Though VoIP technology has exploded in the last decade, the true history of VoIP and Internet phones goes back much further than you might expect.

The story of VoIP begins close to 100 years ago at Bell Laboratories (named, of course, for Alexander Graham Bell, the inventor of the telephone.)

How does Voice Over Internet Protocol intersect with German electronic music, luxury resorts, and the United States government?

Here, we’ll tell you how Internet telephony went from an obscure voice synthesizer to a business communication staple with over 1 billion users.

 

1928: The Roots of VoIP Technology Are Formed

 

 

In 1925, the engineering departments at AT&T and the Western Electric company joined forces to open the Bell Laboratory.

Bell Labs was created to invent, design, and improve technologies that would allow AT&T to expand its communication services nationwide.

In 1938, Bell Labs engineer Homer Dudley created the first electronic voice synthesizer, known as the Vocoder. It made its debut to the public at the New York World Fair, where attendees were fascinated by the vocoder’s ability to analyze and recreate the sounds of human speech. The concept was similar to today’s packet transmission, which records voice samples on one telephone and recreates them on another.

The Vocoder was used in the SIGSALY system to send secret messages during World War Two. Today, the same technology is used not only in VoIP telephony and digital trunking but also in cochlear implants. Even the German electronic band Kraftwerk has made use of the Vocoder in their music.

 

1969: The ARPANET is Built

 

 

You can’t have Internet calling without the Internet itself.

Believe it or not, the Internet began as just an academic research project in 1969.

ARPA, or the Advanced Research Project Agency, (known today as DARPA) was an agency of the US Department of Defense dedicated to military technology. The idea was to find a way to access computers remotely and to improve communication capabilities between computer users.

The result was ARPANET, the first packet-switching network ever created and one of the earliest adopters of the TCP and IP network protocol communications suite.

Packet-switching sends groups of data over telephone networks independently, without the need for a dedicated circuit that requires a constant end-to-end connection. The ARPANET interconnected small computers via modems at numerous locations across the United States, including Harvard, UCLA, and MIT.

Vint Cerf, Bob Taylor and Bob Kahn are credited with creating the protocols that would create the first Internet connection. (Sorry, Al Gore.)

This network was formally closed in 1990.

 

1973: First Voice Data Packet Transmitted

 

 

In 1973, Bob McAuley, Ed Hofstetter, and Charlie Radar developed the first voice packet over ARPANET at MIT’s Lincoln Lab.

This voice transmission was possible thanks to LPC, or Linear Predictive Coding — the foundation of modern VoIP technology. LPC is a speech analysis technique that relies on the linear predictive model to process and resynthesize compressed digital forms of voice signals and speech.

In 1974, Lincoln Lab and Culler Harrison, Inc. successfully transmitted test voice data packets to one another. By 1976, Culler Harrison and Lincoln Labs had a conference call over LPC. In 1982, they achieved a major milestone by using LPC to connect over a local cable network, a mobile packet radio net, and an interface with the PSTN (Public Switched Telephone Network.)

At this time, it was illegal to use the Internet for personal reasons. Therefore, technically the first “cybercrime” occurred in 1973 when user Lenoard Kleinrock sent a message regarding his missing electric razor.

 

1975: CompuServe is born

 

 

Until this point, it was extremely difficult for most companies, let alone civilians, to get access to the very basic version of the Internet that existed at the time.

That all changed when CompuServe, the first large-scale commercial Internet service provider, came onto the scene in 1975. CompuServe got its start as a subsidiary of Golden United Life Insurance.

Golden United planned to use the Internet much like a timeshare home at the beach. Other companies could rent time on the Golden United computer system during standard business hours.

By 1975, CompuServe became its own company and began trading on the NASDAQ. It soon became synonymous with the Internet, much like AT&T with the telephone. CompuServe users could exchange messages over electronic bulletin boards and email. In 1980, CompuServe released the first chat service and became the first service that allowed civilians to chat with one another using a computer. CompuServe wouldn’t see real competition until the 1990s, but when it did, it lost. It was bought by its rival AOL in 1997.

1988: The First Wideband Audio Codec

 

 

In November of 1988, ITU-T approved the G.722 wideband audio codec, which offered a markedly improved speech quality when compared to its predecessors.

In addition to having a much wider speech bandwidth, G.722 was also able to sample audio data two times as fast as was previously possible. The fact that G.722 offers data rates of up to 64 kbit/s makes it ideal for VoIP communication — especially those on local area networks (LANs.)

It was rated as “toll quality,” meaning its audio was comparable to PSTN phone call quality.

 

1989-1991: First VoIP Application Released as Public Domain

 

 

In 1989, developer Brian C. Wiles wanted to build software that would allow video game players to communicate with each other over dial-up modems while playing. He created RASCAL, the first system to successfully send voice over Ethernet networks — their first VoIP application, technically speaking.

In 1991, John Walker, founder of Autodesk architecture, engineering, and other industry-specific software, moved to Europe to expand his company’s operations.

Technology at the time required a speed of 64 Kb/s to run voice applications. To overcome this, Wiles wrote a decimation/expansion scheme that reduced the necessary bandwidth to just 32 Kb/s.

He releases the program to the public domain under the name NetFone.

NetFone, later known as Speak Freely, is the first software-based VoIP phone. Walker primarily used it to listen in on meetings and talk to other programmers within his company.

 

1993: First Video Telepresence System

 

 

Before Skype and Zoom, there was Teleport, the first telepresence system (later renamed TeleSuite.)

