True
The technical answer is the phone system is optimized for an audio bandwidth of 300 Hz to 3.4 kHz.
In free space the human ear can hear frequencies from approx 100 Hz to 12 or 15 kHz. Depending upon age, how well they have taken care of their hearing etc.
Bottom line all those bits 0's and 1's are compressed to fit within the 300 Hz to 3.4kHz BW. You lose a lot of information but still are discernible to people who know you.