What Is PSTN and How Does It Work? A Guide for 2024
By Andrea Viktória Filo
| 30. May 2024 |
Call Center, VoiP
By A. Viktória FiloAndrea Viktória Filo
| 30 May 2024 |
Call Center, VoiP
    By A. Viktória FiloAndrea Viktória Filo
    | 30 May 2024
    Call Center, VoiP

    What Is PSTN and How Does It Work? A Guide for 2024

    Throughout the technological advances of the last century, there’s one thing that hardly changed: The landline telephone network, otherwise known as the PSTN. However, the number of fixed-line subscriptions has been falling since 2009, with just 861 million left in the world as of 2023.

    Before we consign it to history, let’s explore what PSTN is, how it works, and what former landline owners are now using instead.

    Key takeaways:

    • PSTN stands for Public Switched Telephone Network. It is the traditional landline phone system.
    • The PSTN uses automated circuit-switching, with calls routed through a network of switches.
    • The PSTN is familiar and reliable, with good call quality and security.
    • But when it comes to VoIP vs landlines, the old tech is fighting a losing battle, with VoIP excelling in terms of cost-efficiency, flexibility, and more.

    What Is PSTN?

    PSTN stands for Public Switched Telephone Network, and it’s the traditional landline telephone system that’s been around for more than a century. It is a collection of worldwide telephone networks that enables users to make and receive landline calls across the globe. 

    The network is based on physical infrastructure including copper wires, fiber optic cables, switching centers, cellular networks, and satellites. 

    The system is also sometimes referred to as the Plain Old Telephone Service (POTS), although technically POTS is just one part of the overall PSTN.

    The Development of the PSTN

    The first telephone networks relied on manual switchboards, where operators would route calls by plugging and unplugging copper wires. This system was known as the Post Office Telephone Service (the original meaning of POTS) because it was postal office staff who handled calls.

    Eventually, this evolved into the PSTN as we know it, with automated electronic switching replacing human operators. 

    Circuit switches at specific points in the network meant calls could be routed automatically. Undersea cables and satellite communications made it easier to make international calls.

    Then came the ISDN (Integrated Services Digital Network), enabling PSTN systems to transmit multimedia using a dial-up network modem (a piece of tech which dialed the number of your internet service provider to connect your computer to the PSTN). 

    The rise of newer technology means the PSTN’s reign as the dominant telephony network is now drawing to a close—but more on that later.

    Source: Statista.com

    How Does PSTN Calling Work?

    The “S” in PSTN stands for “switched”, because the system routes calls through a network of switches to their destinations. 

    The switches create a wired connection between the two parties. Voice signals travel over the connected lines, with the connection staying open until the call is terminated.

    Businesses often have their own Private Branch Exchange (PBX) to make PSTN calls. This effectively turns the premises into a local exchange, acting as a switch to connect multiple phones on site.

    Main Components of PSTN Architecture

    In public switched networks, underground wires or cables connect homes and businesses to switching centers where phone calls are routed:

    • Central office or local exchange: This connects subscribers in a narrow geographical area to a PSTN line. For calls between users in the same neighborhood, no further routing is required.
    • Tandem office: This routes calls between multiple local exchanges. It’s also known as a junction network. If you want to call someone in a different part of the same city, your local exchange routes the call to a tandem office, which forwards it to the recipient’s local exchange.
    • Toll office: This handles national long-distance calls, and is connected to all tandem offices. If you call someone in another city or state, the PSTN connection will be made via a toll office.
    • International gateway: This manages international switching, routing calls between different countries.

    How Calling Via PSTN Works in Practice

    To make a PSTN call, you pick up the handset and dial the relevant number. If you want to call a number outside the local exchange area, you’ll need to add an area code—or the country code for an international call.

    Your handset converts the sound waves from your voice into electrical signals, and sends them over network cables to the nearest local exchange. The exchange determines the correct destination, and routes the call through a fiber optic cable that converts the electrical signals into light pulses.

    When your call reaches the relevant office, the light pulses are converted back to electrical signals. The office forwards the call to your recipient’s phone number. The electrical signals cause the phone to ring, and the handset turns the electrical signals into sound waves when the user answers.

    The Benefits and Drawbacks of a PSTN-Based Phone System

    Now let’s take a look at the pros and cons of using a PSTN phone line:

    PSTN Benefits

    Traditional landlines are familiar to most of us, and it’s simple to make or pick up a call. If you use PSTN for your business, you won’t have to train employees on how it works. The system has also proved its reliability, having been around for so long.

    Thanks to the established worldwide infrastructure, you can expect great call stability. Even in a power outage, your telephone line won’t be affected. With each PSTN number tied to a specific location, too, emergency services can easily trace the origin of an emergency call.

    PSTNs are also pretty secure, since they use dedicated lines. Yes, wiretapping is possible (though illegal), but your phones won’t suffer a cyberattack.

    PSTN Drawbacks

    PSTN systems require physical infrastructure, as each phone line has to be hardwired to your premises. It’s not a job you can do yourself, and you’ll need an extra phone line installed for every new employee. It also means workers can only make and receive calls within the office.

    As well as paying for line rental and providing handsets for employees, you’ll be paying for the calls you make. PSTN calls are charged by distance. The circuits have to remain open longer for signals to arrive from far afield­­­—so long-distance and international calls are pricey.

