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THIS PAPER describes the exploratory development of a microprocessor-controlled PABX telephone called the Touch Phone. Advanced hardware and software techniques have been utilized in the system design to implement new interface concepts for a user-friendly PABX telephone set. With its interactive capability, the user can easily gain access to the many features of a modern PABX system with minimal memorization. The user enters commands by touching "buttons" on a touch-sensitive screen that are drawn by the self-contained microprocessor. With the guidance of tree-like structured menus presented on an electroluminescent (EL) display panel, the user can interactively select the various features and options provided by the PABX system. The goals of the Touch Phone are to make the man-machine interaction simple and precise.