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The Post Office installed the world's first PCM (Pulse Code Modulation) exchange at the Empress telephone exchange near Earl's Court in London. Postmaster-General John Stonehouse opened the exchange on 11 September with an inaugural call to the Mayor of Hammersmith.

The possibilities of PCM systems for the transmission of speech had been originally developed more than 30 years earlier in 1937 by A H Reeves working in Paris for the Western Electric Company, and PCM was first patented by him in France the following year. He proposed a transmission system in which voice signals were electronically coded into strings of digital pulses, transmitted in this form, and then turned back into speech at the receiving end. His ideas were well in advance of his time, but the technique could not be economically realised until suitable components, particularly transistors, were available.

Technical advances in the early 1960s enabled the possibility for the first time of PCM providing an economic solution to the problem of providing multi-channel systems designed for speech networks. Conventional analogue transmission allowed two pairs of wires to carry two conversations at one time. PCM transmission increased this to 24 simultaneous conversations by interleaving the groups of pulses corresponding to different callers (Time Division Multiplexing), reducing the need for many new cables. PCM transmission also allowed a greater diversity of telecommunications services in addition to telephony, including facsimile and data transmission.

The particular significance of Empress was that it was the first of its type in the world to switch PCM signals from one group of lines to another in digital form. PCM transmission had been introduced the previous year on selected routes, but switching on non-direct routes was done by conventional electromechanical means. This meant that digitally transmitted calls had to be converted to analogue for switching, then converted back to digital form for transmission over the next PCM route. The Empress Exchange was the result of Post Office research into overcoming this inefficient and expensive problem. Empress also demonstrated that an integrated PCM transmission and switching system was capable of working fully within the existing network of electro-mechanical (Strowger and Crossbar) systems. This first use of computer-like technology with micro-electronic circuits was part of the investment programme of the time and led directly to the System X family of digital switching systems and the totally digital service and integrated digital network which BT now operates.

Kiosk No. 8  - (the K8) - was introduced in July. Two designers, Douglas Scott and Bruce Martin, had been commissioned in 1965 to produce designs for a new kiosk. The designs had to incorporate the best features of previous designs and be suitable for both urban and rural surroundings. Bruce Martin's design was eventually selected and when introduced had been produced in just over one year, the shortest time then taken to create a new kiosk. It was made from cast iron and contained full length toughened glass, and became the successor to Kiosk No. 6  -(the K6) - for all replacements and new installations as the standard payphone housing.

The first all-transistor 12 MHz (2,700 circuits) coaxial cable was brought into use.

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