There are two main sources of echo in telephony networks: line echo and acoustic echo. Acoustic echo is generated...
on any phone (IP or otherwise) when there is feedback from the speaker to the microphone. This is particularly noticeable on many speaker phones. Line echo is very common in the PSTN network and this most commonly occurs when there is a two wire to four wire conversion in the network (for example, where analog is converted into T1 or E1).
To combat these types of echo, there are echo cancellers. As you can probably imagine there are acoustic echo cancellers (AEC) and line echo cancellers (LEC). How well the echo is cancelled depends upon the quality of the echo canceller. One key parameter in an echo canceller is the tail length. Basically, the way an echo canceller works is it remembers the waveform sent out, and for a certain period of time looks to see a waveform coming back that it can correlate to the original signal (usually arriving later, at lower amplitude, and with more noise). Typically, echo cancellers can be set to 32ms, 64ms, or 128ms tail lengths. If the return signal (echo) arrives too late, the echo canceller won't be able to properly correlate and cancel it. In summary, it is possible to greatly minimize or nearly eliminate echo if proper echo cancellation is in place.
It is possible that your VoIP device has an AEC that is not performing well. Sometimes a poor quality headset can also introduce echo that the far end can hear. It is a good idea to report the problem to your VoIP service provider and explain the symptoms. If your VoIP device will allow you to lower the receive gain or volume, this may also help to reduce the level of the echo the called party hears.
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