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How Does VoIP Work?

Jargon Buster: How Does VoIP Work?

 How Does VoIP Work

How Does VoIP Work? This is a quesion we are asked all too frequently and Wizards believe our job is to demystify the technology world and make it easier for our clients to understand how that technology works for them, if you have any questions such as How Does VoIP Work please contact Wizards on or 0333 241 7707.

Ian Charles and Chris Comley Wizards Ltd discussing How Does VoIP Work

ATA = Analogue Telephone Adapter

This is a small device with an RJ11 phone socket and an RJ45 Ethernet socket. It essentially converts a regular PSTN phone handset into a VOIP handset. The handset provides earpiece/speaker, microphone, and dialling buttons. The ATA provides the CoDecs, connection to the PBX or SIP Gateway, etc. Normally configured via a Web GUI. Wizards can provide an ATA in conjunction with our hosted VoIp service Horizon for users who prefer to keep their exsting phone system - often an expensive DECT cordless system - rather than use one of the new phones available on the system. An ATA is one type of VoIP Gateway, see below.


Nothing new here. With VOIP, as with PSTN, a "call" starts when someone picks up a phone and dials a number, and ends when the phone is hung up. The differences are "under the hood". If it can, your VoIP PBX system will route the call via VoIP, if it can't, it will work out the cheapest route via ITSP Gateway or via your regular telephone trunks. An incoming call via PSTN or VoIP will arrive at your VoIP PBX and can then be routed to your desk via DDI, via an AutoAttendant, or via a traditional receptionist answering the call and forwarding it to you.

Carrier PreSelect - CPS

In the dark ages, you could only buy your phone lines and calls from BT and before that the GPO. Then the government allowed other companies to offer competing services and the first was Mercury (now part of Cable and Wireless). To use their service, you would dial a short code before starting to dial the number you wished to reach, or buy a phone with a blue "Mercury button" to press at the start of every call with the blue button dialling the number for you. 

There are now a huge number of companies who provide "call minutes" other than BT, even if you still rent your line from BT you can choose who to buy your calls from. The "pre-dial" code is still the traditional method of asking to buy your call off one of these suppliers instead of BT, but now you can "pre-select" your call supplier (carrier). Once you have pre-selected your calls onto a carrier's service, then you no longer need to dial the pre-dial code, you just dial the destination phone number and the call is routed to that carrier automatically.

Given you may not be ready for a VoIP system yet, Wizards offer CPS services with calls at a competitive low cost, with per-second billing and no call setup charge, no minimum call duration. For more detail please Wizards on 0333 241 7707 or use

Centralised Billing

This is an important administrative feature not a technical one. Centralised billing replaces a whole waste paper bin full of different invoices for broadband, phone line rental, phone calls, bandwidth, domain hosting, etc., delivering a single monthly invoice detailing ALL of the items due that month itemising the phone calls etc. It's your choice if you have one single centralised bill covering the whole company, or a bill for each separate location, or bills sliced and diced as you wish. To save time and money we prefer to send bills using an emailed PDF each month rather than a paper bill by post. If you require more information about how Wizards can simplify your telephone bills, please contact us using or 0333 241 7707.

Circuit Switched

Circuit Switched describes the way the "traditional" telephone system works. When telephones were first developed, calls were connected by operators using plug exchanges. More recently calls were routed from the dialler’s keypad which instructs the exchange electronically where you are calling (local or long distance, if long distance then which far exchange to go via) and the exchange equipment sets up the links between your line and the destination. So, even on a fully circuit switched modern system, you still use up an entire physical circuit from your phone handset to the far end for the duration of the call which is wasteful and what the telephone companies are moving away from.

The opposite of Circuit Switched as above is Packet Switched with voice calls compressed into packets and sent using Internet Protocol with many calls on the same line.

In fact, telephone companies have been using VOIP internally for some time, so if you make a call from UK to Australia today, even if you dial from an ordinary land line to an ordinary land line, the phone company will route the call via an VOIP "tunnel" between your local exchange and the exchange at the far end. If the tunnel won't go all the way; if for example Wonga Wonga does not have VoIP capability yet) then the tunnel will still go as far as it can before "breaking out" back into a switched circuit.

CoDec (en) CoderDeCoder

This is a piece of software which will encode non-digital data (speech in the case of VOIP) into a digital data stream that can be stored on computers or transmitted over digital networks, and DeCode the digital data to re-create the sound stream.

CTI = Computer Telephony Integration

This is a blanket term for software which runs on the user's PC, and communicates with the user's phone. Stated simply this allows a PC to add phone features similar to those on a mobile phone such as a list of recent phone calls, missed phone calls, etc., and perhaps a basic directory system. Calls can usually be initiated by clicking on the number on-screen then picking up the handset.

DDI = Direct Dial In.

