VoIP Resources VoIP Fundamentals Introduction to Business VoIP

VoIP Gateway Versus IP PBX

by Margaret Joy

A look at the fundamental differences between VoIP Gateway and IP PBX, with tips to help you choose the best hardware for your business phone service.

The world of telecom/VoIP terms is an overlapping muddle of “same same but different.” PBX, IP PBX, hosted PBX: They’re as similar as their names imply but distinct. Most people charged with finding a new business phone system aren’t familiar with these terms, let alone the specific differences that impact their buying decision. 

And why would anyone keep up with telecom specs? Once you have a phone system in place, it’s hopefully something you rarely think deeply about again. The exception, of course, are the lucky industry folks who dive into the mess to bring you tech-to-English translations like this OnSIP blog. So let’s get into it.


You may know the term PBX: private branch exchange. PBX systems are bulky and expensive, and traditional analog systems connect directly to PSTN copper lines. Modern PBX systems—and by “modern” here we mean post-Internet—are IP PBX to handle digital traffic. Basically, IP PBX is where PBX meets VoIP capabilities. IP PBX systems are still on-premises, so they’re not the less expensive hosted PBX from a VoIP provider like OnSIP. 

Onsite PBX systems require a lot of space and a dedicated IT team. For corporations, they can work well, but they're great for cash-strapped startups and SMBs that might not have the office space for a telco-only server room, let alone the budget for the necessary IT folks. 

VoIP Gateways: Bridging PSTN & VoIP

PSTN calls send voice signals along copper wiring. VoIP calls break voice signals down into little digital packets for travel across the Internet. In other words, the PSTN is analog, while VoIP is digital. A VoIP gateway is the piece of hardware that bridges the two systems by changing call traffic from analog to digital and vice versa. Without it, the signals would get stuck trying to switch from one to the other. 

VoIP to VoIP calls are similar to emails or instant messages: They comprise data packets cruising through cyberspace. This is why VoIP to VoIP calls are almost always free. For VoIP to PSTN calls, the signals need a converter. Think of the VoIP gateway like your outlet converters when traveling internationally. Your electronics work fine—they just need a translator for different voltages and outlet shapes. 

A toy human model posed scratching its head in front of IT wires.
If this is you, you might want to go with a VoIP gateway over IP PBX.

Which Do You Choose?

At the beginning of this blog, we mentioned that all of this tech is basically the same but different. This is a great way to sum it up, but it’s not as helpful when you actually have to pick one. Do you want IP PBX or a VoIP gateway? Cloud or on-premises? Add in SIP trunking questions and you’ll feel you’re back to square one. 

This might help clear some things up: All hosted PBX systems are VoIP, but not all VoIP is hosted PBX. An IP PBX system is closer to the legacy PBX systems, just updated for IP compatibility. The system still lives onsite, with all of the related costs, much of which are up front. Hosted PBX, on the other hand, is handled by a service provider, and includes hardware, staff, and maintenance. All you need to do is have a decent Internet connection and VoIP phones.

If you’re looking to upgrade your existing PBX system, IP PBX might be the right move. Otherwise, hosted VoIP has all of the tools and quality you need for smooth business operations. (Besides, the PSTN is on its way out.)

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