Creators David Allen and Herold Williams created this basic video conferencing system purely to protect their luxury resort business. They realized they were losing business because guests would cut vacations short or book fewer nights because they had to get back to company meetings. Video calls were the perfect solution, and Hilton Hotels soon became their first big client.

Though the deal later fizzled out, Allen bought all of TeleSuite’s assets and sold them to Polycom in 2007.

 

1994: Free World Dialup

 

 

Free World Dialup, known as FWD, was the first true VoIP business venture.

Founded in 1994 by Jeff Pulver, Brandon Lucas, and Izak Jenie, FWD created a network where all FWD subscribers could speak to one another. Note at this time, there was not yet a way to make outbound calls over the PSTN, so only subscribers could connect via FWD.

As the name suggests, the service was completely free but laid the groundwork for Pulver’s 2008 for-profit VoIP system.

 

1995: First For-Profit VoIP Application

 

 

Free VoIP calls could only last so long.

In 1995, the founders of VocalTec Communications created the first-ever commercial VoIP application, VocalTec Internet Phone. To operate over the H.323 protocol, it required a 486 computer processor, 8MB of RAM, a 16-bit soundcard, and either an SLLP or PPP connection.

Though that doesn’t sound like much today, it was very high-tech for its time.

VocalTec charged registration and per-minute fees, but still saved customers money on international and long-distance calling rates.

 

1996: The First Hosted PBX Solution and SIP Development

 

 

In 1996, California Virtual PBX related the first hosted PBX solution, which included key features like web portal access and find me/follow me. Note that at this time, hosted PBX relied on copper wires to communicate via the PSTN and not VoIP.

1996 was also the first year SIP was developed, though, like hosted PBX, it wasn’t powered by VoIP at this time.  Though this first version of SIP had a singular command — to set up a call — by 1999, it had 6.

Because SIP scaled better than H.323, cell phone providers adopted SIP as their protocol of choice for mobile VoIP.

 

1999: Asterisk, The first IP-PBX Developed

 

 

In 1999, Mark Spencer opened his own Linux tech support company but needed a PBX to allow for better communication between himself and employees.

Since he couldn’t afford a PBX, he decided to program his own IP-PBX system and named it Asterisk.

Asterisk was an open-source program that soon skyrocketed in popularity, and it was developed and improved over the years by thousands of programmers.

 

2003-2004: Skype and Vonage

 

 

In 2003, Skype — the company that would become the best-known name in video calling of its time — was founded in Estonia.

It allowed for free in-network communications and charged users who needed to make calls via the PSTN. At this time, it was audio-only.

However, its hybrid P2P and a client-server system meant that it could soon offer video calling, file sharing, Skypecasting, and more. It was acquired by eBay in 2003, and Microsoft in 2011.

Soon, countless Skype alternatives emerged on the market.

Vonage for Business was developed in 2004 and had roughly 2 million subscribers by 2006.

 

2004: The FCC Weighs In

 

 

Up until this time, regulations surrounding VoIP calling were shaky at best.

In 2004, Federal Communications Commissioner Chair Michael Powel declared that VoIP was an information service, not a phone service. Not only did this decrease taxes for VoIP customers, but it also meant states couldn’t regulate VoIP services.

In 2005, VoIP services that connected to the PSTN were required by law to be able to make e911 calls. Firm call recording laws were also established.

 

2005-2006: The Rise of Mobile VoIP

 

 

In 2005, Calypso Wireless released the C1250i, the first-ever mobile phone with Wi-Fi connectivity.

The C1250i allowed users to seamlessly switch between standard cellular link towers and Wi-Fi connections, which made real-time, two-way video conference calls and IP phone calling possible.

In 2006, Truphone, the first mobile VoIP app was launched for Nokia phones, iPhones, Androids, and Blackberry users.

This app let users make free in-network telephone calls, send free in-network texts, and make VoIP calls via the PSTN. The app used SIP to make calls over the Internet connection, not via cellular networks.

 

2010-2016: VoIP Goes Mainstream

 

 

By 2012, hosted VoIP telephone services were growing at a rate of roughly 17% per year, while SIP trunking saw an 83% growth from 2011-2012.

By 2015, many businesses were either transitioning to VoIP voice calls or already had IP telephony in their office. It had become such a large market that AT&T petitioned the FCC to allow VoIP phone companies to discontinue the use of copper wire in favor of fiber optic cables and IP switches.

During this time, there was a boom in VoIP providers that fostered competition in the form of different pricing and features packages and a greater focus on mobile VoIP.

 

2016-2020: Remote Work, VoIP, and Unified Communications

 

 

VoIP technology in the United States alone had already become a $20 billion industry in 2018 and saw a growth rate of more than 28% between 2016 and the start of 2020.

So, while the VoIP industry was on track to become the new normal, the Coronavirus pandemic that began in early 2020 accelerated that timeline. A nearly overnight increase in remote work left businesses scrambling to address remote communication needs.

Omnichannel routing and unified communications, powered by VoIP technology, allowed remote teams to connect with one another and clients via multiple channels on any device, including:

  •  Video chat
  • Softphone apps
  • Conference phone calls
  • Multiple phone lines
  • Team chat messaging
  • Website chat
  • Virtual voicemail

Integration with CRM software that provided essential customer history on incoming callers became another essential feature of business VoIP phone systems.

 

The Future of VoIP

Studies from Gartner predict that roughly 90% of all IT leaders will stop buying on-premises communications altogether by 2021.

In other words, it might not be too long before traditional landline desk phone systems are relegated to museums.

Ready to make the switch to Voice Over IP? Are you using virtual telephone systems already, but looking for a higher-quality provider and better features than what you currently have?

Our interactive table on the top business VoIP providers will help you to learn about the best options.