A typical analog Internet connection via a twisted pair telephone line requires approximately three kilohertz (3 kHz) of bandwidth for accurate and reliable data transfer. Twisted-pair lines are common in households and small businesses. But major telephone cables, operating between large businesses, government agencies, and municipalities, are capable of much larger bandwidths.

Suppose a long-distance cable is available with a bandwidth allotment of three megahertz (3 MHz). This is 3,000 kHz, so in theory, it is possible to place 1,000 signals, each 3 kHz wide, into the long-distance channel. The circuit that does this is known as a multiplexer. It accepts the input from each individual end user, and generates a signal on a different frequency for each of the inputs. This results in a high-bandwidth, complex signal containing data from all the end users. At the other end of the long-distance cable, the individual signals are separated out by means of a circuit called a demultiplexer, and routed to the proper end users. A two-way communications circuit requires a multiplexer/demultiplexer at each end of the long-distance, high-bandwidth cable.

When FDM is used in a communications network, each input signal is sent and received at maximum speed at all times. This is its chief asset. However, if many signals must be sent along a single long-distance line, the necessary bandwidth is large, and careful engineering is required to ensure that the system will perform properly. In some systems, a different scheme, known as time-division multiplexing, is used instead.

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