A DDI number can be assigned to an individual, or a team, or a service. It allows calls to go directly to that user or group without being handled by a receptionist, e.g. a "sales" number would ring phones in the sales department as soon as the caller dials, a personal DDI number would ring the extension of the user.


A VoIP Gateway is a hardware device allowing a VoIP system to interact with traditional connections. For example the Patton Smartnode allows us to connect ISDN2 or ISDN30 lines to a 3CX PBX, so the PBX can make or receive calls via the ISDN circuits as well as or instead of the VoIP trunks.  Similarly, we can provide a Gateway which appears to a legacy PBX to be an ISDN-30 line but actually it's connected to a Sip Trunk, allowing a PBX with no VoIP facilities to make use of Voip trunk services.


Handset means the telephone apparatus you have on your desk.

Hosted System or Cloud based System 

Cost savings are driving the market toward subscribing to a Hosted or Cloud Based System where instead of PBX systems and installing them in your office(s), the PBX system is owned and run by the service provider and runs on big computers in their hosting centre. The client just owns the phone handsets, which log into the PBX over the internet.

ISDN = Integrated Services Digital Network.

Introduced the 1980s this was the first generation of "digital" telephone signalling technology after the original PSTN services. The ISDN line presents on a single copper pair between you and the exchange, unlike PSTN however, ISDN carries a number of "channels" of digital information "multiplexed" on to the cable. In this way the cable spends some time carrying channel 1, some time carrying channel 2, then channel 3 and so on back to channel 1 again. Connected equipment breaks down the information to be carried, be it a voice call, fax, etc., or an internet connection, into packets, and then packets from each of the active services are sent or received in turn.  An ISDN2 circuit has three channels, two data channels capable of carrying up to 64kbits of information each, and a "control" channel of 16k. The control channel is reserved for the exchange equipment to talk to your equipment and decide what calls to make, what sort of data is being carried, etc. The two data channels can be used separately or together (bonded) to make or receive two calls at once, or one 128k data connection. Similarly, ISDN30 has 31 channels (30 x 64k data and one 64k control).

ITSP = Internet Telephony Service Provider.

Analogous to the term ISP (Internet Service Provider) as a provider of IP telephony services but is not widely used now.

Packet Switched.

The underlying technology for VOIP is "packet switched" which is the same technology the internet uses for web pages, emails, file transfers, etc.  Data to be transmitted be it a web page or the next few seconds of your telephone call, is assembled into "packets" of a size which can be handled by internet routers. Typically, about 1500 bytes, each packet is assigned a number and passed to the router to transmit. At the receiving end, the router notes the numbers of arriving packets, and uses them to make sure it has ALL the packets (or it requests a retransmission of anything missing) places them in the right order and hands them over to the receiving application. 


A PBX (Private Branch Exchange) or PABX (Private Automatic Branch Exchange) is functionally the proprietary hardware phone system companies have used in offices for decades.

PSTN or POTS = Public Switched Telephone Network or POTS = "Plain Old Telephone Service"

Both terms refer to a single "ordinary" telephone line such as you may have at home which can carry just one phone call at a time, and, optionally, may also carry your ADSL "Broadband" service. This technology has been largely unchanged since the telephone was first invented. The PSTN line is a pair of copper wires that run all the way from the back of your phone or fax machine via poles, down holes, and ends up being hard-wired to a port on the exchange equipment down at the BT telephone exchange building nearest to you. It is the basic building block of the Circuit Switched telephone network.


A SIPTrunk is the "VoIP" equivalent of one or more traditional or ISDN digital phone lines plugged in to the back of your PBX and connects your PBX to the gateway server allowing you to make and receive calls from/to your PBX and its extensions via VOIP rather than over traditional PSTN/ISDN lines.

Wizards can assist with SIP Trunk services starting as low as 2 concurrent channels, and can provision such geographic or non-geographic telephone numbers as may be required; for more information, please contact Wizards using or 0333 241 7707.


A Soft Phone is an IP phone which exists entirely as a program running on your laptop, PC or smartphone. It allows you initiate or answer calls from a VOIP system without additional hardware, and by deploying these remote users have full access and functionality as if they were at their office extension.

A softphone should not be confused with a CTI program - though some software acts as both or either.


A "true" VOIP PBX is one which has been designed primarily to work in the VOIP world, though it generally still supports one or more types of "traditional" phone trunk (PSTN, ISDN) and may support PSTN extensions.

A "hybrid" VOIP PBX is a legacy PBX which has optional extra features plugged in via hardware or software to support some or more VOIP features.  

VOIP phone/VOIP handset

Essentially a normal telephone but plugged in to your main office network instead of plugged into a BT line or a dedicated extension line to the PBX. A VOIP phone can work either in conjunction with a VOIP PBX, or by being signed in to an account on a SIP Gateway. Or both.

NOT to be confused with "USB phones". A USB phone plugs in to your PC and provides buttons, mike and speaker but does NOT have full IP-phone capability. It would require on Softphone software running on your PC to operate.


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