What Is PSTN and How Does It Work?

What Is PSTN? 

PSTN stands for Public Switched Telephone Network. It’s the traditional network of circuit-switched telephone networks that has enabled voice communication across the globe for over a century.

Commonly known as landlines, fixed lines, or Plain Old Telephone Service (POTS), the PSTN historically used copper wires and analog voice signals to connect telephones using standard phone numbers. It uses a dedicated physical connection for each call, ensuring consistent call quality.

While digital technologies like VoIP phone services are now prevalent, PSTN’s legacy and extensive infrastructure mean it continues to impact modern telecommunications, particularly in areas with limited broadband access.

A Brief History of PSTN

The public switched transport network’s origins trace back to the late 19th century and the invention of the telephone by Alexander Graham Bell and Elisha Gray. Initially, these phones enabled simple point-to-point communication over copper wires.

The late 1800s and early 1900s saw the rise of manual switchboards, where operators physically connected calls. A significant shift occurred in the late 20th century with the introduction of automated switching, eliminating manual call handling, and establishing the modern PSTN.

Undersea cables and satellite communications further expanded international voice communication. The 1970s and 80s brought digital technology to the PSTN, improving call quality and enabling data transmission.

Despite these advancements, the PSTN remained a relatively slow and limited technology, paving the way for the development of Voice over Internet Protocol (VoIP) technology.

What Are the Key Characteristics of PSTN?

Before we understand how PSTN works, let’s quickly overview its key characteristics and learn more about the technology.

• Circuit-switched: Circuit-switching means two devices communicate via a dedicated, physical connection for the duration of the call. This contrasts with packet switching used by the internet, where data is broken into packets and sent over shared pathways. Circuit switching ensures consistent bandwidth and minimal latency, but it’s less efficient for data transmission.
• Analog signals (historical basis): The original PSTN infrastructure was built to transmit analog voice signals over copper wires. While digital channels are now integrated into many parts of the network (e.g., digital switching in exchanges), the local loop (the connection to the customer’s premises) often remains analog in many areas.
• High reliability and resilience: The public switched telephone network is known for high reliability and resilience. Its independent power source at central offices allows it to function even during local power outages, a key advantage in emergencies.
• Extensive global reach (legacy infrastructure): Historically, the PSTN provided near-universal global coverage, connecting households and businesses worldwide. While its dominance has declined with mobile and internet-based communications, its extensive infrastructure remains an advantage in many regions.
• Limited bandwidth: Designed primarily for voice transmission, the PSTN offers limited bandwidth compared to modern digital networks. It’s unsuitable for high-bandwidth applications like video conferencing, high-definition streaming, or large data transfers.
• POTS: The acronym POTS is often used to refer to the PSTN, emphasizing its basic yet dependable functionality for voice communication.
• Fixed line telephones: PSTN connections are typically connected to fixed locations. They’re based on physical cable connections between the telephone and the local exchange. This fixed nature distinguishes them from mobile cellular networks.

How PSTN Works Today

PSTN is a complex network encompassing telephone lines, fiber optic cables, switching centers, cellular networks, satellites, and cable systems.

Put simply, when you dial a phone number, your call moves through the network to reach its destination — and two phones connect. To fully understand how Plain Old Telephone Service (POTS) works, consider what happens when you dial a number from your phone.

Here’s a simplified breakdown of how a call travels through the PSTN:

From telephone handset to Central Office

Your telephone converts your call (sound waves) into electrical signals and transmits them over network cables to a nearby exchange or terminal. The terminal collects these signals and determines where your voice (converted into electrical signals) goes next.

Central Office call routing

The call next goes to a tandem office (a regional hub that routes calls to distant central offices) or to a central office (for local calls). The central office routes the call through a fiber optic cable that converts the electrical signals into light pulses.

From the Central Office to the terminating number 

The relevant center office picks up the light pulses, converts them into electrical signals, and sends them to the target terminal. The destination terminal forwards the call through sound waves to the appropriate telephone number and the recipient’s phone.

It’s natural to be confused about how PSTN works behind the scenes. Remember that it takes a few seconds for your call to reach its destination via fiber optic cables and a global network of switches. It’s like changing buses to reach your final destination, only faster.

Nationwide calling is the norm, thanks to interconnected telephone networks. But since the lines were installed, telecom service providers have since become pioneers in data networks, which operate faster and carry VoIP and other communication technologies.

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PSTN Architecture and Components

PSTNs are all about manual switching, which forms the backbone of traditional telephone networks. When a call is made, switches create a wired connection between two phones, maintaining it for as long as the call lasts.

