[Station X]

If you have an analogue meter, disconnect the phone from the line and connect it across the phone's line cord. Set the meter to the lowest Ohms range.

With the phone on-hook you should see infinite resistance. With the phone off-hook the resistance should drop to a low value. Dial '0' and you should see the meter oscillate between the two readings. If this test works it shows that the dial is OK and the problem is with the exchange.