PSTN vs. VoIP: which telephony solution to choose?

If you use a traditional landline phone that is connected to the Public Switched Telephone Network (PSTN), you should start looking into other options now: Voice over Internet Protocol (VoIP) technology is the future of voice communications, and, in some places around the world, may soon be your only option.

Businesses in the U.S. added 35 million VoIP lines between 2010 and 2018. In 2021, 24 million telephone users canceled their landline service. In this article, we’ll dig into pros and cons of both traditional and internet-based telephony, and help you decide which is right for your business.

What is the PSTN?

First, let’s clarify what the PSTN actually is. The Public Switched Telephone Network (PSTN) is the traditional telephony network that has been around since the late 1800s. It’s often called the Plain Old Telephone Service (POTS), but the PSTN and POTS are synonymous. In this post, we’ll use PSTN for the sake of simplicity.

The PSTN uses underground copper wires to connect circuit-switching telephone networks around the world. It’s the traditional “landline” phone network: think telephone poles and lines, switchboard operators manually routing calls, and old-school phones connected to walls by curly cords. While the PSTN has grown over time to support cellular networks and wireless phones, the basis of the infrastructure remains the same.

Pros and Cons of the PSTN

The PSTN has been around for nearly 150 years, and for good reason. The PSTN is straightforward and reliable. Most locations already have the physical infrastructure in place—so it’s just a matter of purchasing as many phone sets as you need, and paying a service provider to install and maintain each line. The PSTN works even if the power goes out or your internet connection is interrupted, so it’s often used for emergency services, fire alarms, and security systems.

However, there are significant disadvantages to the PSTN. First and foremost, it is expensive. Expect to see high call charges, especially on long-distance and international calls, and monthly fees. You’ll pay extra for features like caller ID and call waiting, and many modern value-add services (like intelligent call routing, call forwarding, voicemail-to-email, and softphones) are simply not available. Maintenance and upgrades are pricey, and often require purchasing additional hardware and paying a technician to install it on-site.

The PSTN also limits your scalability: if you want to add extensions, you’ll need to buy more hardware and pay for additional lines. Calls on the PSTN cannot be optimized for bandwidth, because each call requires a dedicated line that remains open throughout the call, regardless of data capacity needs.

The most urgent drawback of the PSTN is that in a growing number of places around the world, it is no longer in service.

Why now is the time to switch from the PSTN to internet-based telephony

The PSTN will be obsolete by 2030

Communications technology has come a long way since the PSTN, and global telephony trends indicate that the majority of the physical infrastructure supporting the PSTN will be decommissioned within the next few years (remember, it’s expensive to maintain and upgrade, even on a small scale).

Australia and New Zealand plan to complete phase-outs of their legacy telephony systems by the end of 2022; users have mere months to migrate to IP-based systems. The UK is in the midst of switching off their PSTN; all its phone lines and connected services will be digital by 2025. Ten other European countries will follow within the decade.

This global trend away from the PSTN goes hand in hand with the rise of modern telephony technology that gives users better experiences and more room to adapt in the future.

Take your voice communications digital

Businesses need to switch to digital communications in order to meet the demands of today’s market. Digital voice communications easily integrate via API with apps and browsers, providing a cohesive, customizable user experience.

Regulatory bodies are combating fraudulent calling activities by implementing stricter requirements on call authentication practices, like SHAKEN/STIR. Voice communication providers are turning these regulations into solutions that not only protect end-users, but elevate their overall experience. For example, Branded Calling and Google Verified Calls authenticate your business’s calls and display your name, logo, and reason for calling, which helps ensure call completion.

Modern systems remove the need for local infrastructure—powering flexible, scalable systems while reducing costs. Switching from the PSTN to a digital system like VoIP means your business will have access to faster, higher-quality telephony services at lower costs. Read on to learn how VoIP works, and why it benefits businesses.

What is VoIP?

