Voice over IP


This article analyses two methods of Pay-As-You-Go Remote PBX Solutions that provide telephony services to companies – both on the analog network and on the IP Network (LAN/ Internet) – CENTREX Vs Hosted IP PBX. We will analyze the advantages and limitations of both of them.


CENTREX refers to Central Exchange. Companies need an Analog/Digital PBX or IP PBX to give land-line telephone connectivity to all their employees. Click here to know more about the various components of a PBX. Instead of companies buying, installing and managing a PBX in their premises, the Telephony Service Providers (Local Exchange – CO) offer the PBX services directly from their switching equipment. Which means, without buying a physical PBX, customers can still enjoy many PBX functions at their premises. These functions are generally provided through direct (multiple) lines from the Centrex Service Providers. Some Service Providers might place an CPE equipment in the customer premises, if the number of subscriptions are high. But the CPE equipment is owned and maintained by the Service Provider.

Advantages of CENTREX:

  • No capital expenditure incurred for buying the PBX systems.
  • No Power bills which might have been incurred if PBX systems were bought.
  • No Maintenance hassles / No need for technically trained manpower/ No AMC charges for PBX.
  • Intercom dialing (between the various users in the same company) is free of cost.
  • Sometimes, the free Intercom dialing is extended to various locations around the city/ country.
  • Normal analog phones can be used with Centrex (mostly).
  • There is no risk of obsolescence of PBX equipment/ features as new features are added regularly in the Switching equipment present in Exchange (CO premises).
  • The maximum number of extensions that can be accommodated by a Centrex can be huge – So, the number of subscribers can be increased without having to replace/upgrade PBX hardware.
  • Pay-As-You-Use model which enables companies to avail many of the PBX features/facilities with minimum up-front costs.

Limitations of CENTREX:

  • Adds/ Moves and Changes would generally incur separate costs, each time they are done.
  • There is a fixed contract period within which the customer cannot terminate the CENTREX facility.
  • Charges are Per-Month Per Line (Extension).
  • Some features like Voice Mail/ Message Waiting might incur additional cost, sometimes per user.
  • Not all PBX features are supported by CENTREX.
  • It takes time to make changes in the existing set up as help desk ticket needs to be raised with the Service Providers.
  • Cables / MDF and other accessories required in the customer premises fall under customer scope.
  • Analog Trunks/ Digital Trunks can be taken only from the same CENTREX service provider.

Hosted IP PBX:

IP PBX uses the Internet Protocol/ Infrastructure to carry and switch calls. Click here to learn more about IP PBX. Hosted IP PBX is like the CENTREX system mentioned above except that the PBX is IP based (IP PBX) which is hosted in a server (mostly) at the Service Provider premises. At the customer end, there are IP Phones that connect to the computer network directly using RJ-45 ports instead of the analog phones that connect to the telephony network using RJ-11 ports.

Advantages of Hosted IP PBX:

  • Hosted IP PBX uses IP Phones (at the customer end) mostly. These IP Phones directly connect to the computer network and hence there is only one network to set up and maintain thereby reducing the costs involved in setting up/ maintenance of a separate voice network.
  • In addition to IP Phones, Soft-phones (software that can be loaded on to a computer and used with headset-mic) & Wi-Fi Phones (Mobile land-line extensions that use the company Wi-Fi network) can also be used with Hosted IP PBX.
  • Advanced features like Single Number Reach, Unified Messaging, Click-to-Dial etc can be supported by a Hosted IP PBX Service Provider.
  • SIP Trunks can be used (either from the same service provider or external SIP Trunk service providers) to make outbound calls over the Internet and hence saving costs (especially for long distance calls). SIP Trunks can be taken from multiple service providers.
  • Analog Phones/ Analog Trunks/ Analog Fax machines can be connected to the IP Network through ATA’s and hence may be allowed to be registered with some Hosted IP PBX service providers.
  • Hosted IP PBX is a scalable solution, but license costs might still apply for every extension.
  • There may not be much upfront costs, but there are monthly charges for using the Hosted IP PBX service. There may be a minimum lock-in period.
  • The IP Phones (SIP Phones) can be anywhere across the world and still be registered on the same Hosted IP PBX over the Internet. So, the inter-branch calls might not incur additional costs.
  • Adds/ Moves and Changes (for the IP PBX Settings) are easier and can be done (for limited features) remotely using an Internet Browser. Even the users can configure/ manage their own call/ voice mail settings similarly.
  • Only the control signals go to the Hosted IP PBX, while the RTP (payload) flows directly between the two IP Phones.

Limitations of Hosted IP PBX:

  • IP Phones are much more expensive than the analog phones. Moreover, they occupy one network switch port each.
  • Analog phones can be connected to the Hosted IP PBX through ATA’s but each port of ATA is more expensive than the analog phone.
  • Each call takes up a certain bandwidth (like 64 Kbps – at least). So, both the LAN network and WAN network needs to be planned to accommodate this additional bandwidth.
  • QoS Policies need to be set up end to end on the network and all the devices ought to support such QoS policies in order to get optimum performance for voice over the data network. If there is excessive load on the data network, there may be some delays for the voice traffic.
  • If the computer network fails, the IP Phones would also not work.
  • For large installations, it may be better to use VOIP Codecs which might incur additional cost.


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