Digital electronics (based on signals in the form of pulses) turned out to be superior to analogue electronics which produced the exact waveforms. The emergence of digital techniques reduced noise and at the same time was less demanding of bandwidth. Pulse code modulation was introduced and became the dominant form of modulation. The operation of digital exchanges is explained. Their growth is plotted as a function of time for the decade 1987–97. Digital signal processing is discussed. Shannon’s theory predicting that a certain amount of information can be transmitted entirely free of noise is discussed.