Traditional PSTNs are a complex system with several key components working together:

1. The local exchange: A local exchange — consisting of one or more exchanges — connects subscribers to a PSTN line. Also known as a central office or a switching exchange, a telephone exchange can have up to 10,000 lines. All phones are connected to the local exchange in a specific area. The exchange identifies the number dialed to route the call to the correct destination.
2. The tandem office: Also known as a junction network, a tandem office serves a large geographic area with multiple local exchanges while managing switches between local exchanges. Let’s say you dial the number of a client living in the same city but in another suburb. In this case, your call routes to a tandem office from your local exchange. The tandem office forwards the signal to the local exchange closest to your client’s location.
3. The toll office: Every national long-distance switching takes place here. A toll office is connected to all tandem offices. For instance, if you dial a branch of your office in another city, your call will go through a toll office.
4. Inter-exchange carriers (IECs): The international gateways handle long-distance calls between different local exchange areas. They operate high-capacity transmission lines and switching centers that route calls across regions and countries.

How Much Does PSTN Access Cost?

How much would installing and using a PSTN phone system in your home or office cost you?

Cost for consumers

To get a PSTN phone connection at home, you need a telephone set and a PSTN provider. A decent phone can be bought from Walmart or Amazon for less than $60, while basic phone service with unlimited local calls costs up to $30 monthly.

If you need a plan with unlimited local and national calls, you can get one for less than $50 a month. You pay $90-$110 for the first month and then $30-$50 per month. Not bad for a single household phone line.

Cost for Businesses

Things change dramatically when you switch to companies. You need a separate line for each employee to get a PSTN phone system for your business. For this reason, most businesses prefer VoIP over traditional phone systems.

Small businesses with 10 employees or fewer can opt for a monthly plan for as little as $30 per month per connection. And, of course, you’ll need to purchase handsets too.

To connect up to 40 employees to the public switched telephone network, a Key System Unit (KSU) is your best bet. It offers multiple features and is better than a regular phone line. Remember that a KSU is expensive to acquire; it costs approximately $800 or more per line

Private Branch Exchange (PBX)

Large companies with 40 or more employees typically opt for a Private Branch Exchange (PBX).

One of the types of PBX systems connects calls over the PSTN. Generally, PSTNs are more used in residential applications and PBX systems in business environments. It offers call transfer, call conferencing, auto attendant, voicemail, call holding, and more business-specific features.

Since a PBX comes with hubs, switches, phone adapters, routers, and several telephone sets, it costs more. Most businesses use PBX phone systems because they’re easier to use. However, installing and managing them is expensive. Actual costs may vary depending on the number of features you want and the PBX’s complexity.

The installation and setup fee can be as high as $4,000. Monthly maintenance costs start at $600 and can go up to $2,000. The annual maintenance cost of a PBX can reach $10,000!

Analog-based PSTN phones are generally expensive. Most companies don’t like them and are switching to cloud-based phone systems.

The Decline of PSTN

While the public switch telephone network remains a globally recognized communication standard, its usage has steadily declined, especially in business settings. Statistics show a significant drop in landline subscriptions over the past decade, with mobile communication and internet-based solutions becoming increasingly prevalent.

This decline is driven by several factors:

• Competition from VoIP services: VoIP phone systems have become a major competitor to the public switched telephone network due to their lower cost and greater flexibility. VoIP bypasses the traditional circuit-switched network and relies instead on the internet infrastructure. This has led to a decline in PSTN usage and revenue, compelling telecommunications providers to adjust their strategies. 
• Aging infrastructure: A significant portion of the PSTN relies on aging copper wire infrastructure that’s expensive to maintain and upgrade. These copper lines have limited bandwidth compared to newer technologies such as fiber, making it difficult to support high-speed data services. Replacing this aging infrastructure is a costly and time-consuming process.
• Maintaining quality of service: As demand for data services increases, the PSTN struggles to maintain better voice call quality. The network was originally designed for voice traffic, and the increasing volume of traffic causes congestion and deterioration in voice quality. Ensuring reliable and high-quality voice communications remains a critical challenge for the public switched telephone network.

The future of the PSTN depends on its ability to adapt to and integrate newer technologies such as VoIP and fiber.

PSTN Alternatives

The PSTN system offers a handful of features but isn’t particularly optimal for use in a business environment. It costs a lot and relies on outdated technology, both big red flags for faster and more efficient communication. Additionally, PSTN telephone networks transmit limited types of data.

