.

You can also send reminder texts to your clients about the appointment. Additionally, you can improve your customer relationships by sending them a thank you text after they’ve made a purchase, for example.

Considering how many millennials as well as Gen Z adults prefer texting to talking in person, this can help you expand the millennial portion of your customer base.

Better Team Collaboration

With a VoIP solution, everyone in your business is connected to the same VoIP communications system. This will make it easier to forward messages, voicemails, emails, and other forms of communication.

Additionally, if you’re setting up a company call, it’s easy to get everyone on the call. You won’t have to bother with setting up a  Zoom or Skype call; instead, everyone can connect through the system itself.

Whether they prefer to call in or to connect with their computer with a headset, this makes it easier for everyone to work collaboratively and meet whenever necessary.

More Voicemail Access

Many VoIP systems have additional features you can add, including the feature that makes it possible for voicemails to be changed into emails. If you have a client who has to call in with important information, you suddenly have it in writing in front of you.

You can also forward voicemails to different people on your team, as well as the voicemails turned into emails.

This can be especially useful if there are multiple working with one client, but each person handles a different part of the service you’re providing.

Automated Call Waiting

Another feature you can get with a VoIP system is automated call waiting. This means that you won’t have clients or potential business partners who get impatient waiting for your receptionist to get back from their lunch break.

Instead, the phone system will transfer their phone call to the person who needs to answer it. And if that person is out of the office? They can still get the phone calls forwarded to their cell phone when they’re out of the office.

Online Faxing

Even though most businesses don’t use faxes anymore, you might need to when it comes to certain sensitive or confidential documents. Instead of having to deal with a separate phone line for these faxes, you can simply use the VoIP online faxing feature.

Need More Information?

Now that we’ve answered the question, “How does an IP phone work?” and have gone into the different VoIP options and advantages, you might need additional information. Maybe you want help figuring which VoIP option is best for your business.

Or maybe you want to find out about the different VoIP service providers available out there.

Whatever information you need, we can help. At MetroDataSystems, we’re experts when it comes to VoIP systems. We also set up businesses with the right provider for them.

To learn more about how we can help you, contact us now.