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The History of VoIP

Voice over Internet Protocol, abbreviated VoIP, is a fairly recent technology. It goes by many names, including Voice Over Broadband (VoBB), Internet Telephony, IP Telephony, and broadband phone.

The advent of the Internet brought with it an abundance of innovation regarding communication. Of course, there was email in the beginning, but then people started wondering whether they could communicate in real-time. This brought about instant messaging, which put AOL in the spotlight as the most popular provider. But, others wanted a more personal connection – they wanted to hear another person’s voice over the Internet in real time, which brings us to VoIP.

What is VoIP?

To put it simply, VoIP is the transmission of voice “data packets” from one IP address to another over the Internet. Developed around 1995, originally it served as a work-around for long-distance and international telephone charges. Less than two decades old, VoIP has revolutionized communication all around the world.

VoIP may not seem like much to the average person – after all, most people these days have cell phones with plans that do not incur high surcharges and fees for long-distance or international calls. But, perhaps VoIP is not for the average person, anyway. When thinking about the usefulness of VoIP, it is important to consider its origins, and what it was intended for to begin with.

How does it Work?

VoIP operates by transferring voice signals between IP addresses, which means that these signals have to transform into pieces of data small enough to transmit. Vocal samples from the sender are broken down into voice “packets,” which are given routing information and sent to the receiving end. The packets transmit one-by-one, then re-form as close to the original state as possible, creating one whole voice. This process compresses the voice signal, and then decompresses the signal for the receiver.

Setting the Stage

VoIP would not exist today if it were not for three major inventions: the telephone, the Internet and perhaps most crucially, Internet Protocol (IP). Invented in the 1870s by the independent duo Alexander Graham Bell and Elisha Grey, the first widely used telephones required an operator at a switchboard to relay calls between the caller and the receiver.

In the mid-1900s, AT&T used new technology to create the touch-tone buttons that home phones still have today. This allowed for the digital switching of calls, eliminating the position of the human operator. The US government soon broke the phone company giant apart, and as a result, people were able to buy their own phones rather than lease them. The deregulation of ownership also allowed for more creativity, which led to new phone designs.

The Internet first made its appearance in the mid-1960s, though it was not the Internet we know today. Originally, it was developed by the Advanced Research Projects Agency Network (ARPANET), and was a rudimentary computer network founded by the US Department of Defense. It was used primarily to provide communications among the Department and the US Military.

With the growing popularity of networks among businesses and other companies who rented them out at the time, the 1980s brought with them a need to bring this technology to the people. That’s when the Personal Computer (PC) started gaining recognition and ground. With these computers, owners could subscribe to an Internet Service Provider (ISP), such as AOL, dial into their networks via telephone lines, and pay by the hour of usage.

With 1989 came the invention of Hypertext Transfer Protocol, or HTTP. Tim Berners-Lee and a group of people at CERN invented this, as well as a Universal Resource Locator, or the URL. Thus came into being the foundations of the World Wide Web. There is one more puzzle piece left before VoIP, and that is Internet Protocol, or IP. Dr. Vint Cerf invented this in 1972, and this defines how information travels between computers.

Humble Beginnings

VoIP started with a company called VocalTec in 1995. They pioneered the first widely available Internet phone. It was called, quite simply, InternetPhone. It allowed one Internet user to call another, and it connected to the speakers and a microphone. No video was available at the time, and the setup required that both users be on the same software.

In 1996, Internet voicemail applications came to life. Users could send voicemails over the Internet to the destination phone. This was also fraught with complications such as poor sound quality, periods of silence, and loss of connection. In the same year, VocalTec announced their Internet phone software in conjunction with Microsoft NetMeeting.

In 1998, VocalTec went on to create computer-to-telephone, and telephone-to-telephone calling capacities for VoIP. This may appear redundant and unnecessary, and that’s because it is. Consumers agreed. By the end of the year, VoIP calls accounted for less than 1% of all voice calls. Perhaps this is because, though the calls were free, the caller had to listen to a series of advertisements before continuing as well as after finishing a conversation.

During this decade, telephone equipment manufacturers and telecommunications specialists began to use the newly developed digital transmissions to their benefit. The idea of transferring information via IP-based packages was appealing for its speed, improved quality and lower cost. They began to add IP capabilities to their switches, and eventually developed software that allowed users to attach a VoIP adaptor into their phones.