Voice over Internet Protocol (VoIP) is the modern method of telephony communications—instead of copper wires and circuit-switching networks, voice communications are transmitted digitally via the Internet. It originated in 1995, and has steadily gained popularity over the past 25 years.

From an end-user perspective, the experience of making a call on VoIP is exactly the same as making a call on the PSTN—the caller dials a phone number and waits for their call to be answered on the other end. The difference lies in how phone numbers are used, and how the calls are connected. Simply put, VoIP uses packet switching technology to transmit voice signals from one IP address to another over the public internet and/or private internet networks.

VoIP numbers and networks

There are significant technical differences between traditional phone numbers and VoIP phone numbers. However, in terms of the call experience, traditional phone numbers and VoIP phone numbers are the same.

VoIP numbers look just like standard phone numbers, but offer far more flexibility than their standard counterparts because the same VoIP number can be used across multiple devices. Since VoIP numbers are assigned to a user, rather than a specific device, VoIP phone numbers are especially useful for businesses, because a single VoIP number can make or receive calls on several devices in different locations.

When you make a call from a VoIP phone number, the VoIP device converts the audio signal into data packets that can be transmitted over digital networks. Once the call data leaves your local VoIP network, it moves onto your carrier’s VoIP network. Modern VoIP networks are packet-switched networks that transmit audio signals as data packets. VoIP calls connect through a network operated by your telecom carrier, the public internet, or some combination of the two. The call audio data is converted back into an audible signal by the receiving VoIP device.

Sending call audio as data over the internet is what enables you to make phone calls from computers, smartphones, VoIP phones, and traditional phones with VoIP adapters. You can make a phone call from a VoIP phone number using any internet connection, including cellular data or Wi-Fi. If you want a VoIP phone number, the easiest way to get one is to sign up with a VoIP provider. They’ll assign you a VoIP phone number as part of your service package.

There are two parts to a complete VoIP network: a local network that connects VoIP-capable devices (like smartphones, softphones, or even traditional landline phones) to a telecom carrier, and a Wide Area Network (WAN) operated by a telco carrier. The WAN is the network that transmits the audio signal to the call recipient’s device. Most of the time, the term “VoIP network” refers to the local network that connects VoIP phones to the carrier network.

In some countries, local regulations can present challenges that make using VoIP more complicated, but not impossible. For example, in China, VoIP numbers are only permitted on the China Unicom and China Telecom networks. However, if your VoIP provider partners with those providers, you may be able to use your VoIP numbers for calls to and from China.

You have direct control over your local VoIP network, but your carrier’s network affects how well your VoIP service works. So it’s wise to evaluate a VoIP provider and learn more about their network before signing up for VoIP service.

Key differences between VoIP and PSTN

A quick refresher: the PSTN requires both local and global physical infrastructure to function, fundamentally in the form of copper wires. VoIP uses internet networks that are shared with other internet-based services. Here’s a breakdown of the key differences between the two:

VoIP vs. PSTN

	VoIP	PSTN
Connectivity	Connects to existing internet networks, requires little physical hardware Uses packet-switching technology Does not require support of specialized technicians	Uses a dedicated network of physical infrastructure Uses circuit switching technology Infrastructure and hardware must be maintained by specialized technicians
Affordability	VoIP setup costs can be zero, and VoIP users can save up to 50% of their communication costs over time	The average landline setup costs approximately $20,000—hardware and technician costs add up
Features and Customization	Caller ID, call waiting, and call forwarding or transfer are usually included at no extra cost --- Other value-add services include: Do not disturb (DND) Smart IVR (intelligent call routing) Call recording Softphones Conference calling Voicemail-to-text or-email and more	Features are limited: caller ID, call waiting, and call forwarding or transfer may be available at additional cost
Reliability	Relies on internet connectivity, so may not work during power or cellular network outages; prevent this by choosing a provider that offers a private, multi-cloud IP network	Very reliable, even in power outages (with the exception of cordless phones, which may rely on electricity)
Scalability	Easily add extensions anywhere, on-demand	Adding lines or extensions requires installing additional physical hardware and paying for separate lines
Network Capacity	Bandwidth adjusts intelligently, as needed Upgrades involve software updates and reallocation of bandwidth from existing network	Bandwidth remains set for the duration of the call Upgrades require purchasing and installing new hardware (usually done by a service technician), which can become pricey

