From the May 2007 issue of Investment Advisor • Subscribe!

What's VoIP, Anyway?

VoIP, or Voice over Internet Protocol, allows people to make telephone calls by breaking voice data into digital packets which can be sent over the Internet, as opposed to traditional telephone calls transmitted over twisted-pair copper lines. With VoIP, the information is broken up and not necessarily sent in order--which is why early users of the technology often experienced dropped sound or delays during their calls. Upgrades and changes to VoIP, such as providers who prioritize the data over their private networks, have improved the quality dramatically.

VoIP services started appearing in the marketplace in the mid-1990s. A company called Vocaltec is considered by many to have offered the first Internet phone software for sale in 1995, which used a sound card, microphone, and speakers plugged into a PC. But because broadband was not as prevalent as today, the sound often traveled over dial-up modems, with poor results.

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