SIP vs VoIP: Understand the Key Differences

Session initiation protocol (SIP) trunking and voice over internet protocol (VoIP) are two fundamental technologies driving the shift toward cloud communications among modern businesses. Both facilitate voice calls over the internet, which leads to confusion about the core differences between SIP vs VoIP.  Essentially, each has unique functions that enhance the flexibility and scalability of cloud phone systems.

Keep reading as we explore the difference between SIP and VoIP and determine which suits your business needs.

For a comprehensive review of options available, check out our guide to the 6 Best VoIP Software and Providers.

SIP trunking vs VoIP: How are they different?

What is SIP trunking

Session initiation protocol (SIP) trunking uses a signaling protocol called SIP, which refers to a set of rules that controls the flow of multimedia sessions, including voice, video, messaging, and file sharing. The term “trunking” refers to the consolidation of various communication channels into a single, logical connection. 

SIP is the foundation of internet-based communications. It enables businesses to connect their private branch exchange (PBX) equipment to the internet and the public switched telephone network (PSTN). This enables users to call any number by simply connecting to the internet. SIP also manages data connections, allowing two or more parties to communicate over the internet. 

A 2024 study from Taiwan recently declared the internet-based telephony systems have no “largely replaced traditional phone systems,” and lays out a roadmap for an improved SIP trunking system.

How SIP trunking Works

SIP phones use a request-response model that defines the sequence of backend messages to establish, maintain, and terminate communication sessions between two or more devices. To establish the call, these SIP messages carry key information, including the user’s IP address, codecs, and media streams.

Here’s a brief step-by-step guide on how SIP works:

1. Initiation: A SIP client (VoIP phone or meeting app) sends an invitation request to a recipient’s IP address to initiate a real-time connection. This request contains the parameters of the VoIP call or video meeting between two or multiple parties.
2. Negotiation: If the recipient accepts the request, SIP will negotiate the session parameters to ensure compatibility between devices. These parameters include active media types and codecs (for encoding and decoding media).  
3. Establishment: Once the SIP session is established, both parties connect to the call, allowing the real-time transmission of audio, video, or files. Depending on the service provider, users can take advantage of various features, such as conference calls, user presence, and screen sharing. As the call progresses, SIP maintains seamless management of signaling messages to ensure uninterrupted sessions.
4. Termination: When a participant disconnects the call, SIP will send a “bye” request to the other party, which the other acknowledges. This will effectively terminate the call, which closes the session.

Top SIP trunking providers

Modern unified communication solutions use SIP to provide a range of functionalities for voice calling, video meetings, and messaging. These providers vary in pricing options, whether pay-as-you-go or predictable monthly per-user fees, depending on usage and call volume. Here are leading SIP trunking providers known for their reliability and rich feature set.

I’ve gathered some top providers below, but for a more comprehensive look, check out our recent guide to the Best SIP Trunking Providers.

SIP trunking providers

Monthly starting fee

Key Features

RingCentral

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Custom pricing

• AI-powered call transcriptions
• Live reports
• Advanced call management

Nextiva

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$14.95/user

• International long-distance calling
• Direct inward dialing (DID) numbers
• Same-day SIP trunk deployment

Ooma

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$19.99/user

• 50+ standard call features
• Voicemail transcription
• Automated receptionist

Twilio

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0.53 cents/min

• Unlimited SIP trunk
• Fraud prevention
• Simultaneous calls

What is VoIP

Voice over internet protocol, or VoIP, is a cloud-based phone system that uses the internet to enable voice calling. Instead of relying on analog copper lines, VoIP converts voice into digital data packets and sends them across an IP network. 

In comparing VoIP to traditional landlines, VoIP is relatively cheaper and has robust functionalities. This enables users to make and receive calls from their mobile devices and enjoy a range of services, including advanced call management, automatic call distribution, and analytics. 

How VoIP Works

VoIP works like a traditional desk phone, except it uses the internet to transmit calls. Voice calls take place over a computer or any mobile device with a working microphone and speaker.

