What Is SIP Trunking And Why You Should Care

We’ve put off this discussion long enough – and perhaps so have you – “What is SIP Trunking and why you need it.” The big guys figured this out years ago and are already saving on their telecom costs. But with business costs rising for everything from fuel and goods to labor, finding something that can actually improve your business and save you money is worth a look. And it looks like it is finally becoming cheaper for small to mid sized companies to make the switch to the new age of telecom rather than staying put with their current systems.


LD SIP Trunking Diagram

LD SIP TRUNKING DIAGRAM (courtesy AireSpring)

What I’m about to explain may sound complicated at first, but it really doesn’t need to be confusing. Session Initiated Protocol (SIP for short) is just a type of Voice Over IP (VoIP) that many companies are using to lower their telecom costs.

For the last 100 years or so, we’ve been making calls on the Public Switched Telephone Network (PSTN). The carriers have worked out a complex method for charging and compensating each other that results in expensive calls to some areas and less expensive calls to other areas. The PSTN is an aging infrastructure made up largely of old copper wires and inefficient switching equipment (while more efficient than Mabel the chatty Bell Operator of yore – not as efficient and inexpensive as modern digital IP alternatives). That’s the long way of saying that SIP allows you to skip all or part of the PSTN and save on the cost of making and receiving a call.

If the call is carried SIP to SIP, meaning that both parties are using a SIP enabled device, that call can be VERY cheap (often just a fraction of a penny per minute). If the terminating end of the call is still on the PSTN, that call will still need to be converted from VoIP to TDM (Time Division Multiplexing – which is used on the PSTN), but you will still save a bit on these calls since you originated the call using SIP.

There are a couple of other things that you should understand. The more people that you have on the phone in any given location, the more bandwidth that you’ll need (DSL, Cable, T1, etc.); also, what existing and additional hardware will you need to get SIP Trunking up and running? To make a call, you need a phone and, in offices with multiple employees, you’ll also need some sort of phone system.

Most companies these days pay for both phone service AND internet/data bandwidth. For companies with 20 or more phones, that phone service is often a T1/PRI (if you’ve got one, you’ll know, they come with a big bill). SIP is carried over your data connection, so in most cases you can drop your PRI and just use your data connection for both your calls and your internet needs. Just make sure that you have enough bandwidth for all your data needs.

For small offices, you can achieve the advantages of VoIP by using a simple service such as Vonage or Skype. You could also buy a cheap phone system like the Microsoft Response Point which you can get off the shelf at a discount reseller like Costco and connect via SIP Trunking. If you are a larger company with 20 or more users, you’ll probably want a more robust phone system. Most new phone systems include built in support for SIP. That makes things easy for you. Just contact a SIP provider and you’ll be off and saving in no time. But even if you have an old TDM phone system, there are still solutions available for you.

Some carriers will offer to give (or sell) you an Internet Access Device (IAD) to place between your old phone system and your internet connection. This device converts the SIP signal to TDM so you can continue using your old phone system.

There are many flavors of SIP – LD Only, Local, Dynamic (offering voice and data on the same circuit). Essentially, all of the services offered by traditional phone companies are now available in some form on SIP as well.

One thing is becoming clear, as more businesses switch to SIP, the average cost to make a call is dropping as well. SIP to SIP calls are the wave of the future. Not only is SIP cheaper, but the new SIP enabled phone systems offer much more flexibility and robust features than ever before. It is possible for a small company to have all of the features of their multi-national rivals for little more than the cost of a desktop computer. And with the lowered telecom costs associated with SIP, you can pay off your equipment rapidly (especially if you make a lot of outbound calls).

There is so much more that could be said about the advantages of SIP – Virtual local calling in cities that you don’t physically have an office in, the ability to take your phone number with you around the world when you travel, advanced calling and voice mail options, integration between your phone system and customer management systems (CMS) – but we’ll save that for a future column.

