Prior to deregulation in North America and other countries, telephone companies owned the local loop, including the wiring and equipment on the premises of the customers. Deregulation forced telephone companies to unbundle their local loop infrastructure to allow other suppliers to provide equipment and services. This led to a need to delineate which part of the network the telephone company owned and which part the customer owned. This point of delineation is the demarcation point, or demarc. The demarcation point marks the point where your network interfaces with the network owned by another organization. In telephone terminology, this is the interface between customer-premises equipment (CPE) and network service provider equipment. The demarcation point is the point in the network where the responsibility of the service provider ends.
The example presents an ISDN scenario. In the United States, a service provider provides the local loop into the customer premises, and the customer provides the active equipment such as the channel service unit/data service unit (CSU/DSU) on which the local loop is terminated. This termination often occurs in a telecommunications closet, and the customer is responsible for maintaining, replacing, or repairing the equipment. In other countries, the network terminating unit (NTU) is provided and managed by the service provider. This allows the service provider to actively manage and troubleshoot the local loop with the demarcation point occurring after the NTU. The customer connects a CPE device, such as a router or frame relay access device, to the NTU using a V.35 or RS-232 serial interface.