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A Look at VoIP: Definitions and Misconceptions

By Mary Beth Hamilton | Thursday, October 21st, 2010

This is the first article of a two part series exploring Voice over IP and its use at hedge funds and alternative investment firms. Our first article will define the technologies used to conduct VoIP calls and common misconceptions about VoIP. Next Thursday we’ll look at the ways investment firms can use VoIP.

VoIP allows companies to integrate voice and data services and applications over a single converged IP network to achieve a more flexible, robust network infrastructure. VoIP stands for Voice Over Internet Protocol and describes a group of technologies used to make voice calls over IP networks. There are two primary technologies VoIP employs to execute calls – 1) Protocol and 2) Codecs.

Protocol is the method in which the two devices making the call communicate. It is nothing more than a language, but it is important. There are multiple protocols used for VoIP calls, however, Session Initiation Protocol (SIP) is an industry standard protocol and the most commonly used to transmit VoIP calls. H.323 and skinny are also used, but not nearly as broadly as SIP. Protocols are used to communicate information like caller ID and call waiting.

Codecs (Coder/Decoder) is another technology used to make VoIP calls. Codecs are used to transmit the actual voice traffic. Codecs can also be used to save network bandwidth by compressing traffic to make it smaller. For example, compression can be ideal for calls where bandwidth is expensive, such as calls between the United States and India. A call from New York to Boston, on the other hand, would not require compression as bandwidth is relatively inexpensive and you would expect flawless call quality.

This compression process is valuable to help minimize costs; however, compression can cause a slight loss in call quality, so it is critical to select the right codecs and program them based on desired call handling.

Eze Castle Integration's voice team has extensive experience in helping alternative investment firms and hedge funds use VoIP.

Be sure to check back on Thursday for the second part of this series which looks at common misconceptions regard the use of VoIP at investment firms.

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