Why VoIP is cheaper

The opportunities for deriving savings in VoIP arise from the fact that it has a fundamentally different cost base to conventional telephone systems in that it allows you to share costs with your computer network. For example:

Network efficiency
With circuit-switched calls, ports in both the originating and receiving switches are tied up for the duration of a call, whereas VoIP with its virtual circuits, makes more efficient use of available network bandwidth. The integration of voice and data effectively fills up the data communications channels efficiently, thus providing bandwidth consolidation.

Infrastructure investment reduction
VoIP takes advantage of the same equipment that is driving the Internet. The hardware and protocols for VoIP are largely off-the-shelf, interchangeable and developed by numerous vendors.

Lowered cost of expansion
VoIP is more scalable. Traditional telephone networks are geographically restricted by their circuit switches, with a switch required for each service area. With VoIP technology, a soft switch can be installed at the regional level, allowing multiple markets to utilise it, with only limited equipment required locally.

Toll charges reduction
VoIP is used by companies to eliminate call charges between their offices by using their data network to carry inter-office calls. They may also use VoIP to reduce the costs of calls outside the company by carrying them to the nearest point on their network before handing them off to the PSTN. This gives them an alternative to the PSTN that can continue to grow and be scaled to fit their needs.

Network simplification and consolidation
One network is easier to manage than two. Moreover since VoIP exchange is based on software rather than hardware, it is easier to alter, configure and maintain. For Enterprise PBX, for instance, it results a substantial improvement in move/add/change of telephony circuits and substantial reduction in staffing and administration costs.

Additionally, for the service provider, VoIP systems are typically computer applications running on high specification PC servers, rather than traditional telephone switches, which mean the costs of delivering the service are less than that for traditional telephony services.