Purpose
In basic telephony there are two types of offices: local and foreign. A local office was assigned a specific area, and all telephone services provided to that area came from that central office. Each central office had its unique identifier. In the early days names were used, such as "Jackson" or "Newton". The office names were changed to three-digit numerical exchange codes (NNX), prefixed to the local phone number (not the area code).
Customers who want a telephone number provided by a neighboring telephone central office, lease a "foreign exchange" line. With the old two-wire loop technology, this would require an engineered circuit with increased costs. The practice is rare except in big cities.
Read more about this topic: Foreign Exchange Service (telecommunications)
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