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Phone System in Office 365 enables call control and PBX capabilities in the Office 365 cloud with Microsoft Teams and Skype for Business Online. With Phone System, users can use Teams or Skype for Business Online to place and receive calls, transfer calls, and mute or unmute calls. Phone System users can click a name in their address book and place Teams or Skype for Business Online calls to that person. To place and receive calls, Phone System users can use their mobile devices, a headset with a laptop or PC, or one of many IP phones that work with Teams and Skype for Business Online. Phone System administrators can manage calling options and settings from the same console used for messaging, collaboration, and so on.

Give people the calling features they need to get business done. Get consultative transfers, music on hold, call park, and cloud voicemail. Deliver great collaborative experiences with features such as group call pickup, delegation, and shared line appearance. Help ensure every customer is answered and routed to the right queue with cloud auto attendants and call queues.

Calls between users in your organization are handled internally within Phone System, and never go to the Public Switched Telephone Network (PSTN). This applies to calls between users in your organization located in different geographical areas, removing long-distance costs on these internal calls. For calls outside your organization, Microsoft provides multiple options for connecting Phone System to the Public Switched Telephone Network (PSTN).

Phone System can be connected to the PSTN in one of two ways. You can purchase a Microsoft Calling Plan (domestic or domestic and international) for Office 365. Microsoft Calling Plan is an all-in-the-cloud solution with Microsoft as your PSTN carrier. You can also use your existing telephony infrastructure for on-premises PSTN connectivity. For your Teams users, you can connect your on-premises telephony infrastructure to Phone System by using Direct Routing.