Direct answer
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The PSTN is the public telephone network that lets a phone number on one carrier reach a number on another. A PBX is the phone system one organization runs for itself. It gives people extensions and decides how calls are routed, answered and transferred. A business normally uses both, because the PBX handles calls inside the organization and a PSTN connection carries calls to and from outside phone numbers.
PSTN stands for public switched telephone network. It is public in the sense that many carriers take part and connect to each other, so a number on one can be dialed from another.
PBX stands for private branch exchange, and the word private carries the meaning. A PBX serves one organization, and that organization sets its rules. Microsoft describes its own product in these terms. Teams Phone is its technology for "call control and Private Branch Exchange (PBX) capabilities in the Microsoft 365 cloud." Call control means deciding what happens to a call. It covers which phone rings, what a caller hears after hours and where a call goes when nobody answers.
The feature list of a hosted PBX shows the same job. Atlantech Online's business phone service includes auto attendants, ACD groups that distribute calls among staff, a receptionist console and voicemail transcription. An administrator can add users, devices and call queues. Each item on that list is about handling calls for one organization. Delivering a call to another company's number is a different job, and it belongs to the PSTN side.
PSTN and PBX side by side
| Question | PSTN | PBX |
|---|---|---|
| Who it serves | Anyone with a phone number | One organization |
| What it does | Carries calls between carriers and their numbers | Routes calls among the organization's users and applies its call rules |
| How you reach someone | A full public phone number | An extension, or a public number assigned to that user |
| Who runs it | Telephone carriers | The organization, or a provider hosting it for the organization |
Suppose a 20-person accounting firm uses a cloud PBX. An employee at extension 104 calls a colleague at extension 117. The PBX recognizes both extensions as its own users and connects them. The call needs no public phone number, and no carrier handoff is involved. Microsoft describes the same behavior in Teams, where calls between users in one organization are, by default, handled inside Teams and stay off the PSTN.
That does not mean the call stays inside the building. In this firm, both phones reach the provider over the office internet connection, so the call depends on that connection.
Now the same employee dials a supplier's ten-digit number. The PBX sees that the number is not one of its own and sends the call out through the firm's PSTN connection. The carrier on that connection passes it toward the supplier's carrier, and the supplier's phone rings. The PBX chose to send the call out, and the PSTN delivered it.
Incoming calls run the other way. The carrier delivers a call for the firm's main number, and the PBX decides whether the auto attendant answers or a desk phone rings.
Buying a PBX as a cloud service can make the two functions look like one product. Microsoft keeps them visibly apart. Its documentation states that PSTN connectivity is separate from the Teams Phone license. The license gives a user the calling features. A separate arrangement supplies the phone numbers and the access to outside calling. A company with only the license can call coworkers in Teams, but it cannot dial an outside phone number. We cover the choices in how to choose a PSTN connectivity option for Teams Phone.
A carrier can also sell both together. Atlantech's page offers two routes. A customer can use its cloud PBX, or keep its own PBX and take service over SIP, PRI or analog. On the first route, Atlantech supplies the PBX and the public connection as one service, and the page says its hosted voice includes unlimited nationwide calling. On the second route, the customer keeps its own PBX and buys only the connection, delivered in whichever of those forms the PBX accepts. We compare the two routes in SIP trunking versus cloud PBX, and using SIP trunking with an existing phone system covers the second one.
A bundle is convenient, and both functions are still inside it. Knowing that helps when you compare quotes. Atlantech prices its phone service by consultation and publishes no rate on that page. So read a quote from it, or from any provider, for both parts: the phone system features and the public calling that comes with them.
Both terms picked up assumptions from the equipment that used to deliver them. A PBX was once a cabinet in the office, so people expect it to be on the premises. It can be, and it can also run in a provider's data center. A cloud PBX takes the PBX out of the office. The office still needs working power and a working network for its phones to reach the service, which is one of the trade-offs in how UCaaS compares to an on-premises PBX.
For decades a fixed line reached the PSTN over copper, so people expect the word to mean copper. Some carriers are now retiring that copper, and public-number calling continues over IP connections.
An older PBX can stay in service through that change. If it has analog or digital trunk ports, a PSTN gateway can join it to an IP connection by converting calls between telephone circuits and IP packets.
Informa TechTarget
“A private branch exchange (PBX) is a telephone system within an enterprise that switches calls between users on local lines, while enabling all users to share a certain number of external phone lines.”
Wikipedia
“The central office lines provide connections to the public switched telephone network (PSTN) and the concentration aspect of a PBX permits the shared use of these lines between all stations in the organization.”
Mitel
“a PBX allows a company to accommodate all its external voice communication requirements with a small number of external lines.”
Informa TechTarget
“PSTN (public switched telephone network) is the world's collection of interconnected voice-oriented public telephone networks via traditional circuit-switched networks.”
Wikipedia
“The public switched telephone network (PSTN) is the aggregate of the world's telephone networks that are operated by national, regional, or local telephony operators.”
Wikipedia
“the telephone company provides one or more trunk lines to the customer for connection to the customer's PBX, and allocates a range of telephone numbers to the customer.”
Wikipedia
“It provides functions similar to a PBX, but is provisioned with equipment owned by, and located at, the telephone company premises.”
International Telecommunication Union (ITU-T)
“The international public telecommunication numbering plan. Status: In force.”
GOV.UK
“Analogue networks have been in operation for decades and have reached the end of their serviceable life.”
Atlantech Online
“SIP Trunking uses IP at the application layer to connect a phone call to the Public Switched Telephone Network (PSTN), replacing a traditional 'phone trunk' such as a Primary Rate Interface (PRI) or analog line.”