When referring to the telephone system, the demarcation point, or demarc, is that point at which the Public Switched Telephone Network (PSTN) ends and then connects with the customer’s wiring. This point will vary depending on country and may continue to change over time. However, in order to understand why demarks exist, it is important to know a little of the telephone system’s history.
The American Telephone & Telegraph Company (AT&T Corporation) was originally founded in 1886 as. As the AT&T Corporation grew, it evolved into a natural monopoly for telephone service within the United States. Through numerous acquisitions and technological innovations, AT&T grew so large that it even owned the local loop, which included the customers’ wiring and the customer telephone equipment.
In 1956, lawsuits began ensued. The ‘natural monopoly’ status did not sit well with the United States. Some felt that AT&T had become too powerful, and that it should not be allowed to retain this status. In 1974 the United States Department of Justice filed an antitrust suit against AT&T. The United States v. AT&T suit continued until a settlement was reached on January 8, 1982. The settlement, known as the Modified Final Judgment (MFJ), forever changed the telecommunications industry.
Effective January 1, 1984, the MFJ required AT&T to dissociate from its local exchange service operating companies. These local operations were split into seven independent Regional Bell Operating Companies (RBOCs), which were required to provide equal access to AT&T competitors. Companies were also able to sell third-party equipment that would connect to the PSTN and American consumers now had the ability to purchase telephones without going through AT&T.
Because consumers could now own their own phone systems (as opposed to leasing them from AT&T) there needed to be a way to delineate that portion of the network which was owned by the customer and the portion owned by the Telephone Company (or common carrier). The dividing line, or meeting point, became the demarcation point.
Today, the demarc is serviced by the Telephone Company and any lines and equipment connected to it are the responsibility of the consumer. This has enabled consumers to choose a phone system from a variety of third party manufacturers, and the competition amongst these manufacturers has bred great innovations in business communications.