PSTN vs. VoIP: Which Is Right For Your Business?

December 18, 2023 7 min read

Cameron Johnson

Cameron Johnson

VoIP vs Landline (Analog) Phone Systems - Detailed Comparison

Picture this: A customer hangs up after getting a busy signal calling your sales phone number.

Scary, thought, isn’t it? That’s what you risk with a traditional phone setup that relies on analog phone lines.

These days, small businesses depend on a reliable and cost-effective approach to business communications. You shouldn’t limit your success by as far as landline copper wires can reach.

Voice over Internet Protocol (VoIP) is at least comparable to the telephone lines of the past but with dozens of advanced calling features.

As you weigh your options between PSTN vs. VoIP, we’ll make the case for both types of phone systems and technologies. But there are a few cases when PSTN beats out voice over IP.

New to VoIP? Check out our definitive guide to VoIP — it’s beginner-friendly!

But first, let’s tackle the acronyms.

Phone System Acronyms

Let’s navigate the alphabet soup – PSTN, VoIP, PBX, POTS, and SIP and give you a quick primer on them.

PSTN

PSTN is short for Public Switched Telephone Network and describes the physical network of dedicated lines connecting telephones globally. These phone lines transmit your voice data in analog format, allowing you to reach any other user on the network with their phone number. When referring to PSTN, it means you can dial anyone across the public telephone network consisting of area codes, switching centers, and various exchanges. The emphasis here is on the network established between telecom providers.

POTS

POTS stands for Plain Old Telephone Service, which is an informal alias for PSTN technology. It emphasizes the fundamental nature of traditional landline telephony, relying on dedicated copper wires and basic voice calls.

POTS lines refer to the actual technology consisting of analog wiring that runs from your building to a local central office. These voice signals traverse over various switches and network terminals to reach the PSTN.

PBX

PBX means Private Branch Exchange and is how a company establishes phone service for multiple users within an organization. PBXs can operate on a PSTN system or VoIP phone system.

Traditional on-premises PBX systems require a significant level of telecom expertise to manage, but VoIP flavors are much easier to set up and manage. Speaking of VoIP …

VoIP

VoIP is short for Voice over Internet Protocol. VoIP means that voice signals are sent over an internet connection through a business phone service provider rather than through analog-based phone lines.

VoIP network diagram

SIP

Session Initiation Protocol (SIP) is the technical foundation of Voice over IP. A lot of real-time communication apps use this technology for high-quality audio, video, and messaging.

Most commonly, SIP is used for SIP trunking, which is like a bulk set of VoIP lines often used for call centers.

PSTN vs. VoIP Differences

If you’re thinking of switching to a new business phone service, you should know some key differences between VoIP vs. PSTN.

PSTN refers to the traditional landline phone networks that have been around for decades. PSTN uses analog signals transmitted over copper wires to make phone calls. The telecommunications system relies on dedicated circuits being opened between exchanges to connect your call to the other person — hence long-distance charges.

POTS network diagram illustrating how traditional phone systems work
POTS network diagram illustrating how traditional phone systems work

VoIP is a better phone service technology that works using the internet. With VoIP, your voice is converted into digital data packets that get transmitted over the internet, similar to how emails or downloading files work. There are no dedicated circuits kept open since the data packets take different pathways through the internet.

Hosted VoIP network diagram illustrating how cloud-based phone systems work
Hosted VoIP network diagram illustrating how cloud-based phone systems work

The main advantage of VoIP is that it allows making phone calls using any IP address rather than needing a landline. VoIP also tends to have lower costs compared to traditional landline services. The sound quality can be lower than landlines in some cases, but VoIP call quality keeps improving.

VoIP vs. PSTN Comparison

FunctionVoIPPSTN
TechnologyDigital – transports calls over the internetAnalog – transports calls over copper phone lines
CostLower monthly fees typicallyHigher monthly fees typically
HardwareRequires IP phones or adapterUses traditional landline phones
FlexibilityEasy to add numbers and linesAdding new lines requires new wiring
ReliabilityDependent on internet connectionVery reliable, dedicated circuits

🗞️Case Study: Media Publisher Thrives with Flexible Phone System 👇

VoIP & PSTN Limitations

PSTN limitations

Here are some of the common issues with PSTN that compel business owners to move on from traditional phone lines.

