History of PCM Transmission:

A voice digitization technique known as Pulse Code Modulation started to be deployed in the United States Public Switched Telephone Network in 1962. 

Basically, you start with a 4 KHz analog voice channel. Then you take a "snapshot" of the voice signal's amplitude every 1/8000th of a second (you have to sample at twice the maximum frequency to avoid a problem known as "aliasing"). Then you convert the measured amplitude to a number (the "quantization" process) that is represented by 8 bits. Thus, PCM requires 64 KBPS of digital bandwidth (8 KHz * 8 bits). This basic channel represents the first level of a digital hierarchy, known as a DS0. 

A special type of Time-Division Multiplexer (TDM) called a "Channel Bank" takes 24 of these 64K DS0 channels and combines (multiplexes) them into a single aggregate rate of 1.544 MBPS. This rate is the combination of the channel data payload of 1.536 MBPS (64 KBPS * 24 Channels) + 8 KBPS of framing and synchronization bits. The 1.544 MBPS rate is known as the DS1 level in the digital hierarchy. Facilities that support this rate are usually referred to as "T-Spans" or "T1" circuits. 

International standards were developed later. Although the basic hierarchical DS0 rate of 64 KBPS was preserved, the algorithm for converting the voice signal to a digital signal is different. Also, the International standard calls for 30 voice channels + a 64 KBPS synchronization channel + a 64 KBPS signaling channel. Therefore, these systems operate at a rate of 2.048 MPBS (1.920 MBPS + 64 KBPS + 64 KBPS). Facilities that support this rate are usually referred to as "E1" circuits. 

Using a transmission line code known as Bipolar-Alternate Mark Inversion (AMI), a 1.544 MBPS T1 circuit requires 772 KHz of analog bandwidth. So, why go digital? I could use Frequency Division Multiplexing (FDM) and combine those same 24 channels into a 96 KHz (4 KHz * 24) analog pipe, right? While FDM saves bandwidth, noise is added as the signal travels through every amplifier and modulator. In a digital system, "ones" and "zeroes" go in, and "ones" and "zeroes" go out. Since major sources of analog noise are removed in digital systems, circuit lengths can be extended, and network topologies simplified through the reduction of the number of circuits required between any two telephone exchanges. Quality improves, operating costs decrease!