What is IP Telephony?

IP telephony (Internet Protocol telephony) is a term used to describe technologies that use a variety of protocols to exchange voice, fax, and other forms of information, traditionally carried over the Public Switched Telephone Network (PSTN). The call travels in the form of packets, over a Local Area Network (LAN), or the Internet, avoiding PSTN tolls.

Starting in the mid to late 1990s, the Internet and the TCP/IP protocol began to drive the telephone and communications industry to change. The Internet Protocol became the transport for almost all data communications. Today, all communication carriers are using an IP infrastructure for a part, or for all of their voice services. Most companies have already switched from PSTN to using VoIP (Voice over IP) for their internal voice communications or have plans to implement it as part of their Unified Communications solution.

what is ip telephony

What are VoIP protocols?

Several core protocols power IP telephony:

IP telephony in business

The benefits of IP telephony in corporate environments are numerous, but are mostly narrowed down to cost considerations related to infrastructure and monthly telco bills. Modern VoIP PBX solutions, like 3CX, allow for companies to run the system on existing, non-proprietary hardware as well as low-cost machines such as Mini-PCs. Traditional phone systems and proprietary VoIP systems require extensive implementation of closed architectures, which can cost hundreds of thousands of dollars and are much more difficult to manage, configure and maintain. Open standards IP telephony systems are also much easier and more cost-effective to scale.

The use of VoIP phone systems and VoIP service providers means that phone bills are greatly reduced. This is because companies can easily connect branches in other cities and countries, making phone calls within the company free. Long-distance charges are slashed and overall call rates are much cheaper.

A comprehensive contact center

Business telephone systems are now able to offer much more to companies than standard telephone calls. IP telephony services have ushered in the development of unified communications solutions which can provide a complete communications package all in one, to be run over a single network and on one platform. This means that businesses can easily manage calls, and collaborate using video conferencing and instant messaging in one system. These solutions have also allowed users to make VoIP telephone calls through their smartphones and computers, either with the use of apps or web clients.

Here is what you can expect from an all-in-one business phone system:

  • Unified Communications: Integrating video, voice, chat, and email.
  • VoIP Calling: Cost-efficient IP network calls.
  • Call Queues & Routing: Automatic call distribution (ACD), skill-based routing, and ring groups.
  • Video Conferencing: Secure, high-quality meetings with no additional cost.
  • Mobile App: Allows users to manage calls and messages from anywhere.
  • CRM Integration: Sync with popular CRM tools for better customer service.
  • Call Recording & Monitoring: For quality assurance and training.

Enhance your business communication with 3CX’s unified phone system that integrates voice, video, and chat into one powerful platform. Reduce costs with VoIP calling and optimize productivity with advanced features like call queues, CRM integration, and mobile access. Take control of your communication today with 3CX and empower your team to work smarter from anywhere.

Your questions answered…

In telecommunications, IP stands for Internet Protocol, which is the method used for transmitting voice data over the internet or local networks. In the context of IP telephony, voice signals are converted into digital data and transmitted using the same protocol that governs data communication. This allows businesses to make phone calls over the internet, reducing costs and enhancing flexibility compared to traditional phone systems.

IP telephones work by converting voice signals into digital data, which is then transmitted over the internet using the Internet Protocol (IP). Here’s what happens: 

When a user speaks into an IP phone, the voice is digitized and broken into small data packets. These packets are sent over the network to the recipient’s phone, where they are reassembled and converted back into audio. This process allows for cost-efficient, secure, and flexible communication, eliminating the need for traditional phone lines and enhancing business efficiency.

The benefits of IP telephony are significant for businesses. It reduces costs by utilizing the internet for voice communication instead of traditional phone lines. IP telephony is also flexible, allowing for easy scalability as your business grows. With advanced features like call forwarding, conferencing, and integration with CRM systems, it enhances operational efficiency. Furthermore, IP telephony offers secure, reliable communication, giving businesses peace of mind with data protection. Its innovative approach enables effortless global connectivity, empowering teams to work more effectively from anywhere.

The key difference between VoIP and IP phone systems lies in their scope and setup. VoIP (Voice over Internet Protocol) is a broader term that refers to any technology that enables voice communication over the internet. On the other hand, an IP phone system is a specific setup that uses VoIP technology to manage and route calls within a business environment. While VoIP can be used on any device with an internet connection, IP phone systems typically involve dedicated hardware like IP phones and PBX servers for enhanced functionality and control.

Further reading

Last Updated
This document was last updated on 4 July 2025
https://www.3cx.com/pbx/what-is-ip-telephony/