I'm not sure I understand what is being said about "the first entity on the phone line". If all phones and the security panel are wired in parallel, there is no "first entity" - they all have the same privileges as far as use of the line. If a phone conversation (or fax call, or dialup computer modem, TiVo, etc.) has the phone line busy, and the security panel wants the line, it will try (and fail) to get a dial tone.
MmmDee may be implying that the incoming phone line goes directly to the phone connections of the security panel, and that all the house phone lines go (in parallel) to the outgoing phone connections of the security panel. That's the way it needs to be so that the panel can take control of the phone line no matter what.
The issue for existing home wiring is that all of the house phone wiring may not be routed all the way to the location of the security panel. Often when there is no security system, the house phone wires star out from the point where the phone line comes into the building. In that case there is an inexpensive device called an RJ31X, which can be mounted near the incoming phone line, and an 8-wire cable routed to the security panel to provide all the signals that the panel needs. Cat5 wire with an RJ45 connector is usually fine for this purpose.
Read more about the RJ31X here: http://www.hometech.com/learn/rj31x.html
Basically, the phone line coming into the building goes directly to this device, and all the house phone wires connect to the device in parallel. There is an RJ45 8-pin jack on the device that is intended to connect the security panel, and if no cord is plugged in, the incoming phone line is switched directly to the house phone wiring. However, if a cord is plugged in to the RJ31X jack, the security panel takes control of the switching. If the panel wants the line, it gets it even if that means disconnecting a phone conversation in progress. All house phone lines are interrupted until the panel gets done with the line.
The RJ31X is inexpensive, $6 or so.
So, maybe this is what MmmDee means by "the first entity on the phone line". If so, I apologize for greatly belaboring the point :-)