As I said the exchanges have already started coming out, for a couple years now actually. They replace a splitter card in the broadband equipment that used to allow the phone line to be combined with the ADSL with one that can supply a copper phone line and then the landline is coming from the broadband network instead of the old exchange.
For an end user you wouldn't know the difference.

Equipment has got smaller but that's nothing new. I spent a lot of my trainee days helping to replace the step by step and crossbar hardware with Neax exchanges. Basically a whole large room of electro-mechanical hardware was replaced by a couple of rows of Neax back in the 80s. Now phone service is a tiny amount of traffic compared to the internet that it can just be tacked onto the broadband equipment.