Advantages of VoIP over PSTN

Since VoIP is a digital method of communication, there are many opportunities to customize your communication experience by incorporating other media forms. For example, you might integrate a customer relationship management (CRM) software, like Salesforce or Zendesk, that enables your team to access a customer’s profile before even picking up the call. And, unlike the PSTN, you get value-add services at no additional cost. For example, when your business receives an inbound call, your team could instantly access the caller’s name and account history. You can even integrate VoIP with the systems your business uses to facilitate efficient data transfer and tracking.

Fully featured voice calling at scale

PSTN replacement is happening now in nearly 30 countries around the world. If you switch to VoIP, you can keep your existing phone numbers and enjoy the same features (plus more) as traditional PSTN numbers for a fraction of the price. It’s time to update your voice communication strategy and future proof your business with enterprise-grade VoIP.

Switching to VoIP is quick and easy

You can buy and begin using VoIP numbers in just a few minutes with nothing more than an internet connection; unlike the PSTN, there’s no need to wait for a service technician to install hardware. VoIP allows your business to expand into new markets quickly by purchasing local numbers around the world. Some providers offer self-service portals that allow you to port your existing phone number or order new numbers with just a few clicks.

VoIP is more cost effective than PSTN

VoIP is an affordable voice communication solution. In fact, 82% of companies report cost savings after moving their voice communications to the cloud.

VoIP is cheaper than PSTN because it uses an internet connection to make calls. Since calls are placed over existing internet infrastructure, there’s no need for large amounts of pricey hardware or infrastructure installation. You don’t need to purchase new desk phones or run wires through your office building or property.

VoIP providers offer different calling plans, so you can choose the plan that best fits your needs, but, as a baseline, a typical VoIP setup for a small business costs around $800, compared to around $2,500 for a comparable landline system. VoIP offers lower call costs, regardless of distance, than calls placed over the PSTN. And, if another party uses the same VoIP system as you, the calls are free, whether you call the business next door, or connect with a customer halfway around the world.

Quality and reliability

One downside of VoIP, in comparison to the PSTN, is that VoIP communications can be more susceptible to security risks. The security of your VoIP system depends on the security of your internet connection.

VoIP users may be susceptible to something called number spoofing, which occurs when a party uses technology to to display a different caller ID number than the number they are really calling from, often with malicious intent. Spoofing is often used by scammers or telemarketers to trick individuals into answering the phone by making the incoming call appear as though it originated from a local or trusted number. To minimize number spoofing, choose a provider that offers high levels of fraud detection and call context.

Some businesses are hesitant to move away from the PSTN because it is an inherently reliable service that experiences few outages. Since VoIP relies on internet connectivity, if an internet connection fails or the power goes out, your VoIP system may not work. However, if you choose a provider that offers a private, multi-cloud IP network, you can rest assured that their built-in redundancies provide high-quality, reliable service—even if your local network goes down.

Future proof your voice communication strategy

Over 60% of businesses have already switched to VoIP—what are you waiting for? VoIP could save your business up to 40% of monthly costs, plus it’s easy to integrate, comes with an array of features, and provides the high-quality, cost-effective voice communications your business needs to be competitive in today’s market.

Your telecommunications service provider’s network and support are critical components of your VoIP setup: it’s critical that you choose a VoIP provider that offers a high-quality, reliable network.

Want to be sure that your VoIP carrier will deliver the connection quality you need? Find out what makes Telnyx the best VoIP provider and find the perfect plan for your business, or connect with a Telnyx VoIP expert who can answer all your questions today.