The concentrator digitizes your voice and then combines it with dozens of others and sends them all down a single wire (usually a fiber-optic cable) to the phone company office.

In order to allow more long-distance calls to be transmitted, the frequencies transmitted are limited to a bandwidth of about 3,000 hertz. All of the frequencies in your voice below 400 hertz and above 3,400 hertz are eliminated.

If you are calling through a PABX to someone connected to the same office switch, then the switch simply creates a loop between your phone and the phone of the person you called. If it’s a long-distance call, then your voice is digitized and combined with millions of other voices on the long-distance network. Your voice normally travels over a fiber-optic line to the office of the receiving party, but it may also be transmitted by satellite or by microwave beams.

In a modern phone system, the operator has been replaced by an electronic switch. When you pick up the phone, the switch senses the completion of your loop and it plays a dial tone sound so you know that the switch and your phone are working.

PABX (Private Automatic Branch Exchange) make connections among the internal telephones of a private organization — usually a business — and also connect them to the public switched telephone network (PSTN) via trunk lines. Because they incorporate telephones, fax machines, modems, and more, the general term “extension” is used to refer to any end point on the branch.

Initially, the primary advantage of PABX was cost savings on internal phone calls: handling the circuit switching locally eliminated charges for internal phone service. As PABX gained popularity, they started offering services that were not available in the operator network, such as hunt groups, call forwarding and extension dialing.

Two significant developments during the 1990s led to new types of PABX systems. One was the massive growth of data networks and the other the increased public understanding of packet switching. Companies needed packet switched networks for data, so using them for telephone calls was tempting, and the availability of the Internet as a global delivery system made packet switched communications even more attractive.

These factors led to the development of the VoIP PABX – technically, nothing was being “exchanged” any more, but the abbreviation PABX was so widely understood that it remained in use.

Solid state digital systems were sometimes referred to as EPABX (Electronic Private Automatic Branch Exchange) or DEPABX (Digital Electronic Private Automatic Branch Exchange).

Historically, the expense of full-fledged PBX systems has put them out of reach of small businesses and individuals. However, since the 1990s there has been a large set of small, consumer-grade and consumer-size PABX available. These systems were not comparable in size, robustness or flexibility to commercial-grade PABX, but still provided a surprising set of features.

The first consumer PABX systems were for the analog telephone systems, typically supporting four private analog and one public analog line.

Particularly in Europe these systems for analog phones were followed by consumer-grade PABX for ISDN. Using small PABX for ISDN is a logical step, since the basic rate interface of ISDN (which is the phone interface individuals and small businesses typically get) provides two logical phone lines (two B channels) which can be used in parallel.

With the pickup of VoIP by consumers, of course consumer VoIP PABX have seen the light, and PABX functions have become simple additional features of consumer-grade routers and switches.