TL;DR: Communication is important for any business. In this article, I will break down the three major types of phone line services that are popular for businesses (PBX, PSTN, and VoIP) and explain the process of how each one works. You will also find a section of the pros and cons for each service.


In today's world, there are hundreds of different ways that we are able to communicate and stay connected with each other. Communication is just as important for businesses in a professional setting as it is for individuals in their personal lives. Having a reliable phone-line system that meets the needs of your client relationships and interactions is important. There are several different telecommunications systems, but in this article, we will be reviewing three different types to help you to decide which meets your company's needs.

Private Branch Exchange (PBX)

How It Works

Private Branch Exchange (PBX) is a phone-line system that operates privately and internally in the company using physical phone hardwire. This type of system will have instant connection with phones inside of the company (internal lines), while also being able to reach phone lines outside of the company (external lines). PBX systems have extensions that are dialed after the company's phone number to reach a specific area or office that is within the company. These extensions can be dialed on their own when an internal line is dialing another internal line. However, when an external line is attempting to reach one of the company's internal lines you would have to enter the extension after the company's phone number. Here is an example of how this may work:

  • Company's Phone Number: (800)- 555-1234
  • CEO's Extension: *851
  • HR's Extension: *332

Internal Line to Internal Line

If HR wants to contact the CEO from one of the company's phones on a PBX system, they would only need to dial *851. This is because HR is trying to reach an internal line with another internal line.

External Line to Internal Line

If a customer is trying to reach the CEO, they would first dial the company's phone number, then follow it up with the extension. A customer calling from an external line would dial 1(800) 555-1234*851.


PBX phone lines come with several features that are used to help your company handle front desk and phone traffic. Some features included are voicemail, call recording, transferring calls, extensions and interactive voice menus. Connection and calls are completely private on modern PBX lines since the phones are linked by a physical hardwire that feeds directly to your company.


Some older models of the PBX systems will only work with phones that are designed for them. This can cause an issue for when you need to update your phone system software. You wouldn't be able to upgrade the software without updating all of your physical phones. Usually that will happen with older PBX systems. This costly replacement can easily be avoided by making sure the system you purchase is a modern line. Another con would be the initial cost of installation since the PBX systems tend to be hardwire and therefore requires separate wires and phones for each user.

Public Switched Telephone Network (PSTN)

How It Works

In layman's terms, the Public Switched Telephone Network (PSTN) is the classic landline style phone service. Using hardwired connection, the signal reaches a central office that then connects the signal to your business. To help you understand this concept better, think of it like this: Back in the 1950's, a signal would be sent to a central office where all calls are received and a phone operator would manually connect you to the company you are trying to reach using cables. Modern PSTN services are similar to this. When using a PSTN service, it will send your incoming calls to a central office and then will automatically connect it to your company using electronic switches (which replaced the old-school cables).


Since PSTN has been available for years, it has proven to be very reliable. We understand how this technology works and know how to fix it when we encounter issues. The network has been built over the years and therefore, is readily accessible by essentially anyone. PSTN services are also very easy to set up and maintain.


With a PSTN service, you must purchase individual physical phones per line. This can increase cost immensely. Another con is that since all calls are sent to a central office before reaching your company, maintenance and other issues that affect the central office may greatly impact your business. This heavy reliance on another entity can prove to be frustrating and possibly costly in the long run.

Voice-Over-Internet Protocol (VoIP)

How it works

Voice-over-internet protocol (VOIP) is one of the newest types of phone services out right now. Its modern technology has attracted the attention of many businesses that range from small to large. This form of telecommunications uses the internet to connect calls instead of a hardwire, like what is used with PBX and PSTN services. It works by using your internet service to connect your phone to both send and receive phone calls. VOIP compresses the incoming (or outgoing) signal and sends it through the internet to the receiving end. This all happens almost instantly and allows clear and quick communication over the phone.


Since VOIP uses the internet to connect your phone, you are able to reach and be reached by a global market. No longer are you constrained to just your country's hardwire phone lines. Another advantage of a VOIP system is that you are able to have more physical phones than you do of phone lines. This will save money, since you will not have to pay to install a new phone line every time a new user is added to your company. VOIP services also save you money by not having to pay for a separate phone bill. Since all your phones are connected through the internet, you only have to pay for the internet bill and the VOIP service fee. In addition, because VOIP technology is modern, it will constantly be updated at little to no cost to you.


When using a VOIP service, you may run into issues with your phone service if your internet is down. You may also experience slower connection if your WiFi does not have enough bandwidth to support your phone lines and other connected devices. Since this form of communication functions via the Internet, it is not as secure as a hardwire connection. If your company handles sensitive information such as client banking and social security numbers, you may want to consider a hardwire connection.


When deciding on what phone system your company needs, consider the pros and cons of each phone line service. If direct connection and privacy is important to your business and clients, you may consider the PBX service. If you desire reliability, the PSTN phone service may be right for your company. If you need to be connected to clients outside of your country, the VOIP service is possibly a good investment for your business. These are only a few of the ways to connect your business with its clients. Be sure to do further research to see which service will be the best fit for you.