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 communicationsrouter — 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.


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