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This connection is usually on a pair of copper wires called twisted pair. The system was originally designed for voice transmission only using analog transmission technology on a single voice channel. Today, your computer's modem makes the conversion between analog signals and digital signals.
With Integrated Services Digital Network (ISDN) or Digital Subscriber Line (DSL), the local loop can carry digital signals directly and at a much higher bandwidth than they do for voice only.
Also read About DSL for lots more information