What is a PBX?

You might ask: What is a PBX?

A PBX (Private Branch Exchange) is a system that connects phones within a specific area, like an office or a building. Calls made within this network stayed inside the PBX, while any call going outside had to pass through the Public Switched Telephone Network (PSTN)—the broader public phone system.

Because traditional PBX systems relied on physical wiring, phones had to be in the same location to connect. The PBX managed all calls within the building or area, routing them between internal extensions or out to the public network.

Why old PBXs are so expensive.

A PBX (Private Branch Exchange) is a physical box or server inside a company’s office that connects internal phones and manages call routing. The more phones and complex call features a business needs, the larger and more complicated the PBX becomes.

This tangle of wires and hardware requires a significant upfront investment and is expensive to maintain. Large companies often need IT staff or specialized technicians to install, upgrade, or repair it.

Additional PRI and ISDN cost.

A PBX alone doesn’t automatically connect to the public phone network (PSTN). To make external calls, businesses need a separate connection.

This is where PRI (Primary Rate Interface) comes in—a dedicated circuit that allows the PBX to send and receive calls to the outside world through a network called ISDN (Integrated Services Digital Network).

Each PRI line provides either 23 (T1) or 30 (E1) channels, meaning a business can handle that many simultaneous external calls. If a company needs more capacity, it must purchase additional PRI circuits, adding to the cost.

How a PBX, PRI, and PSTN Work Together

Let’s run through a typical system with an example. Say you run an office with 80 employees, each with their own extension number for internal communication. However, not all of them are on calls at the same time, and only some need to make or receive calls from the outside world.

To handle external calls, your PBX needs a connection to the PSTN. This doesn’t happen automatically—it requires a dedicated circuit known as a PRI (Primary Rate Interface), which acts as a bridge between your internal phone system and the public phone network.

Now, imagine this is a contact center where, during peak hours, up to 70 calls happen simultaneously. Here’s how the setup would work:

① Internal Call Routing (PBX)
The PBX connects all 80 employees’ extensions, so they can call each other without using external phone lines. These internal calls stay inside the PBX and don’t touch the PSTN.

② External Calls (PSTN Connection via PRI)
When employees need to call external numbers, or customers call in, the PBX needs a pathway to the PSTN.

Since one PRI line provides 23 (T1) or 30 (E1) channels, you need enough PRI circuits to handle the 70 simultaneous external calls.

③ Why You Need More Channels Than You Actually Use
To support 70 concurrent calls, you’d need:

• Two E1 circuits (30 + 30 = 60 channels)
• One T1 circuit (23 channels)

This gives you 83 channels, even though you only need 70—because PRI lines come in fixed channel sizes, meaning you pay for extra capacity whether you use it or not.

④ What Happens When You Hit Capacity?
If all 83 channels are in use and an 84th person tries to call in, they would either:

• Hear a busy signal (if no queueing system is in place).
• Be placed in a queue if the PBX has a call-waiting feature.
• Be routed to voicemail or another overflow option.

Why Legacy PBX Systems Need to Be Replaced.

Traditional PBX systems that rely on physical hardware and PRI circuits are now considered legacy systems. Maintaining them is expensive, requiring both specialized technical expertise and ongoing hardware costs. Even if a business isn’t using all the features, they still have to pay for additional capacity and functions they may never need.

For small to medium-sized businesses, this represents a high operational cost that eats into profits. For larger enterprises looking to expand, scaling a legacy PBX means significant upfront investments in new hardware and PRI circuits, making growth unnecessarily expensive.

This rigid and costly model isn’t ideal for businesses that need flexibility, better cash flow, and efficient capital use. Moving away from legacy PBX systems reduces both cost and complexity, freeing businesses to invest in more strategic priorities instead.

What to replace legacy PBX with?

Businesses looking to replace their legacy PBX are typically offered a VoIP (Voice over Internet Protocol) solution. This means calls are made over the internet or private networks instead of using traditional wired phone lines.

Replacing PRI/ISDN While Keeping a PBX

Some companies may choose to only upgrade the part of their system that handles external calls, while keeping their existing internal PBX for extension dialing.

Why? Internal calls within a legacy PBX are free, but external calls over PRI/ISDN are charged by the minute. By replacing PRI/ISDN with VoIP, businesses cut costs since phones only need an internet connection.

This can be done in two ways:

① SIP Trunking: A modification that allows the existing PBX to keep handling internal wired calls while using VoIP for external calls.

② On-Prem IP PBX: A modern PBX that still supports wired internal extensions but uses internet-based calling for external communication.

A business may choose to keep a large legacy PBX for additional control over their setup. They will still have to pay for its maintenance, even if internal calls remain free.

Replacing the entire phone system.

Many modern businesses are choosing to replace their entire phone system, eliminating the need for on-site PBX hardware. In this setup, both internal and external calls are handled virtually, requiring nothing but an internet connection.

This is known as a Hosted PBX, but can also be referred to by many other names or terms including: cloud PBX, cloud phone PBX, hosted cloud PBX etc.

Why does it matter that it works through desk phones, computers, or mobile apps?

Since everything runs online, businesses aren’t tied to physical office phones anymore. Employees can answer calls from their laptops or smartphones, work from anywhere, and still appear as if they’re calling from the office. This is especially useful for remote teams and companies with multiple locations.

Choosing the right PBX system for you

When you choose a PBX, you should consider options that help you keep up with and achieve your company’s goals. As technology continues to evolve, businesses will be continually offered options to change.

Consider carefully the long term and short term costs, from the sticker price to the limits, use and flexibility of your PBX solution.