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Grow Your Business Technology

What Is SIP Trunking? Do You Need It for Your Business?

image for fizkes / Getty Images
fizkes / Getty Images
  • SIP trunking can significantly cut costs and increase reliability for your business phone system.
  • To determine the right service for your business, you need to research and carefully assess your business's communication needs.
  • SIP trunking pricing is based on several factors, like your vendor and add-on features.

As a small business owner, you're always looking for ways to cut costs and optimize your business. SIP trunking is an increasingly popular way for businesses to minimize their phone costs and improve their telecommunication bandwidth, but it can be a difficult service to understand. We broke down what SIP trunking is and how you know if it's right for your business. 

To put it simply, SIP trunks are virtual phone lines that allow you to make and receive calls over the internet to anyone in the world who has a phone number. 

SIP stands for Session Initiation Protocol, a popular telephony protocol that initiates calls over the internet and is primarily used to manage multimedia communications, like voice and video calls. SIP establishes and terminates the connection for a phone call, controls the transfer of data, and is what enables services like Skype and Facebook Messenger to provide free calling anywhere around the world.

A "trunk" is a line or link that carries signals and connects nodes in a communications system – in other words, a pipe that carries the data channels inside it to connect two locations.

SIP trunking is a method of sending voice and other communications over the internet through an IP-enabled private branch exchange (PBX), which is a telephone system within an enterprise that switches calls between users on local lines while allowing them to share the use of external phone lines. A PBX cuts down on costs by avoiding the need for each user to have a line to a telephone company's central office. SIP can be used to send and receive local and long-distance calls, text messages, and emails; browse the internet; and conduct video chats.

SIP trunking replaces the traditional method of the public switched telephone network (PSTN), which is a copper-wire, circuit-switched network that requires a physical connection between two points to make a call. Instead, SIP trunks use a packet-switched network, which breaks down voice calls into digital packets and sends them over a network to their destination.

 

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Each SIP trunk can hold an unlimited number of channels. A channel, or line, is equivalent to one incoming or outgoing call. Because each trunk can hold as many channels as necessary, a business would only need one SIP trunk – no matter how many calls you have coming in and going out at one time. The more phone calls you have running concurrently, the more trunk channels you will need.

When looking for a SIP service provider, make sure you have a good estimate of how many channels you will need to get an accurate quote, since many vendors only charge you for the number of channels you need.

SIP and VoIP (Voice over Internet Protocol) are similar in many ways, but they cannot be used interchangeably. "VoIP" is a broad term that can describe any internet-based phone service (including SIP), but SIP is a specific protocol that enables VoIP by establishing start and end points and defining messages during a call.

The greatest benefit of using SIP trunking as your business phone system is that it is highly cost-effective. This is due to many reasons, but mainly because it eliminates the costs of long-distance calling. If your business often makes phone calls across the country or the ocean, SIP trunking may be the answer for you.  

SIP also eliminates the use of both data and telephone voice networks. Because SIP is IP-based, you can enjoy one centralized network with multiple digital streaming capabilities that is easily scaled and requires no physical infrastructure, which means no maintenance or hardware costs.

The removal of the PSTN gateway allows the SIP trunk to connect directly to your chosen internet telephony service provider (ITSP), removes subscription fees, and gives you greater flexibility in how you scale your telecommunications services by providing more bandwidth increment options at lower rates.

A SIP trunk enables all calls to be local calls by carrying them over the internet, avoiding the costs of international or long-distance calls. The SIP trunk sends the call to the provider's termination point, where the call is transferred to a local PSTN, therefore only charging you for a local call.

To compete with ITSPs, many SIP trunking providers have added services such as ENUM, or telephone number mapping, which allows you to use the same phone number no matter where you are in the world. They also offer the elimination of 800 numbers by providing a local number based on your location.

SIP trunking is flexible and easily scalable, with an unlimited number of channels allowed per trunk and no physical installation or setup necessary. New channels can be added and enabled within hours.

SIP trunking services tend to be far more flexible and resilient than legacy phone systems in a disaster Whether it's a network failure, natural disaster or hardware problem, most services will have measures in place to make sure you can still place calls. These may include geographic redundancy, routing calls to different locations or data centers, or dispersed network operating centers.

Your SIP trunking service will also help you create a disaster preparation plan on your end, including steps such as routing your calls to a different predetermined number, using a backup trunk provider, or having a cloud system ready for backup.

To transition from a traditional phone service to SIP trunking, start by determining how many channels you need. This will depend on the size of your business and how many phone calls you think will be going at once.

For example, companies with 100 people or more should follow the 3-to-1 rule: For every three employees making calls, you should have one SIP channel. Companies with fewer than 100 employees will need more channels, because you are more likely to have multiple people using the phone at one time in a smaller office.

Next, assess whether you have enough bandwidth and a robust enough network to support a SIP service. Also take inventory of whether you will need to replace any desk phones with SIP-enabled IP phones.

Once you have an idea of the number of channels you'll need, you can start collecting quotes. Some of the best SIP trunk providers are 8x8, RingCentral, Jive and Nextiva.

Be sure to ask about a Session Border Controller (SBC), which acts like a firewall for SIP traffic and provides security against hacking and denial-of-service (DoS) attacks.

When you call vendors for SIP trunking prices, be sure to ask about setup fees, required equipment and monthly service fees. Most businesses can expect to save around 75% on telecommunication fees by switching to SIP trunking. The prices you're quoted will also vary, depending on how many IP-enabled handsets you will need and if you want to add extra features like video conferencing or forwarding to mobile devices.

These will be your main costs for SIP trunking:

  • Subscription, which includes the price per channel
  • Calling rates, which is the cost per call or per minute for outbound calls
  • Add-on costs for extra features
  • Setup fees

For SIP trunking services, the average outbound call rate in North America ranges from 0.5 cents to 3 cents per minute. The average cost per channel is between $1.67 and $15 per month. Unlimited SIP trunk channels range from $19.99 to $29.99 per channel.

A cloud-based VoIP system can cost anywhere from $10 to $75 per user per month, whereas a traditional, on-premises phone system can cost several thousand dollars in one-time fees for equipment and installation and several hundred or several thousand dollars in monthly fees, depending on your call volume.

Kiely Kuligowski

Kiely is a staff writer based in New York City. She worked as a marketing copywriter after graduating with her bachelor’s in English from Miami University (OH) and is now embracing her hipster side as a new resident of Brooklyn. You can reach her on Twitter or by email.