Let’s explore the steps on how VoIP phones work:

1. Digitization: VoIP calls are made through VoIP software installed on an internet-connected device. When you speak into your device’s microphone, the VoIP system detects your voice as analog audio signals.  
2. Packetization: Using a specialized codec, the VoIP software converts the analog signal into digital data packets, compressing them to get ready for transfer. This process enables voice data to be easily transmitted in a format that devices can easily process. 
3. Transmission: VoIP sends the data packets over the internet and moves through network devices like routers, switches, and fiber optic cables, guiding them to their destination. 
4. Reassembly: Once the packets reach their destination, VoIP decompresses and reassembles them into the correct order, preserving the audio quality. The recipient’s VoIP system converts the digital packets back into audio signals, allowing the other party to hear the sound through their speakers. The process repeats for both parties until the call ends. 

Top VoIP providers

Telephony-focused VoIP solutions cater to small businesses whose primary mode of communication is through phone calls. Due to their limited functionality, these VoIP providers are often cheaper and easier to use. 

Again, we’ve gather some providers below for convenience, but more in-depth rankings can be found in our guides to Best VoIP for Small Business, or even Best Free VoIP Phone Service.

VoIP providers

Monthly starting fee (per user)

Key Features

Grasshopper

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$18

• Unlimited texting
• Toll-free vanity numbers
• Custom greetings

Zoom Phone

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$10

• Metered & unlimited call plans
• International calling
• Auto-attendant

Phone.com

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$14.99

• Call handling rules
• Call transfer
• Pooled metered minutes

Verizon

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$20

• 45+ call features
• Unlimited local calling
• Mobile app

Use cases for SIP & VoIP across industries

Now you understand how VoIP and SIP work independently of each other, it’s time to explore how these technologies can transform your communication strategy. While both have intertwined functionalities, each one has a distinct use case and a set of advantages that meet a certain business need. 

When to use SIP trunking

• Companies with an existing IP PBX system: A SIP trunking service lets you maintain your current PBX setup while transitioning to cloud communications. It offers a cost-efficient way to upgrade your on-premise infrastructure without the need to rebuild your entire phone system. You’ll also benefit from lower rates for long-distance and VoIP international calling. 
• Expand the communication functionality of your current infrastructure: Upgrading your PBX to a digital phone system enables your business to reap the benefits of multimedia communications. In addition to voice calling, you can connect with clients through video meetings and instant messaging.
• Scale operations due to high call volumes: SIP trunking providers allow businesses to add or reduce the number of SIP channels or virtual phone lines based on their current call traffic. This creates a flexible communication setup, as you can also add users or features for less money. 

When to use VoIP

• Enhance mobility: VoIP works with any internet-connected device, allowing users to make and receive calls from their laptops or smartphones. This provides a flexible communication tool for remote and hybrid workforces as it lets them stay connected from anywhere.
• Reduce overhead costs: Building your communication infrastructure with VoIP eliminates the need for costly hardware investments. If you’re seeking to replace your outdated PBX system, transitioning to VoIP provides a cost-effective solution and seamless migration to fully cloud-based operations.  
• Manage complex communication needs: By installing a VoIP provider’s softphone, your device gains access to advanced features, including the ability to configure call routing, purchase numbers, and customize phone greetings, all with just a few clicks. 

Read more: VoIP Troubleshooting: 7 Common Problems and How to Fix Them

Choosing between SIP trunking vs VoIP

When considering SIP trunking vs VoIP, remember both offer flexible communication solutions that enable businesses to reduce costs and scale their operations to meet evolving needs. Since these technologies function differently, knowing their distinct capabilities can help you decide whether VoIP vs SIP best suits your business. 

SIP trunking is a phone setup that allows an on-premise PBX system to connect to the internet, allowing efficient cloud integration with existing phone infrastructure. With SIP, an on-premise phone system benefits from unified communications services like video conferencing and messaging. 

VoIP, on the other hand, is a cloud-based phone service that allows users to make and receive calls via the internet. This supports businesses seeking a seamless transition from their outdated phone systems to a fully cloud-based setup.  

Understanding your communication needs is key to knowing which setup works for your business. This includes careful consideration of your budget, existing communication infrastructure, future scalability needs, and features your business relies on. 

Frequently Asked Questions (FAQ)