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How to handle incoming call - problems with third call

I have a S20 system that has 3 lines. I everything is connected and working for the last year+. Business is starting to pickup and we noticed something strange when having 2 lines used and third call coming in.

For the incoming route, we have th calls going to a ring group of 5 phones. First call comes in, reception answers no problem, second call, reception puts the first call on hold and answers the second call. Third call comes in, the caller hears a ringing but none of the phones in the ring group end up ringing. CDR shows busy if I remember correctly. 

What I am thinking is the reception phone has call waiting so of course it has a maximum of 2 calls at a time. Even if its part of the ring group maybe its limiting the calls because its maxed. Not sure if this makes sense. 

Another question regarding this, what is the best way to handle multiple incoming calls? Should we do old style of having line 1, line 2, line 3 on the reception phone and having inbound calls pick an available line?

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