10 Terms to Understand When Looking at Business Phone Systems

If you’re just starting to look into business phone systems, you might be a little confused by all the

jargon surrounding VoIP. While it’s important to educate yourself about the technology you’re using, the

good news is that these acronyms describe a fairly straightforward technology. So, stick with us and

you’ll be able to talk about VoIP like an expert.

Voice over IP (VOIP): VoIP is the technology that is used to transmit voice over the Internet. The voice is

first converted into digital data which is then organized into small packets. These packets are stamped

with the destination IP address and routed over the Internet. At the receiving end the digital data is

reconverted into voice and fed into the user’s phone. Cloud Based or Hosted Voice business phone

systems are referred to as “VoIP” phone system as they are powered entirely by the Internet.

IP: IP, Internet Protocol, defines the way data packets, should be moved between the destination and

the source. More technically, it can be defined as the network layer protocol in the TCP/IP

communications protocol suite. If you think of VoIP as a highway, IP is like the exits that define where

data gets on and off.

Kbps: Kbps is the acronym for kilobits per second and is used to indicate the data transfer speed. If the

modem speed, for instance, is 1 Kbps then it means that the modem can route data at the speed of one

thousand bits per second. It’s important to know how many Kbps your router and modem have to make

sure your office gets the clearest call quality possible.

Bandwidth: Bandwidth is the volume of data that can be transmitted over a communication line in a

fixed amount of time; expressed in bits per second (bps) or bytes per second for digital devices and in

cycles per second, or Hertz (Hz) for analog devices. When speaking with a specialist about business

phone systems, they may ask about your Internet connection or bandwidth to make sure that your

office is set up to handle the demands of VoIP.

SIP: SIP, which is the acronym of Session Initiation Protocol, is an IP telephony signaling protocol. It is

primarily used for voice over IP (VoIP) calls, though with some extensions it can also be used for instant


SIP Phone: A SIP phone is a telephone that uses the SIP (Session Initiation Protocol) standard to make a

voice call over the Internet. Not all phones are SIP-enabled. When comparing business phone systems,

ask your prospective providers if they support your phone or can make a recommendation of SIP


Softphone: This is a software application that is installed in the user’s PC. It uses the Voice over IP

technology to route voice calls over the Internet. The audio is provided through a microphone and

speakers plugged into the sound card. The only limitation of a Softphone is that the phone call has to

made through a PC. This type of phone is great for when you’re traveling and want to be able to make

calls from your laptop with nothing more than the use of just a headset.

PBX (private branch exchange): A telephone switching system that interconnects telephone extensions

to each other in-house as well as to the outside telephone network. PBX is the same thing as a phone

system. Today there are two architectures for PBX’s: On-premise or Cloud based. On-premise is the

same thing as a traditional phone system. Cloud based is the same thing as a hosted PBX or hosted


Hosted PBX: An Internet telephony solution that follows the Software as a Service (SAAS) model by

hosting phone system equipment in remote datacenters. Remember the old closet full of equipment

that your office used to have years ago? That’s an on premise PBX. The Hosted PBX model only requires

SIP phones and an Internet connection. Most SMB’s that use a hosted PBX will also purchase a VoIP

router and PoE Ethernet Switch. This is much less expensive than the equipment required for a

traditional system.

DID (Direct Inward Dialing): A hosted PBX and an On Premise PBX’s can both offer DID services. A

service provider (telephone company) provides a block of telephone numbers for calling into a company.

These numbers can be routed to the receptionist phone, the sales group or the voicemail system. DID’s

make it affordable for customers to assign individual phone numbers for each person within the

company without paying $35 or $40 per line/number.