Digital telephony (a.k.a "cable telephone") is accomplished by installing a special telephone interface at the customer's premises that coverts the analog signals from the customer's in-home wiring into a digital signal, which is then sent on the local loop (replacing the analog last mile, or POTS) to the company's switching center, where it is connected to the PSTN.

The biggest obstacle to digital telephone service is the need for nearly 100% reliable service for emergency calls. One of the standards available for digital cable telephony, PacketCable, seems to be the most promising and able to work with the Quality of Service demands of traditional analog POTS service.

The biggest advantage to digital cable telephone service is similar to the advantage of digital cable TV, namely that data can be compressed, resulting in much less bandwidth used than a dedicated analog circuit-switched service. Other advantages include better voice quality and perhaps future integration to a VoIP network providing cheap or unlimited nationwide and international calling. Note that in most cases, digital cable telephone service is separate from broadband internet service being offered by many cable companies and does not rely on TCP/IP traffic or the Internet.