What Is Hosted Telephony? How Cloud Phone Systems (VoIP) Work in 2026

Quick answer

Hosted telephony is a business phone system that runs in your provider's cloud instead of on a box in your office. Your numbers, call routing, voicemail and features live on the hosted platform; calls travel over your internet connection as data, which is what VoIP (Voice over Internet Protocol) means; and your people answer on an IP desk phone, a desktop or mobile app, or inside Microsoft Teams. There is no copper phone line anywhere in the chain. It is priced per user per month, it is usually cheaper than the lines it replaces, and since Openreach is switching the old analogue and ISDN network off by 31 January 2027 it has become the default rather than the alternative.

I have installed these systems for businesses from a two-person accountancy to a care group with a dozen sites, and the questions are always the same: what do I actually need, what will it cost, will my numbers move, and will it sound as good. This guide answers all four without the jargon, and tells you where hosted telephony is the wrong answer too. If you would rather have someone design it for your team, get a no-obligation hosted telephony quote and we will do exactly that.

What hosted telephony actually is

Every business phone system has to do the same job: hold your numbers, decide where an incoming call should ring, connect the call, and offer the trimmings such as voicemail, hold music and call recording. For decades that job was done by a PBX (private branch exchange), a box in a cupboard, fed by analogue or ISDN lines rented from BT.

Hosted telephony takes the box out of the cupboard. The PBX still exists, but it is software running in your provider's data centres, shared securely across thousands of customers and maintained by them. That is the "hosted" part. Your office connects to it over the internet, which is the "VoIP" part. From the caller's point of view nothing has changed: they dial your 01282 or 0333 number and someone answers. From your point of view almost everything has: there is nothing to maintain, every setting is in a web portal, and the system follows your staff wherever they have a connection.

You will hear the same thing described as a cloud phone system, hosted VoIP, a hosted phone system, cloud telephony or a cloud PBX. Providers pick the label they think sells; the service underneath is the same. The one genuinely different thing is SIP trunking, which uses VoIP to feed lines into a PBX you still own, and we come back to that below.

How a cloud phone system works, step by step

It helps to follow one call. A customer rings your main number.

1. The call reaches your provider's platform, not your office. Because the number is hosted, the public telephone network routes it to the cloud PBX where your numbers live.
2. The platform applies your call flow. Office hours, so it plays the auto attendant; the caller presses 2 for accounts; the accounts hunt group rings three people in turn, with a queue message if they are all busy.
3. The ringing device converts the call. Whoever answers, their IP desk phone, laptop app or mobile app receives the call as a stream of data packets over the internet and turns it back into voice. That conversion is VoIP, and it happens in milliseconds.
4. Outbound works in reverse. Your team dial from any device; the call leaves as data, the platform hands it to the public network, and the person you are calling sees your business number, not a mobile.

Three components make this possible, and they are the whole shopping list:

• Your internet connection. A single call needs around 100 kbps in each direction, so bandwidth is rarely the issue; stability is. Low latency and jitter matter more than headline speed, and a router that prioritises voice traffic (QoS) is worth having. Our guide to the internet speed you need for VoIP has the numbers.
• Your endpoints. IP desk phones from Yealink, Poly or similar; the provider's softphone app on Windows, Mac, iOS and Android; or Microsoft Teams. Most of our customers end up with a mix, and many use no desk phones at all.
• The hosted platform. The provider's cloud PBX, the web portal you manage it from, and the carrier connections that link it to the rest of the world. This is what you are really paying for each month.

What it costs

Hosted telephony is priced per user per month, which is the first thing that trips people up when they compare it with a phone bill built from line rental and call charges. As an illustrative September 2026 guide, a standard UK seat runs roughly £8 to £20 per user per month ex VAT. The bottom of that range is a basic seat with pay-as-you-go calls; the top buys unlimited UK landline and mobile minutes, call recording and analytics. IP handsets are roughly £60 to £200 each one-off or a few pounds a month rented, porting is often free or a small per-number fee, and set-up is usually bundled into a 12 to 36 month term.

