TDM vs.PBX vs. VoIP: What Do These Terms Mean?

You might have seen these terms floating around. But do you know what they really mean?

Basically, traditional (analog) phone systems are usually associated with TDM or PBX, while VoIP is used to describe a digital phone system.


Acronyms can be confusing, so let’s clear the air with some basic definitions.

Time Division multiplexing (TDM)

TDM phone technology is based on electrical circuits that are physically switched on the public switched telephone network (PTSN). Telephones transmit an electrical signal to a switch, which interprets each signal, breaks them into segments, and then routes the segments to the right end users. Because conversations are two-way, each circuit needs to be able to handle signals in both directions. These systems have been in place for a long time – before IP server technology and the Internet was invented.

TDM phone systems are reliable in that the use a dedicated phone line with existing infrastructure. Sound quality is consistently high, but calling features are limited to the basics like call routing, hold, voicemail, and conference calls. Phones can only be connected if there is an unused phone jack available – adding more lines might require installing additional infrastructure. Moreover, this technology has peaked in that there is little to no innovation in TDM phone systems.

Private Branch Exchange (PBX)

PBX telephone system hardware has traditionally been used by large enterprises that need a lot of phone lines and thus opt to host their own phone systems locally. A PBX system physically switches calls between enterprise users on various local phone lines while permitting all users to share a single (or sometimes multiple) external phone line. Historically, enterprises installed local PBX systems to reduce the cost of subscribing to multiple telephone lines for each employee.

Traditional PBX systems were analog, but newer systems use digital signals that are converted to analog signals once they leave the local system. Essentially, a PBX system connects internal phones within an enterprise to either the PSTN or the Internet, depending on whether it is a traditional PBX system or an IP PBX system.

Voice over Internet Protocol (VoIP)

VoIP phones use the Internet rather than physical switches to route calls. The term refers to the technology used to ‘switch’ analog voice signals into digital packets of data, which are then sent to the recipient caller via the Internet. VoIP phone systems can be used to communicate with users who use either traditional or IP phone systems.

The main benefit of VoIP phone systems is that they don’t have to be physically connected to the PTSN. Instead, you only need an Internet connection and an Internet-connected device. And virtually any Internet-connected device (your computer, smartphone, tablet, etc.) can be used as a VoIP phone. Moreover, because VoIP is Internet-based, the set of features that can complement VoIP phone systems is virtually unlimited. Many VoIP providers include additional features like call waiting, voicemail, conference calling, and more, as part of the basic monthly subscription.

Putting TDM, PBX, and VoIP all together

It turns out that the technologies listed above can actually be combined in various ways. For instance, you can have a TDM PBX, an IP PBX, or a Hybrid PBX.

A TDM PBX is the technology traditionally used by large enterprises. This system uses physical switches (as opposed to digital) and connects to the PSTN.

With the advent of VoIP, it became possible to get the features and reliability of a PBX without having to invest in costly on-premise infrastructure. Instead, companies pay a subscription fee to access an IP (hosted) PBX system maintained by a third-party service provider. In contrast to a TDM PBX, an IP PBX is scalable and can reduce overall telecom costs significantly. While most IP PBX systems are hosted by a third party, they can also be hosted locally.

A Hybrid PBX is a system that combines TDM and IP PBX technology. These systems permit companies to switch to IP telephony without completely getting rid of their TDM phone systems.

Seriously thinking about switching to VoIP?

Vist our POTS to VoIP resource page and learn how you can make the switch to VoIP without getting rid of your traditional phone system.