Voice over internet protocol (VoIP) technology holds enormous potential for small and medium businesses (SMEs), according to one industry expert.

Chief executive of Voipfone, Colin Duffy, claims that VoIP allows SMEs to do "all the things that big companies can do" but would cost "tens or hundreds of thousands of pounds".

He explained: "The big beneficiaries of VoIP, apart from students, are very small businesses.

"Small businesses now can have multiple telephone extensions, they can have music on hold, they can have call divert, they can have business hours configured, [automated options saying] press one for sales or two for support."

He added that VoIP technology can make these services available for as little as a couple of pounds.

Ofcom's annual Communications Market Report 2007 revealed that consumers are increasingly using telephone services over the internet, offered by VoIP providers such as Skype.

At the end of 2006, 20 per cent of respondents to Ofcom’s survey said they were making phone calls online, which is a 14 per cent increase compared with figures from the end of 2005.

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