Several PSTN alternatives have emerged that offer greater flexibility, functionality, and cost-effectiveness:

• Integrated Services Digital Network (ISDN): While largely obsolete now, ISDN was a digital alternative to PSTN, offering improved data transmission.
• Voice over Internet Protocol (VoIP): VoIP transmits voice over the internet, offering features like video conferencing, instant messaging, and integration with other software.
• Unified Communications platforms: Unified customer experience management platforms combine various communication channels (voice, video, messaging) into a single, integrated solution. Examples include Nextiva, Microsoft Teams, Slack, and Zoom.

What’s the Difference between PSTN and VoIP?

Voice over Internet Protocol is a modern, more advanced, and reliable alternative to the PSTN. It’s also known as IP telephony, broadband telephony, or internet telephony, but means the same thing: your voice transmitted through the internet — voice over IP. 

Unlike PSTN, which uses a network of wires to route calls, a VoIP phone uses only a DSL or cable modem connected to the internet. The voice signal is converted into a digital voice signal that reaches its destination via the internet. However, if you dial a PSTN number from your VoIP, your call will be transmitted through an exchange. 

VoIP works for all types of calls, data transfers, and more. The PSTN uses circuit switching to connect calls. Business phone systems use digital packet switching. Digital switching is more efficient than circuit switching because data is sent and received as needed. A permanent connection isn’t maintained for the entire duration of the call.

Plus, VoIP systems don’t use dedicated lines. Instead, the data packets use routers and the internet. Each data packet travels through the least congested and shortest path that publicly switched telephone networks aren’t smart enough to do.

Because packet switching is efficient and cost-effective, businesses now widely use VoIP. 

A 2022 study commissioned by Spiceworks Ziff Davis reported that 31% of organizations use a unified communications solution. This figure reflects a whopping 41% growth in VoIP since 2019. Lower cost, easier deployment, and more functionality make voice-over IP the standard for business communications. 

Here’s a closer, feature-by-feature comparison between PSTN and VoIP to ease your choice.

Why VoIP Is Better Than PSTN

If you’re still using a PSTN, PBX, or just any tech running on Plain Old Telephone Service, consider these factors to invest in better business communications technology. Your wallet and customers will thank you.

1. Better Cost Savings

Switching from a PSTN phone network to VoIP is costly because you lose your existing hardware, but it will save money in the long run.

VoIP reduces local calling costs by a whopping 40%, and softphones can save your business up to $1,727 monthly. Switching from PSTN to VoIP can save you up to 65% monthly. 

2. Better Customer Service

VoIP phone systems come with several features at no additional cost. These features add functionality to your customer service team, improving response times, and amping up daily resolutions. 

For instance, with a call forwarding feature, you can automatically transfer calls to an available agent so your customers don’t have to wait. 

87% of consumers want brands to do their best to provide a seamless experience, and half of consumers expect a response within 24 hours. If you’re a small business or just starting out, think of the impact good customer service can have on building your reputation from the ground up. 

3. Better Productivity

Happy customers mean better service, less stress, and smoother work processes, all contributing to employee morale, satisfaction, and productivity. VoIP plays a huge role in building and driving the pillars of productivity.

A joint study by Cisco and Sage Research has shown that unified messaging saves employees 43 minutes a day and mobile workers 55 minutes daily. Unified communications can help businesses with 100 employees reclaim up to 191 hours per day and $920,000 per year in productivity.

This powerful combination of customer satisfaction and advanced communications boosts a company’s overall performance and success.

4. Better Scalability

As you expand and onboard new employees, you need new phones. Using a PSTN means buying, installing, and adding new hardware and wiring for these phones. Costly, time-consuming, and slow!

Unlike traditional phone systems, VoIP is a better option for adding new lines as your business grows. Adding new connections is dead cheap, and you can do it instantly without upgrading the hardware.

If you can’t afford new telephones, your employees can use softphones on their computers, smartphones, or laptops. Scaling a VoIP phone network is also pretty easy compared to a PSTN network, which requires a lot of resources.

What’s the Future of PSTN?

The public telephone network continues to function for areas with limited access to newer technologies and for emergency calls. But its future is uncertain. It’s being phased out in favor of fiber optic and mobile networks.

PSTN’s limitations make it unsuitable for a growing business environment. The shift toward internet-based solutions such as VoIP and Unified Communications is accelerating, offering greater flexibility, cost efficiency, and functionality.

The future of PSTN is bleak and companies will eventually need to adapt to newer technologies to stay relevant and offer better customer communications.

PSTN Frequently Asked Questions

Here’s what you need to know more about PSTN.