In the past, entering the telephony business consisted of only two options: reselling the facilities of another operator (switchless resale) or purchasing a circuit-switch infrastructure at a cost of upward of US$1 million. With the advent of voice over IP (VoIP), any provider with a retail channel and a business infrastructure can enter the switched telephony business for an up-front investment of less than US$50,000.

These new VoIP service providers have the strength of retail channels and customer relationships, but they often lack the skills, contacts, and resources to provide one of the essential ingredients of any telephony service offering: global termination. While many have proven adept at originating minutes, they have struggled at finding, maintaining, and expanding relationships with other carriers worldwide to terminate their outgoing minutes.

The role of the VoIP clearinghouse is to bring together regional and local service providers for origination and termination of telephony minutes. Rather than pursuing traffic-sharing agreements with hundreds of service providers in different countries and cities around the world, local ITSPs turn to the clearinghouse operator to provide a single point of contact and interface for termination worldwide. In addition, regional clearinghouse services have also emerged, gathering traffic from dispersed local sites in specific areas of the world and pooling that traffic for low-cost termination to global clearinghouses or other regional operators.