  • Cost-prohibitive to scale — Adding new phone lines requires running new physical wires and infrastructure, which is expensive. Monthly costs per line are typically higher than VoIP services.
  • Limited flexibility — Adding or changing phone numbers is hard as the business grows quickly. Limited ability to customize features or add new capabilities. Remote work? Out of the question.
  • Poor disaster recovery — If wires get physically cut or the office is damaged, the phone system could be down for weeks or months. Requires manual switching to backup systems by the phone company.

Now, let’s take a look at some of the limitations of a Voice over IP system.

VoIP limitations

When researching VoIP technology, there are a few concerns that you want to plan around. In most cases, most businesses are unaffected by these — we’ll share solutions below.

  • Reliability issues: VoIP call quality and functionality depend on a high-speed internet connection. Slow internet speeds or high traffic volumes can cause lag, jitter, or call drops. Power outages will cause the hosted VoIP phone system to go down unless proper battery backups are connected.

    Solution: Test your internet connection for VoIP call capacity and set up redundant battery backups on critical systems.
  • Emergency call limitations: VoIP users must register their location so 911 operators can identify their address. Without registration, operators may be unable to pinpoint the caller’s location. In a power outage, VoIP users typically cannot make emergency calls unless using a softphone installed on their mobile device.

    Solution: Update the actual physical address (E911) of each user on your VoIP phone system. Recommend users download the free VoIP app that works on Wi-Fi and cellular connections.
  • Legacy hardware challenges: Using VoIP requires new IP phone hardware or adapters for analog phones. Installation and setup take some time across an office. As a cloud-based system, VoIP relies on servers rather than direct copper wiring. This transition could mean replacing old telephony equipment.

    Solution: Retire analog phone equipment that no longer meets business needs, such as fax machines. Set up the equivalent of cloud communication, such as online faxing.

Comparing VoIP vs. POTS Lines

FunctionVoIPPOTS
ConnectivityUses data networks, no new infrastructure neededRequires dedicated voice network with special techs
Call CapacityLow bandwidth needs, burstableReserved bandwidth per call, costly to upgrade
Remote ExtensionsEasy software additionsPhysical lines required
ResilienceForwards calls on power outageStays active in power outage
Call ManagementIncludes call waiting, forwarding, transferAdd-ons cost extra fees
Emergency CallsNot location traceableLocation traceable
PricingVoIP is often priced per user monthly. Many advanced features are included in one fee. POTS is often priced per line monthly with additional fees for long-distance or other calling features. 

POTS uses dedicated infrastructure, so it has high resilience and emergency call traceability. But upgrades require new analog lines and hardware, which is costly as the business grows.

VoIP also enables value-added features like auto-attendants, voicemail-to-email, and softphones. Upgrading is a lower cost since it leverages your existing data network.

20 Popular VoIP Phone System Features

The Bottom Line on PSTN vs. VoIP

While PSTN has its place for some use cases where internet access is limited or legacy telecom installations prevent an upgrade, the best option for businesses is VoIP phone service.

VoIP beats PSTN in every category:

  • Scalability: Easily add or adjust the number of lines or users whenever your business needs.
  • Advanced calling features: Access dozens of calling features your team needs to help customers, collaborate, and outmaneuver competitors.
  • Emergency services: Have confidence that you can dial 911 accurately with E911 capabilities.
  • Redundant internet service: Reliable broadband is the norm, and even if you lose service, cellular (4G/5G) has you covered.

Change can be hard, but resisting change is even harder. 

Go easy on yourself and choose a reputable business VoIP provider. See why over 150,000 businesses choose Nextiva for their company’s phone service. Get a customized quote today!

Cameron Johnson

ABOUT THE AUTHOR

Cameron Johnson

Cameron Johnson was a market segment leader at Nextiva. Along with his well-researched contributions to the Nextiva Blog, Cameron has written for a variety of publications including Inc. and Business.com. Cameron was recently recognized as Utah's Marketer of the Year.

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