Growth and Popularity

VoIP pushed on, and in that same year, three different companies introduced VoIP switching software as standard add-ons in their routing equipment. This accessibility meant that by 2003, the number of VoIP calls leapt significantly to 25% of all voice calls.

The availability of broadband Ethernet service meant that call quality improved significantly, and connectivity was much less of a problem than it was with poorer, dial-up connections. These calls were still rather heavy on the static, and sometimes had connectivity issues as well, but overall this advancement was a big improvement. Users could now browse the Internet, play games and do much more on the Internet at the same time as they made voice calls, and the people responded positively to this change.

Communications hardware manufacturers began producing equipment for VoIP calling that could “switch.” Whereas with previous technology, the participants’ CPUs had to perform the switch of the voice data packets into information that the public telephone network could read, now the CPU had less involvement because the hardware took care of the switch.

Consumers started to recognize that VoIP calling was a great way to avoid fees associated with Internet use and long-distance telephone calls, and they supported VoIP more than ever. Companies that had headquarters around the world also began to take advantage of these perks.

VoIP and the Economy

As the popularity of the Internet and web communication soared, corporations began to feel the pinch of these increased communications expenses. This was furthered when the government began regulating VoIP communications in 2000.

Many companies solved this problem by using the advantages of VoIP to create call centers outside of their countries – in India, for example. This has had a significant impact on the job market. It has perhaps taken potential jobs from Americans and put overseas, but on the other hand, it has increased the ability of companies to provide customer support at all hours of the day.

Some companies resisted this change by increasing the number of shifts for their customer support employees. Still others chose to install customer support services in every single time zone in America to be able to provide 24-hours-a-day service. However, this caused operating costs to soar, and it was largely unsustainable for most.

Many companies tried to cut costs by merging their voice and data networks. However, VoIP calls were still simply not up to snuff. The quality of calls was still relatively poor. Internet Telephone Service Providers (ITSPs) rose to the occasion and elevated their business by upgrading telecommunication quality and charging a small fee for the increased quality.

Now that the Internet, telecommunications and VoIP were saturating the economy, the country started to see a sort of bottleneck congestion of the markets. The US Government still had very little regulatory influence over VoIP.

This led to the emergence of small communications companies that sought to make money off the boom without big regulations. These companies offered consumers pre-paid calling cards, so that users could place long-distance and international calls at only a small fee, and long-distance calling became something of a commodity.

Skype Enters the Scene

2003 saw Skype launch its beta software, and it quickly gained national attention. For one thing, Skype allowed people to make computer voice calls completely free of charge. They also developed their own instant messaging service – also free –, which gave users more options for communication, making it much more universal.

Skype’s major advantage was that it was able to rapidly evolve and grow to accommodate users’ needs. Soon, users were even able to use Skype to call landlines and cell phones. These services came at a charge, but one that was much lower than many other VoIP providers’ costs at the time, as well as today.

In 2005, Skype blew up the scene again when they introduced video chat into their software. Today, that’s what Skype is best known for. They were very successful in integrating video chat, and it obviously filled a void in the market. Virtually everyone who has access to the Internet these days knows what Skype is, and associate it with making video calls. Skype made itself a benchmark for any other VoIP company in the market.

One disadvantage of Skype has been that their closed networks, while offering free and inexpensive calling, have limited the users’ freedom of choice with regard to third-party software and hardware. Skype has gained a sort of monopoly on the industry in this way.

Mass Communications

In 2004, around the same time that Skype became the reigning king of VoIP calling, several companies sprung up that were full-service VoIP providers. They often provided unlimited domestic calling services for a flat rate, and free calling for those using the same VoIP provider. A user with a VoIP phone can connect to a provider in one of three main ways:

  • Ethernet and Wi-Fi: VoIP phones can connect directly to the IP network using either of these two technologies. This is the most traditional option.
  • Analog Telephone Adapter: This connects to the network and operates an analog telephone, which connects through a wall jack.
  • Softphone: This is an app installed on a computer, equipped with speakers and a microphone, and/or headset capabilities. The phone interface displays on the monitor, operated with clicks or typing the numbers to “dial.”

Companies at this time began to take full advantage of VoIP calling capabilities. VoIP enables voice and data communications to travel on the same network, greatly reducing costs. These companies created unified communications bases, which service all forms of communication, including faxes, phone calls, emails, voicemail, web conferences, and more. These are all treated individually and delivered to any phone, including mobile phones.

