A distributed processing telephone system (10) for providing "plug-and-play" capability comprises a plurality of telephone sets (15-1, 15-2, --- 15-N). Each telephone set is coupled to at least one common communications channel (11), or telephone line, and includes at least one tunable RF modem. There is no key service unit (KSU). That is, the system is KSU-less. Resources of the telephone system are allocated using a peer-to-peer protocol. For example, as each telephone set is newly added to the system, the new telephone set adaptively determines its own allocation of resources, e.g., intercom numbers, etc. During operation, each telephone set requests the appropriate resources from its peers.