A Guide to Common Business Phone System Terms

Don’t know your VoIP from your SIP trunk? Can’t tell your PBX from your PSTN? Let Business.org’s guide to business phone system terminology clear a few things up.

If your business telephone needs are no more complicated than a wall-mounted dial box that you occasionally answer with “Yo, this is Vinnie’s Pizza,” read no further. Those of you running a small business with multiple employees who need to be taking and making calls, however, have come to the right place.

Digital communications and storage innovations, and the internet, have made business phone systems more useful and inexpensive than ever . . . but not without the introduction of a whole lotta confusing terminology.

Digital communications and storage innovations, and the internet, have made business phone systems more useful and inexpensive than ever . . . but not without the introduction of a whole lotta confusing terminology. A potential service provider will likely throw some unfamiliar jargon around when you’re shopping for office solutions—here are 13 common business phone system terms, demystified:

Phone system

The term “phone system” is as basic as it gets: it’s simply a tree of multiple connected telephones within a business that handles incoming calls, call transfers, and voice messaging (should you be too busy to answer, or are avoiding, said calls). Classically, a phone system refers to landline-connected hunks of plastic on desks.

On-premise phone system

If a business’s phone system hardware is physically located on its property, it’s an on-premise phone system (and you thought this was going to be complicated). While the telephone connection comes from an outside provider, the businesses is responsible for the maintenance of an on-premise phone system. You break it, you fix it.

Multi-line phone system

The offices of ancient times required a switchboard operator to physically route phone calls to the correct parties (re-binge Mad Men for a corporate history lesson). The multi-line phone system automatically directs calls to unique extensions and dedicated phone numbers for employees and departments, thus putting Marge out of a job.

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PBX phone system

A PBX phone system, or private branch exchange phone system, is a private telephone network within a company. Employees share a handful of external telephone lines for outside calls, but they’re able to make free calls within the office using simple three- to four-digit numbers, reducing cost overall. Just don’t dial “666” for Lou.

Public switched telephone network (PSTN)

The public switched telephone network, or PSTN, refers to the legacy telephone system of copper wires that’s carried analog voice data internationally since the 1900s. Hipster audiophiles might argue that analog “sounds warmer, man,” but the PSTN is gradually being supplanted by digital and fiber-optic connections.

SIP trunking

SIP trunking isn’t something you tried at spring break in your college years; it’s when a company’s PBX phone system connects to the internet in place of the PSTN. SIP (session initiation protocol) trunking carries voice, data, and video over a single line—or trunk—to consolidate the entirety of a business’s multimedia usage.


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Ever talked to someone through Skype or Google Voice? Then you’ve used VoIP (Voice over Internet Protocol). VoIP phone systems bypass the traditional connections managed by Big Telephone and offer a wider variety of internet-enabled features, like mobile call routing and data tracking. They’re also more expensive and subject to computer issues and power outages.

Hosted phone system

As a form of VoIP, a hosted (cloud) phone system—or cloud phone system—is internet based but with the advantage of being hosted and maintained offsite by the service provider. Aside from purchasing compliant IP phones or adaptors, cloud phone systems are inexpensive and scalable for businesses, as well as susceptible to the same drawbacks as VoIP.

Video conference calling

Video conference calling, sometimes referred to as “videoconferencing” to save one whole syllable, is a VoIP perk that allows multiple people to talk to each other face-to-digital-face, regardless of location. Anyone who’s struggled to set up a voice-only conference call may wince, but video conference calling is becoming the norm.


Before high-speed broadband, gamers would congregate and wire their computers together to do battle in LAN (local area network) parties. In-person gaming is so ’90s, but offline, closed LANs are still used in offices because they’re fast and easy to set up if the wiring is already in place. If not, a WLAN (W for wireless) will do.


It sounds ominous, but “unified communications as a software,” or UCaaS, is just about simplification. Instead of utilizing separate systems for voice, email, instant messaging, video conferencing, etc., UCaaS streamlines all outbound and in-house business communications into a single system via cloud-based VoIP, typically for a subscription fee.


It would have an entirely different meaning on a party invite, but in this context, BYOD stands for “bring your own device.” Employees conducting company business on their personal laptops, tablets, and phones in the workplace is more common than ever; if you allow it, put appropriate IT security layers and guidelines in place.


Virtualization generates software-based versions of physical business applications like file storage and email, condensing the load of multiple servers into one—and it also works for business phone systems. Answering BYOD challenges, virtualization can even create independent business- and personal-use layers within one smartphone.

Not every business’s phone system requirements will be the same, but being forearmed with basic terminology knowledge will help you choose the right one for you—and avoid getting stuck with a setup you may not need that could cost you big as your business grows.