While it may seem that the more information you read the more complicated it becomes, you won’t have to figure this out on your own – so don’t worry! The next time you receive your phone bill, ask yourself if it might be worth exploring a change in your telephone habit. You might be able to drop your phone lines and carry your calls on your data connection instead, via SIP. You may not even need to buy new phone equipment. There are no shortage of carriers and consultants who can help you. If the end cost quoted to you isn’t worth the effort, you can always say no. But the potential to save big should be worth the initial inquiry.

It is our opinion that it is time to accelerate the adoption of new VoIP solutions to get the lowered termination costs associated with IP communications. Companies should aggressively shop for the lowest possible bandwidth costs and then find a SIP Trunking provider who can offer them low cost local and long distance calls. Make a few calls, get some prices, and if the numbers add up in your favor, take the plunge.

The future of telecom has already arrived, most people just haven’t figured it out yet.

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  1. This is a good article that describes practical uses for SIP. While it’s a bit technical for the newbies, it’s written in plain English for all to understand. I also agree with many of the points made.

    I have to contest one implied point though; phone systems designed for companies with fewer than 20 employees can be robust. I agree that some “free” concoctions can be costly and unreliable, but there are many rock-solid solutions for the small business owner – TalkSwitch being one of them. These sub-20-employee systems are easy to implement and offer many features for a price small businesses can afford. The choice for small business owners isn’t “Asterisk or Nortel”, and it sure isn’t “cheap or robust”.

    Ron Reddick

  2. Todd says:

    Thanks for your comments guys. I was worried about how technical to make this story. I’d like it to be a resource for the folks who need it most, and I’ll be sure to do more on this subject soon.

    But I do think the time is right for people to start thinking about either a VoIP/SIP enabled phone system, getting a hosted service, or going with a carrier who can send you an Internet Access Device which will give you much of the benefit without having to buy a new PBX. That’s a lot of choices, all of which “Could” save you money – depending on system costs and carriers.

    You really can give AT&T the boot, if you are willing to make a few changes – and can find a broker/consultant/vendor who you trust to help you make the decision.

  3. John Grink says:

    I’ve read about SIP Trunking for quite some time now. What I don’t understand is how to you know that your time sensitive voice packets are going to get thru the Internet during high periods of traffic? I far as I understand it, there is no QOS on the public Internet. While this might work out ok for personal use or maybe a remote user, isn’t this somewhat risky for running your business? How do you know your calls won’t experience dropouts or disconnects?

  4. iTodd says:

    Howdy John,

    If you get a voice only SIP trunk (instead of a dynamic trunk), all of your packets will be for voice – no data to compete with. Although, for companies with average to light call traffic and 12 or fewer phones, a dynamic trunk should be fine as well. It saves money to put your voice and data on one trunk, but isn’t worth it unless you know that you won’t exceed your bandwidth requirements.

    Many carriers, like the AireSpring example above, use a private IP backbone which keeps your traffic off of the public internet. That gives you TDM equivalent quality, and also improves security and latency.

    Don’t be afraid to discuss your concerns with the agent or carrier that you speak with.

  5. Jeff says:

    I agree that “the future of telecom has arrived.” However, one of the reasons perhaps that market adoption of new telecom concepts like SIP are slower than one might expect, despite all the benefits, is that the telecom industry tends to confuse the market with its buzzwords. SIP has been around for over a decade, and based upon our B2B experience, a small minority of business managers (non-IT types) understand or even know about SIP. The telecom industry has lacked creativity in the naming of its product concepts and has been too heavy handed with the acronyms, SIP not withstanding. Telecom should perhaps take its cues from the software industry.

  6. William Davis says:


    I have read about SIP trunking in this page: http://www.ozekiphone.com/what-is-sip-trunking-session-initiation-protocol-trunking-314.html

    When I read the page I found a way how I can have a system that can handle my calls without any troubles. I use the services provided by
    Ozeki System XE and I am fully content with it.

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    With havin so much written content do you ever run into any problems of plagorism or copyright infringement?
    My website has a lot of unique content I’ve either written myself or outsourced but it looks like a lot of it is popping it up all over the web without my authorization. Do you know any techniques to help prevent content from being stolen? I’d truly appreciate it.

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