Skype got in on this game as well. They began to offer VoIP services to corporations and companies, both large and small, providing free connections between Skype users among the company, and connecting with any public service telephone for a small charge.

Even the US Government was not exempt from heeding the siren song of the VoIP service. The Social Security Administration began converting their field offices, with tens of thousands of workers, to a VoIP infrastructure, and they are transferring over their data network as well.

The Scope of Communications

Advances in technology meant there were several ways in which a person could communicate with another via VoIP:

  • PC to PC: Both persons required a sound card, microphone, and speakers, or a headset
  • PC to Phone: Only the PC user required a headset, and the recipient gets the call to their phone
  • Phone to Phone: Only the caller requires a VoIP adapter, and the recipient gets the call on their phone
  • IP Phone to Phone: The caller uses an IP phone, and the signal is transmitted over an IP network to the recipient’s regular phone
  • IP Phone to IP Phone: The call travels over an IP network from both ends

Session Invitation Protocol

Session Invitation Protocol, or SIP, began to take shape in the early 2000s as well. SIP means that a person must initiate a VoIP conversation by inviting another party or group of people into the conversation. This technology has been since widely used in instant messaging and chat groups, Skype software, group and work conferencing, and much more.

SIP allowed developers and creators to overcome the limitations of hardware necessities. Developers could create applications that could comply with any phone system, which would in turn lower the cost of VoIP software. SIP is much safer than earlier VoIP standards, providing a secure network for all parties involved.

Another benefit of SIP is that it can be used in just about any device that is associated with communication: PCs, Macintoshes, phones and smartphones, video devices, etc. Microsoft enabled all of its devices to use SIP technology. This means that a person could use SIP to communicate no matter where they were. SIP knew where to reach a person if they were not home, and connected with whatever device they had on them at the time.

Many people enjoyed the fact that SIP inherently supported Peer-to-Peer (P2P) capabilities. This means that the communication did not depend on servers or gateways, or any other auxiliary devices. Finally, SIP’s structure was similar to the web’s Hypertext Transfer Protocol (HTTP). Programmers loved this fact, because it allowed them to easily develop and adapt the software, as well as understand it.

VoIP Today

With the plethora of technological advancements, such as broadband, and later Wi-Fi, capabilities, the integration of phones, computers, and other devices, and the emergence of Skype as a completely revolutionary model for the way people want their communications to operate, VoIP has become an integral part of the day-to-day lives of many people throughout the world.

Many use VoIP technologies to keep in touch with family members overseas for cheap or even free. Many VoIP services are combined with computer faxing capabilities. Companies use VoIP to conduct work conferences and keep costs down. Skype has become a leading way to speak with someone and see him or her at the same time – something that once was just a technology of the future!

The future of VoIP is a bright one. It simplifies many communications processes, so that phone and ISPs are attracted to VoIP for its lower expenses, and its convenience. It also offers a greater degree of flexibility than other means of communication, because it can be used to communicate to and from just about any device that can receive calls.

The flat rate fees that most VoIP providers use is much lower than the per-minute fees of traditional communications. The call quality is improved greatly due to technological advances – an example of this being that multiple people can attend the same call.

VoIP is now one of the most talked-about technologies in the communications industry. Its growth over just a few decades has been astounding, and there is no telling where it can go from here.

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About Johnson Hur

After having graduated with a degree in Finance and working for a Fortune 500 company for several years, Johnson decided to follow his passion by embarking on a path to the digital world. He has over 8 years of experience with large companies setting marketing strategy.


  1. Actually VOIP in the sense of phone service via computer network predates the Internet. The first call I’m aware of was made by Steve Casner at the USC Information Sciences Institute (ISI or USC-ISI) after we and a similar group at MIT Lincoln Labs did the first real time speech connection on ARPANET in August, 1974. Use of VOIP phone calls spread fairly quickly in places that were then doing network research and were early adopters of NVP (Network Voice Protocol).

    ISI and others also extended NVP into NVCP, Network Voice Conferencing Protocol. If you can find it, in 1977 ISI produced a film that illustrated the telephone interconnect by having project leader Danny Cohen sail his Hobie Cat up to a transient dock in Marina Del Rey, leap out and rush to a phone booth, then call in to ISI to join a network-based conference in progress.

  2. VoIP stands for Voice over Internet Protocol. It is also referred to as IP Telephony. Thanks for sharing this helpful information.

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