Set against that, the copper line rental disappears entirely, per-minute UK call charges largely disappear, and the PBX maintenance contract goes with the PBX. For most small businesses the monthly figure falls. The full breakdown, with worked examples for a four-person office and a twenty-seat business, is in how much hosted telephony costs in the UK.

What you get that a phone line never gave you

The features are why businesses that moved for the switch-off tend to say they wish they had done it years earlier:

• One number, every device. Your office number rings the desk, the laptop and the mobile app at once, so remote and hybrid teams stop handing out personal mobiles.
• Auto attendant and IVR, call queues, hunt groups and time-of-day routing that you change yourself in the portal, in minutes, for nothing.
• Call recording with retention rules, for training or because a regulator, insurer or contract requires it.
• Call analytics: how many calls you missed, how long people waited, who is actually answering.
• Voicemail-to-email, CRM screen-pops, Microsoft 365 presence and the rest of the feature set.
• Resilience. If the office loses power or broadband, calls keep going to mobiles; the business-continuity case is often what convinces the finance director.

Hosted telephony vs SIP trunking vs a cloud PBX

The decision that actually matters is hosted versus SIP, and it comes down to the PBX you already have. If it is under five years old, does what you need and someone maintains it, SIP trunks keep it alive at lower cost than replacing it. If it is older, out of support or the reason you are reading this article, hosted telephony retires it and the maintenance contract with it. Our hosted vs on-premise total cost comparison runs the numbers over five years.

Microsoft Teams as your phone system

If your business already lives in Microsoft 365, Teams can be the phone system, and increasingly is. There are three ways to give Teams a real phone number: Microsoft's own Calling Plans, Operator Connect (a UK carrier plugged directly into Teams admin) and Direct Routing through a session border controller. They differ in per-user cost, number flexibility and how well they handle a busy reception, call queues and recording, which is why many businesses run Teams for knowledge workers alongside a conventional hosted system for the front desk. We support both Microsoft 365 and telephony, so we build all three; the comparison is in Microsoft Teams Phone for UK businesses.

Moving: numbers, timing and the switch-off

The two worries every business has about moving are losing numbers and losing service. Neither should happen. UK numbers, including whole DDI ranges, port to a hosted platform under Ofcom's rules; the gaining provider schedules the port, typically two to four weeks from go-ahead, and the new system is live and tested before the port date so the handover is a matter of minutes. Our guide to number porting covers the paperwork.

The timing is being decided for you. Openreach has stopped selling analogue and ISDN lines and is switching the remaining ones off, with the national deadline of 31 January 2027. Anything still on a copper line then stops working: phones, but also alarm signalling, lift emergency lines, some card terminals and door entry. Hosted telephony is the answer for the phones; the other devices need their own plan. Our PSTN and ISDN switch-off explainer covers the technology, and the business-landlines guides cover the deadline and order of work and a device checklist. Moving in your own time, with your numbers ported cleanly, is cheaper and calmer than moving in January 2027 with everybody else.

When hosted telephony is the wrong answer

Honesty about the exceptions is how you avoid buying twice:

• You have a recent PBX you like. Look at SIP trunking first.
• Your internet is genuinely poor and cannot be upgraded. VoIP on a flaky connection is a bad phone system. Fix the connectivity first; a 4G or 5G failover often solves it.
• Everyone is already in Teams and nobody takes external calls. A Teams-only set-up may be all you need.
• Safety-critical devices. Alarms, lifts and telecare should not simply be plugged into a VoIP adapter and hoped for; they need their own signalling path. The landlines guides cover alarm systems and lift lines.

The bottom line

Hosted telephony is a phone system rented per user from the cloud, connected over the internet, that keeps your numbers, follows your people and costs less to run than the lines it replaces. It is the default replacement for the analogue and ISDN lines being switched off in January 2027, and for most UK businesses the only real decisions are how many seats, which devices, and whether Teams is part of the picture.

If you want those decisions made for your team rather than in the abstract, get a no-obligation hosted telephony quote or call 0333 006 9399. We will audit what you have, tell you what is reusable, and price the system per user with the one-offs shown separately. You can also read about our hosted telephony service first.

Not sure who is calling one of your numbers? Our free UK phone number checker shows which network or provider Ofcom allocated any number to, and whether the range is in service — no sign-up.