What Is a PBX? How a PBX Phone System Works

A PBX, short for private branch exchange, is the switching system that runs a business's phones. It gives each person an extension, lets colleagues call each other with a short number, answers outside callers with a menu, and shares a few outside lines among many people. Vonage defines it as "a private telephone network designed for business use" that connects employees with external callers "while sharing a limited number of main phone lines" (Vonage).

What PBX stands for

From PBX maker Yeastar's explainer. Yeastar notes the first PBX systems were manual switchboards that handled only phone calls (Yeastar).

Yeastar describes a modern PBX as "a system that manages both internal and external communication for a business," routing calls across VoIP, the regular phone network (PSTN) and ISDN, and tying desk phones, softphones and mobile devices together (Yeastar). VoIP.ms puts it more simply: a private phone network used within a company (VoIP.ms).

How a PBX phone system works

Inside the office, staff reach each other by short extension numbers, "such as dialing a three-digit code instead of a full phone number" (Vonage). Outside calls come in and go out over shared lines, so a 10-person office does not need 10 separate phone lines. The PBX decides where each call goes, using rules you set: business hours, menus, ring groups and voicemail.

What a PBX system is made of

Components from Yeastar. A traditional on-site PBX also has a cabinet that houses the switching logic and call control, and often an automatic call distributor that routes calls by rules, such as sending sales calls to the sales team (Vonage).

What a PBX phone system does

Types of PBX phone systems

Yeastar lists four main types: analog PBX, IP PBX, cloud or hosted PBX, and hybrid PBX (Yeastar).

Descriptions from Vonage and Vonage on hybrid PBX.

From switchboard to software

The first PBXs were manual switchboards where an operator connected each call by hand, handling only phone calls (Yeastar). Later systems switched calls automatically in a cabinet on site. IP PBXs then moved the switching to software that carries calls over internet protocol, and cloud PBX moved that software into a provider's data center, leaving only phones and apps in the office. The job never changed: route each call to the right person while sharing a few outside lines among many users.

PBX terms in plain English

PBX vs VoIP vs hosted PBX

These terms get mixed up. Yeastar separates them cleanly: the PBX is the business phone network, in hardware or software, that manages call routing; VoIP is "the underlying transmission technology" that carries voice over an internet protocol network (Yeastar). A hosted PBX is a PBX that a provider runs for you and that uses VoIP to reach your phones. So a cloud phone system from RingCentral, Zoom or Ooma is a hosted PBX, and it is VoIP. For prices from ten providers, see hosted PBX; for how the calls travel, what is VoIP.

How much does a PBX cost?

An on-premises PBX means buying hardware and installation up front, then paying for maintenance and lines. A cloud PBX, Vonage notes, "typically uses a subscription model based on users or call volume" (Vonage). Entry prices for cloud PBX service from six providers:

Our math: entry price times 10 users, list price before taxes and fees, from each company's pricing page. Some systems price differently: 3CX charges "a flat annual price for your whole 3CX system" based on how many calls can happen at once, not per user (3CX); see 3CX pricing. Grasshopper charges per account. Full cost breakdowns are on business phone system pricing.

PBX systems and 911

Federal rules written for multi-line telephone systems apply to PBXs. Under Kari's Law, anyone must be able to dial 911 from any station without first dialing a 9 or any other prefix (47 CFR 9.16). The system must also notify a central location on site or off site when someone calls 911 (FCC), and installers, managers and operators must make sure direct dialing works (FCC). If you inherit an older PBX that needs a 9 for outside lines, check that 911 works without it.

Moving off an on-premises PBX

A business with a working PBX has three paths. Keep the PBX and replace its phone lines with SIP trunking, so you run the PBX and the provider supplies only the lines. Move in stages with a hybrid PBX that blends existing equipment with cloud features (Vonage). Or retire the hardware and move every extension to a hosted PBX. Whichever you choose, port your numbers before cancelling the old lines, and test that 911 works without a 9 or other prefix.

Questions to ask before you buy a PBX

1. Who maintains it: you, an installer or the provider?
2. Is it priced per user, per line, or by simultaneous calls?
3. Is the auto attendant on the plan you are pricing?
4. Which desk phones and softphone apps does it support?
5. How does it meet direct 911 dialing and notification rules?

Do you need a PBX?

If more than one person answers your business calls, you need what a PBX does: extensions, transfers and a menu. You almost never need to own one. For most small businesses the answer is a cloud phone system, which is a PBX someone else runs for a monthly fee. A single owner who only needs a second number may need even less; see virtual phone number providers. Comparing complete systems? Start with office phone systems.