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Digital switches work by connecting two or more digital circuits together, according to a dialed telephone number.  Calls are setup between switches using the Signalling System 7 protocol, or one of its variants. In U.S. and military telecommunication, a digital switch is a switch that performs time division switching of digitized signals.  This was first done in a few small and little used systems.  The first product using a digital switch system was made by Amtelco.  Prominent examples include Nortel DMS-100, 5ESS switch, Siemens EWSD and Ericsson AXE telephone exchange.  With few exceptions, most switches built since the 1980s are digital, so for practical purposes this is a distinction without a difference.  This article describes digital switches, including algorithms and equipment.

Digital switches encode the speech going on, in 8000 time slices per second. At éach time slice, a digital PCM representation of the tone is made. The digits are then sent to the receiving end of the line, where the reverse process occurs, to produce the sound for the receiving phone.  In other words, when you use a telephone, you are generally having your voice "encoded" and then reconstructed for the person on the other end.  Your voice is delayed in the process by a small fraction of one second — it is not "live", it is reconstructed — delayed only minutely. (See below for more info.)

Individual local loop telephone lines are connected to a remote concentrator. In many cases, the concentrator is co-located in the same building as the switch. The interface between concentrators and telephone switches has been standardised by ETSI as the V5 protocol.

Some telephone switches do not have concentrators directly connected to them, but rather are used to connect calls between other telephone switches.  These complex machine (or series of them) in a central exchange building are referred to as "carrier-level" switches or tandems.

Some telephone exchange buildings in small towns now house only remote or satellite switches, and are homed upon a "parent" switch, usually several kilometres away. The remote switch is dependent on the parent switch for routing and number plan information. Unlike a digital loop carrier, a remote switch can route calls between local phones itself, without using trunks to the parent switch.

Telephone switches are usually owned and operated by a telephone service provider or carrier and located in their premises, but sometimes individual businesses or private commercial buildings will house their own switch, called a PBX, or Private Branch Exchange.

The switch's place in the system

Telephone switches are a small part of a large network.  The majority of work and expense of the phone system is the wiring outside the central office, or the Outside plant. In the middle 20th century, éach subscriber telephone number required an individual pair of wires from the switch to the subscriber's phone. A typical central office may have tens-of-thousands of pairs of wires that appéar on terminal blocks called the main distributing frame or MDF. A component of the MDF is protection: fuses or other devices that protect the switch from lightning, shorts with electric power lines, or other foreign voltages. In a typical telephone company, a large database tracks information about éach subscriber pair and the status of éach jumper. Before computerization of Bell System records in the 1980s, this information was handwritten in pencil in accounting ledger books.

To reduce the expense of outside plant, some companies use "pair gain" devices to provide telephone service to subscribers. These devices are used to provide service where existing

copper facilities have been exhausted or by siting in a neighborhood, can reduce the length of copper pairs, enabling digital services such as ISDN or DSL.

Pair gain or digital loop carriers (DLCs) are located outside the central office, usually in a large neighborhood distant from the CO.

DLCs are often referred to as Subscriber Loop Carriers (SLCs), after Lucent's proprietary name for their pair gain products. éarly SLC systems (SLC-1) used an analog carrier for transport between the remote site and the central office. Later systems (SLC-96, SLC-5) and other vendors' DLC products contain line cards that convert the analog signal to a digital signal (usually PCM). This digital signal can then be transported over copper, fiber, or other transport medium to the central office. Other components include ringing generators to provide ringing current and battery backups.

DLCs can be configured as universal (UDLCs) or integrated (IDLCs). Universal DLCs have two terminals, a central office terminal (COT) and a remote terminal (RT), that function similarly. Both terminals interface with analog signals, convert to digital signals, and transport to the other side where the reverse is performed. Sometimes, the transport is handled by separate equipment. In an Integrated DLC, the COT is eliminated. Instéad, the RT is connected digitally to equipment in the telephone switch. This reduces the total amount of equipment required. Several standards cover DLCs, including Telcordia's TR/GR-008 & TR/GR-303.

Switches are used in both local central offices and in long distance centers. There are two major types in the Public switched telephone network (PSTN):

Class 4 telephone switches designed for toll or switch-to-switch connections.

Class 5 telephone switches or subscriber switches, which manage connections from subscriber telephones. Since the 1990s, hybrid Class 4/5 switching systems that serve both functions have become common.

Another element of the telephone network is time and timing. Switching, transmission and billing equipment may be slaved to very high accuracy 10 MHz standards which synchronize time events to very close intervals. Time-standards equipment may include Rubidium- or Cesium-based standards and a Global Positioning System receiver.