    Although a PSTN line comes with basic features like call transfer and caller ID, there are fewer advanced call management features, AI-based automation opportunities, or integrations with digital tools.

    PSTN is also being phased out in favor of fully digital communications, making it harder for carriers to maintain legacy infrastructures. In the UK, for example, the PSTN will close in December 2025, and it’s scheduled to be phased out in most countries by 2030.

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    An Alternative to PSTN: Voice over Internet Protocol (VoIP)

    So, with PSTN getting phased out, what’s the alternative? You could set up a company cell phone plan, but your best option is VoIP. 

    Voice over Internet Protocol technology routes calls via your internet connection, instead of the PSTN’s wires and cables. It converts analog signals (your voice) into digital “packets” for transmission.

    PSTN vs VoIP: A Direct Comparison

    So, how does VoIP stack up against PSTN? We’ve put together a table highlighting the key differences. (For a more comprehensive comparison, click here: PSTN vs VoIP).

    PSTN

    VoIP

    Transmission type

    Uses a dedicated POTS line to transmit voice data as electrical signals.

    Uses your internet connection to transmit voice data, converted into digital data packets.

    Switching type

    Uses circuit switching over a dedicated line, requiring a permanent connection for the call’s duration.

    Uses packet switching, sending and receiving data as needed via the most efficient path. No dedicated line required.

    System requirements

    Requires physical telephony infrastructure on-site, including wiring and fixed handsets.

    Requires an internet connection. You can use special IP phones, or computers and mobile devices.

    Setup and maintenance

    Requires professional installation (including when you add new users/lines), and ongoing maintenance if you use on-premises PBX.

    Set up an account with the vendor, install the software, and plug in IP phones if using. You can be ready within an hour.

    Calling costs

    Charges based on distance, so national and international calls are more expensive.

    Calls are not charged based on distance, and VoIP to VoIP calls can be free.

    How Much Do PSTN and VoIP Systems Cost?

    Costs for both types will vary hugely depending on your service provider, the number of users, and the features you want.

    With a PSTN-based system, you’ll need separate phone lines and handsets for each employee. You’ll pay for line rental, while PSTN calls are either charged per minute or as part of a bundled minute subscription. There’s also often an extra fee for additional features.

    Companies with up to 40 employees can use a Key System Unit (KSU) to connect to the PSTN. This offers multiple lines and extra features, but costs from $300 to $1,000 per user. Larger businesses may opt for an on-premises PBX, which incurs a setup fee, hardware costs, and ongoing maintenance. This can cost up to $26,000 in the first year.

    VoIP systems are cloud-based, so you don’t need hardware (not even handsets, as you can make calls with a computer or mobile device via your existing internet connection). Calls are cheaper because the tech is more efficient and you’re not charged by distance.

    You pay for VoIP with a monthly subscription, with no upfront costs or lengthy contracts. Unlimited calling and advanced features are built in, and VoIP is usually sold as part of a communications package. For example, a VoIP-based call center costs $25 per user, per month with CloudTalk.

    Why VoIP Is Better Than PSTN

    As we’ve mentioned, VoIP saves you money on infrastructure and the cost of calling compared to a PSTN service. 

    It’s also flexible and scalable—users can access the cloud-based system from anywhere on any internet-connected device, which is ideal for remote work. And, you can easily add or remove users as needed.

    With VoIP, you’ll get advanced features and integrations with your other business tools, as well as the opportunity to choose a virtual phone number that’s not tied to a geographic location.

    Ready to Leave the PSTN Behind?

    When you trade in traditional PSTN landlines for modern VoIP technology, you’ll see a raft of benefits including cheaper calls, more powerful features, and a low-maintenance system that’s user-friendly, flexible, and scalable.

    PSTN FAQs

    What Kind of Network Is the PSTN?

    The Public Switched Telephone Network (PSTN) is a circuit-switched network, which means that calls are routed through a series of switches to the final destination. The switches open and maintain a connection between two phones for the duration of the call.

    What Is an Example of a PSTN Network?

    An example of a PSTN network would be the central, tandem, and toll offices, which connect calls between users in either the same neighborhood, city, or country. 
    Calls are initially routed to the caller’s nearest exchange, and forwarded to either the tandem or toll office (if necessary) for transmission to the recipient’s number. International gateways connect overseas calls.

    Why Are Many Countries Phasing Out Their PSTN Networks?

    PSTN systems are old-school tech. They weren’t designed to handle other data types or integrate with AI tools—which is why so many businesses are moving away from PSTN. It’s harder for carriers to maintain legacy infrastructure, and not worth it when demand is falling steadily.

    Should I Replace My PSTN System with VoIP?

    PSTN services are being phased out globally, so pretty soon you won’t even have a choice. It makes sense to take the leap before you’re pushed, and VoIP offers so many benefits that it’s an easy decision.

    Is It Worth Switching to VoIP for Small Businesses?

    Definitely. The digital packet-switching used in VoIP systems is much more efficient, making calling cheaper—and you don’t have to worry about the cost or hassle of physical infrastructure. VoIP enables small businesses to enjoy advanced features like smart routing and automatic transcription, as part of the package.
    Plus, there’s the advantage of getting a VoIP number that’s not linked to your location, meaning you can appeal to new customers in any region by displaying a number that’s local to them. Coupled with the access-anywhere nature of VoIP, your small business can realize its global ambitions.