private branch exchange (PBX)

What is a private branch exchange (PBX)?

A private branch exchange (PBX) is a telephone system within an enterprise that switches calls between users on local lines, while enabling all users to share a certain number of external phone lines. In contrast to a public switched telephone network, the main purpose of a PBX is to save the cost of requiring a line for each user to the telephone company's central office.

Used as a business telephone system or private telephone network, a PBX is owned and operated by the enterprise rather than the telephone company. However, the telephone company may be considered a supplier or service provider. Originally, private branch exchanges used analog technology. Today, PBXs use digital technology -- digital signals are converted to analog for outside calls on the local loop using Plain Old Telephone Service. Nonetheless, PBXs can include network switching systems that accommodate analog phones into the enterprise's digital PBX system.

How does a PBX work?

The equipment used in a PBX varies depending on the complexity of the system -- for example, whether it is a traditional PBX to which copper telephone landlines are attached, whether the PBX accommodates a mix of analog and digital lines, whether it uses voice over IP (VoIP) hosted at the enterprise or whether it's a cloud-based PBX system. Each is described below.

Traditional PBX phone systems use landline copper-based telephone lines that enter a business's premises, where they are connected to a PBX box. That box contains telephony switches that enable calls to be distributed to different phones in an office and those phones to access a limited number of outside lines -- trunk lines.

An IP PBX uses digital phone signals, rather than analog landlines, to send calls. Because a user can make use of Ethernet cables to connect phones instead of traditional phone ones, no rewiring is needed. IP PBX systems can also be hosted by managed service providers.

While hosted systems require monthly fees, there are fewer end-user hardware costs associated with their use. Smaller PBX systems, often referred to as virtual PBXs, offer hosted services but with fewer features, which are more appropriate for small businesses. Hosted PBX services are sold by numerous providers, including Nextiva, Vonage and RingCentral.

Features of a PBX

The equipment needed depends on the complexity and use of the PBX -- for example, the types of phones used at a particular site. In general:

• Telephone trunk (multiple phone) lines that terminate at the PBX.
• Computer with memory that manages the switching of the calls within the PBX and in and out of it.
• Network of lines within the PBX.
• Unified communications router -- wireless and wired.
• Phone handset -- USB , VoIP and Session Initiation Protocol (SIP).
• VoIP gateway.
• IP PBX.
• Internet router.
• Cables, cabinets, uninterruptible power supply.
• Telephony application server.

A PBX call center handles inbound and outbound calls and incorporates features to enable the automatic handling of inbound calls. These features include interactive voice response; call monitoring to help assess employee productivity and provide training; conferencing capabilities; phone features that help agents answer and make calls from their desktops; integration to customer relationship management systems that help capture logistics and bring up customer information to agents; and predictive dialer systems.

In some situations, alternatives to a PBX include a central office exchange service in which a pool of lines are rented at the phone company's central office, key telephone systems and, for small enterprises, primary rate Integrated Services Digital Network.

PBXs installed within the enterprise are sold by numerous vendors. They include NEC, Fujitsu, Sangoma, Cisco, Avaya and Alcatel-Lucent.

Difference between PBX and PABX

A private automatic branch exchange (PABX) is a type of PBX that is automated. The term PABX was created for modern automated systems, while PMBX -- private manual branch exchange -- referred to older manual systems. However, all modern PBX systems are automated today, and there is no longer the need to differentiate between the automated and manual systems. Today, the acronyms PABX and PBX are used interchangeably and describe the same system.

Comparing PBX vs. VoIP

A traditional PBX system uses traditional phone lines, while a VoIP system uses the internet to send and receive phone calls. VoIP phone service is widely used today, although one drawback is that a VoIP connection depends on an internet connection to handle the bandwidth. Modern offerings, such as IP PBX systems, provide almost unlimited growth in terms of extensions and trunks. IP PBX introduces more complex functions -- such as ring groups, queues, digital receptionists, voicemail and reporting -- that are more costly and difficult to implement with a traditional PBX.

Price and company size are deciding factors as to which telephony option to choose. Larger companies may look for new technology and special features and make purchases based on future needs. Often, these expenditures are spread out among 40 or 80 users. However, a small company may look mainly at costs, which will be substantially lower for digital phones connected to its already-in-place on-premises telephone lines. If new cables need to be installed and the local area network (LAN) is not VoIP-ready, costs will be higher.

Some small offices or retailers may need just three, 10 or 15 phones and are operating with traditional copper phone lines, rather than a Primary Rate Interface circuit. So, these establishments may limit their selection of a new phone system to either an over the open internet VoIP service (hosted business VoIP) or a small new digital system because the upfront cost per phone can be significant when getting an in-house IP PBX.

The cost of using a PBX

When it comes to choosing a telephony option, cost is king, especially as free or near-free services, like Skype, become more common in the enterprise. Additionally, management mandates to reduce short- and long-term operational costs have also led to the migration to VoIP.

Organizations get immediate savings with the internet telephony service since the monthly line rate is less than with time-division multiplexing (TDM) systems, including the enhanced features incurring additional charges with standard telephony that is included free with VoIP.

Plus, with VoIP, domestic long-distance calls cost little, and international calls will be less. Although these savings must be contrasted with the overall cost of migration to VoIP, there are significant cost reductions with network convergence in which telephony traffic shifts from the dedicated voice network to the data network. Migration to VoIP could also yield hardware savings since IP-based phone systems and handsets cost less than continuing with legacy systems.

It's important to bear in mind possible hidden costs with network upgrades to support VoIP on LAN and penalties for ending existing contracts with telephony vendors. Enterprises upgrading from legacy telephony to VoIP would need to expand their network capacity to handle voice traffic and possibly add SIP trunks.

Furthermore, new network management capabilities would be necessary to prioritize voice traffic and provide appropriate VoIP security protection. Finally, the organization would need VoIP-specific network infrastructures, such as media gateways and session border controllers. Overall, lowering costs can be a solid use case for VoIP but only if the switch is made with these factors in mind.

PBX use cases

In addition to cost, the need to refresh older PBX systems is driving migrations to VoIP systems. Legacy technology at some companies may be reaching its limits, prompting enterprises to replace aging TDM systems.

Although some businesses may have a telephony environment that works well for its intended purpose, once employees adopt new technologies on their own, legacy telephony usage falls off. In comparison to web-based or mobile voice modes, TDM can no longer support how people communicate.

Today, employees rely heavily on other web-based technologies -- such as email, chat and video -- in which VoIP natively integrates, while TDM does not. VoIP also adds value because it integrates with other data applications over the LAN and enables businesses to migrate their phone management to the cloud.

Other definitive benefits to modern IP telephony include increased employee productivity -- for example, by using visual voicemail and ad hoc conferencing, both of which enable employees to manage missed calls remotely.