Remote concentrator
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In modern telephony a remote concentrator is the lowest level in the telephone switch hierarchy. Only a few hundred telephone lines attach to each remote concentrator. In North America, concentrators are located in a little box in each neighbourhood. In Europe, the buildings that once contained local Strowger telephone exchanges are now usually empty except for a remote concentrator.
The wire coming into the concentrator is to the local phones, and the wire leaving it is from the local phones. Nonlocal phones' time slots just pass through the concentrator unchanged. If the concentrator breaks, a fail-safe relay shorts the in wires to the out wires, and nonlocal phones detect no difference. The central switch periodically counts concentrators, and schedules maintenance, probably before users notice the failure. Concentrators for several hundred customers can be threaded on this loop like pearls.
The interface between remote concentrators and their parent telephone switches has been standardised by ETSI as the V5 protocol.
When a user picks up the phone, the concentrator produces the dial tone. When the user dials, it reads the tones. Once the user has completed dialing, the concentrator's microcomputer sends the dialing data to the central switch, which allocates a time slot for the dialing phone on the wire pairs that pass through the concentrator and through the switch.
The trick is that after the central switch tells the concentrator which time slot to use, the concentrator "opens" a time-slot on the loop to a local phone. The allocated time slot on the wiring into the concentrator is used to send data from the remote telephone's microphone to the local telephone's speaker. The allocated time slot on the wiring out of the concentrator (with the same time slot number) carries data from the local microphone to the remote speaker.
So, to arrange a connection, the switch just completes the circle between the user's phone and the remote phone. It interchanges the data from one to the other. In this limited sense, Telephone "exchange" is exactly correct terminology.
