Menu Menu

PBX (Private Branch Exchange)

PBXs are among the most important components of a business telephone system. An office uses a PBX, which can either be a piece of hardware or a software system, to route calls within the office and to transfer outbound and inbound calls between phone lines.

PBXs have been in use for a long time, but modern PBXs look very different from their predecessors. You can now use IP PBXs (Internet Protocol PBXs) and hosted PBXs for the same results as a traditional manual PBX. Check out our comparison chart below for a look at some VoIP service providers with hosted and cloud PBX systems.

History of the PBX

The term “PBX” originally referred to the manually operated switchboards used in offices for routing calls. This could include

  • Transferring calls between office phones
  • Processing inbound calls
  • Sending outbound calls

These systems could be very expensive, generally about $1000/user. By itself, a PBX cabinet (the body of the PBX machine) can cost between $1000 to $10000, and a manual operator is usually paid about $10/hour. On top of this, the cost of repairs can run as high as $100/hour.

A traditional PBX machine was necessary when traditional telephone companies were the only kind of telephone service provider available. Today, however, you have more options for business phone service. In particular, you can use a VoIP service provider instead of a traditional telephone service provider.

Traditional telephone service providers rely on the PSTN, or public switched telephone network, to relay calls. The PSTN is an analog system, meaning it handles phone calls as analog data. Analog data is composed of electronic frequencies which are very easy to transmit over short distances but hard to transmit over a long distance.

Because of this, an analog call must stop several times on its way to its destination and the network needs lots of devices and locations to handle and transfer analog data.

A traditional PBX is basically another layover for an analog call. The PBX machine handles calls as they transfer back and forth between the office and the PSTN.

VoIP and PBX

As digital technology has become more prevalent, Internet telephony has become an increasingly popular choice for business phone service. Unlike analog data, digital data (made up of binary code) is very easy to send over a long distance through the Internet. As a result, VoIP service providers can charge very low rates for telephone service.

However, traditional PBX machines are not designed to receive and transmit digital data. As a result, Internet telephony service providers needed to find alternate solutions for the office PBX.

If you want to use a VoIP service in your office, you have a few options for PBX service:

  • Hosted or Cloud PBX
  • IP PBX
  • Sip Trunking

Hosted and Cloud PBX

Every business VoIP provider now offers a hosted or cloud PBX service.

When you use a hosted PBX, you are using a PBX service hosted by your VoIP provider. “Hosted” simply means that all of the equipment and hardware aspects of your digital PBX are stored and maintained by your VoIP provider. With a hosted PBX, you never actually see a physical PBX machine, but you have full access to all of the standard PBX features that you would expect.

A cloud PBX is a PBX service supported by cloud technology. In cloud systems, data and systems are hosted through the Internet without an actual physical location. With a PBX supported entirely through the Internet, you can access your office’s PBX through any Internet-enabled device (like a computer, smartphone, or tablet) that you authorize to work with your PBX system.


An IP PBX, or Internet Protocol PBX, can either be a hardware or a software system.

As hardware, IP PBXs are generally cheaper than traditional PBXs. Generally an IP PBX costs closer to $800 as compared to the $1000 starting price for a traditional PBX.

An IP PBX is simply a PBX system that is Internet-compatible, meaning it operates as a digital system, rather than an analog system. However, most IP PBXs can also interact with the PSTN to send or receive calls. This is an important feature because many of your customers and business partners may not use a digital telephone service, and your PBX will still need to be able to receive their calls.

SIP Trunking

With SIP (Session Initiation Protocol) trunking technology, you can equip a traditional PBX or an IP PBX to carry digital calls and send digital calls, while still being able to work with the PSTN.

If you already have a PBX but you want it to process digital calls, you will need to install an interface for SIP trunking. After this, you only need 2 more things:

  • An edge device
  • ITSP (Internet Telephony Service Provider, like a VoIP provider)

An edge device is either a firewall or an attachment for your firewall. A firewall is used to control traffic and to keep your network safe while it is online (this is because, technically, SIP consolidates your Internet and voice traffic).

To use a SIP trunk, you don’t actually need a business VoIP service. Rather, you will need a SIP trunk service. This service is also provided by many business VoIP service providers, but the two services are not synonymous.