The main reason that your phone calls are less expensive when using a VoIP provider is because they’re sending your call as far as they can using VoIP and only sending it as short a distance as they can out on the PSTN; in other words, they’re saving by not sending the call long distance either.

An ITSP (Internet Telephony Service Provider) with many termination points all around the world can have rates well below a traditional carrier for this reason. Take, for example, a call you want to make from Los Angeles to someone’s regular home phone in Paris. If the VoIP carrier you’re using has a termination point in Paris, you’re in luck and the call will travel across the distance just like any other internet traffic (like if you sent an email to someone in Paris), and then when it needs to go from that termination point in a data center out to the PSTN network in Paris, its just a local call, and therefore, cheap!

But all this goes out the window when you consider that most ITSPs are actually just reselling a larger, wholesale carrier’s minutes. So shopping for an ITSP can just come down to shopping for the lowest rates. But buyer beware! Just like in anything else, you tend to get what you pay for. There are definitely bargains to be had, but its important to know if the carrier you’re researching is reselling someone else’s minutes or actually have their own network. It may actually be better if they’re reselling a larger carrier’s minutes because that large company has a lot of infrastructure, presence worldwide, and support staff. On the other hand, you will get some frustrating answers from ITSPs that don’t own their own network if they’re experiencing an outage.