This invention discloses an integrated exchange system for the terminal edge network connections. The integrated exchange system, comprising an IP packet based switch system and a telephony executive engine, is capable to execute IP and non-IP communication protocols, which puts LAN, WAN, PSTN and POTS together to offer the data network functionalities of Ethernet switch, route, gateway, firewall, VPN tunnel, and voice communication functionalities of IP-PBX, voice mail box, computer telephony and call center.