What Is a Telephone Exchange System, and How Does it Work?

Telecommunication emerged in the 1880s, and the first telephone exchange systems were founded in physical infrastructure, routing calls through switches and circuits. They’ve been an integral part of the UK’s communication network ever since. However, the infrastructure of telephone exchange systems is now changing.

Homes and businesses will soon need to move over to a digital network instead, chiefly using wireless and cloud-based telephone technology like Internet Protocol (IP) and Voice over Internet Protocol (VoIP) phone systems, which many already use.

That’s because of the ‘Big Switch Off’, the switch from landlines to digital announced by the government, which is due to be completed by early 2027.

If you’d like to know more about what the telephone exchange system actually is, and how it works, just read on. We explain the inner workings of past, present, and future systems.

What Is a Telephone Exchange System?

A telephone exchange system acts as an intersection between two phone lines. This is because a direct phone line between two establishments doesn’t technically exist.

Think of it as similar to taking the tube. Sometimes you can’t travel to your destination directly, so instead, you have to switch lines at an intersecting station to reach it. In a nutshell, that’s how an exchange system works.

How Does a Telephone Exchange System Work?

The UK’s current telephone exchange system is the Public Switched Telephone Network (PSTN), which is a wired system through which landline telephone calls are made and received and the circuit is based on successful circuit switching.

To connect one phone to another, a phone call is routed through several switches which operate on local, regional, national or international systems. The connection established between the two phones is referred to as a circuit.

Put simply, a telephone exchange links your line with the receiver’s line to create a circuit – this itself is a connected call.

How do digital telephone exchanges work?

Although most people in the UK still have a landline, nowadays a lot of calls are made through apps on a mobile phone or computer. These digital telephone exchanges don’t use the PSTN, instead, they use the Internet.

What this means in practice when you’re on a call is that your voice is being converted into digital signals, transmitted over the Internet, and reconstructed on the other end of the line.

This technology is now also being implemented into corded or cordless home phones, slowly replacing the old landline PSTN system.

What Are the Different Types of Telephone Exchange?

There are two types of telephone exchange systems – public and private. Conceptually, both do the same thing. The only difference is a public telephone exchange system only serves external communications, while a private telephone exchange system serves internal and external communications.

The Public Telephone Exchange

All lines within a certain area are connected to a local exchange. Your office or home is connected to a local exchange via a copper or fibre-optic line, depending on what type of line is available.

In basic terms, this is how phone calls travel from your telephone to your receiver’s telephone.

For international calls, there are few additional stages. Instead of travelling straight from one exchange to another, the call has to travel via a long distance telephone carrier. On a basic level, it looks a bit like this:

The Private Telephone Exchange

A private telephone exchange is often referred to as a private branch exchange (PBX). These units allow the internal transfer of calls while providing a limited number of outbound call lines (trunks).

Internal calls can be made from deskphone to deskphone. However one of the biggest benefits of a PBX is transferring one external call to multiple internal numbers. Most PBXs come with an auto-attendant, which allows callers to select which line extension they want to connect to. For a list of the best auto-attendant systems, head to our page.

Types of PBX

There are three varieties of PBX. These are:

• Traditional PBX (analogue): Only sends and receives phone calls via traditional copper wiring. It acts as an internal exchange, connecting calls within the office and sending calls out to the local exchange.
• Hosted PBX (digital): Uses the broadband network to send your digital phone call data to an offsite PBX server. Once there, it either continues as digital data to another digital phone system, or it’s repackaged into analogue data for traditional telephone networks.
• Self-hosted PBX (both): Can connect to both the traditional telephone network (via a SIP trunk) and the digital network. You can choose to make calls over the landline, or the internet, and you have a backup if the phone line or broadband network goes down.

A Brief History of The UK’s Telephone Exchange System

Here’s brief history of how the telephone exchange system has evolved in the UK:

1. The first manual telephone exchange systems

The founding of the telephone exchange – or the Public Switch Telephone Network (PSTN) – occurred in the late 19th century, with the first exchange opening in London in 1879 by The Telephone Company Ltd.

These early exchanges were manual systems where operators connected calls by physically plugging wires in and out of a switchboard.

2. The move to electromechanical telephone exchange systems

In the late 19th century, Almon Strowger, an American inventor created an automatic switch, which allowed calls to be connected without the need for an operator, through an electromechanical exchange.

The new technology helped telephones become more widespread in the early 20th century (although they were still reserved for the elite), pushing the UK government to nationalise telephone communications in 1912 under the Post Office. It sought to unify the technology for the sake of national security and governance, and in the process, expanded the network.

However, up until the mid-20th century, automatic switching was only possible for localised telephone exchange systems. Longer distance, inter-city communication still required manual routing through multiple different telephone exchanges that existed across the country.

3. The advent of the electronic telephone exchange

The need for manual call routing for long-distance calls was made obsolete in the 1960s when Subscriber Trunk Dialling (STD) emerged. This new form of telephone exchange used area code numbers to define the region of a telephone exchange, followed by a local number, just as we use on landline calls today.

By the late 20th century, digital technology began to replace older mechanical switches, leading to an electronic telephone exchange system. This was highlighted by the deployment of one of the first digital switching systems in the world in the 1980s. This digitisation of PSTN allowed for better quality calls and more efficient call handling overall.

4. The rise of digital telephone systems

Since the 2000s, newer and even more efficient communication technologies such as Digital Subscriber Line (DSL), and Voice over Internet Protocol (VoIP) have led to the decline of the Public Switched Telephone Network (PSTN).

These new digital telephone exchange systems use the Internet to make and receive calls, instead of the traditional PSTN used by landline phones, which relies on physical infrastructure such as copper wires, fibre optic cables, and switching centres.

Now, as stated at the top of this page, the PSTN network is set to be switched off in 2027, ushering in a new era of telephone communications.

How The Big PSTN Switch Off Will Impact the UK’s Telephone Exchange System

PSTN stands for Public Switched Telephone Network and is the traditional telephone network in the UK. BT Openreach has now decided that the equipment is too old and it will switch them out for fibre-optic cables. This means that every home and business will move onto a digital network.

ISDN (Integrated Services Digital Network) is used by businesses to make phone calls, video calls, and transmit data over PSTN. Businesses still using ISDN for various technologies such as ATM machines, printers, and alarm systems will lose service once the PSTN has been turned off.

To prevent losing service and to improve connectivity, businesses should switch to a VoIP (Voice over Internet Protocol) subscription. While the PSTN will be completely turned off by early 2027, it has already begun so it’s best to get ahead before you’re forced to. If you need help on how to switch your phone service, check out our guide on how to change landline providers.