Introduction
In the early days of broadband, as Ethernet transport technology began to gain traction, Internet Service Providers (ISPs) relied on basic Layer 2 Ethernet switches, along with early DSLAMs and BNGs, which had just evolved from ATM-based. At that time, extending the Point-to-Point Protocol (PPP) to Ethernet became the natural choice for continuing the access model previously used in dial-up service.
What is PPPoE
PPPoE (Point-to-Point Protocol over Ethernet) is a network protocol that encapsulates PPP (Point-to-Point Protocol) frames inside Ethernet packets. It was designed to enable multiple users to connect to a single BNG (Broadband Network Gateway) over shared Ethernet infrastructure while still preserving all key PPP functions—maintaining individual user sessions with authentication, IP address assignment and traffic management.
Why Did ISPs Favor PPPoE
PPPoE became widely adopted by ISPs because it provided several key advantages:
✅ Authentication & Policy Enforcement
• PAP (Password Authentication Protocol) and CHAP (Challenge Handshake Authentication Protocol) allow ISPs to verify user credentials before granting network access. Integration with RADIUS servers enables centralized authentication, accounting and authorization (AAA).
✅ Dynamic IP Address Assignment
• Uses PPP’s Network Control Protocol (NCP) to assign and manage dynamic or static IP addresses for subscribers.
✅ User Isolation & Security
• Each subscriber gets a unique PPP session, effectively creating a per-user P2P tunnel between the CPE (Customer Premises Equipment) and the BNG. Unlike traditional shared Ethernet, users cannot communicate directly with each other, reducing security risks.
✅ Keepalive & Redundancy
• PPPoE includes a built-in keepalive mechanism, allowing the CPE to detect BNG failures and trigger a reconnection. A dual BNG setup, where both BNGs are visible to the subscriber, provides a simple and efficient network redundancy solution with seamless failover.
✅ Traffic Filtering & Network Control
• Uses dedicated Ethernet types (0x8863 for discovery, 0x8864 for session traffic), making it easy to filter and control traffic in the transport network, preventing unwanted inter-user communication.
✅ L2TP Wholesale Model
• PPPoE makes wholesale broadband services easier by allowing PPP sessions to be forwarded to resellers via L2TP tunnels – just strip the “oE” part and forward the PPP session.
Disadvantages of PPPoE
Despite its advantages, PPPoE has some notable drawbacks:
❌ Overhead & Fragmentation
• The 8-byte PPPoE header reduces the Maximum Transmission Unit (MTU) from 1500 to 1492 bytes, which can lead to IP packet fragmentation
❌ Performance Bottlenecks
• Encapsulation and decapsulation (PPP over Ethernet) require additional processing, which can impact performance on high-speed broadband connections.
❌ Multicast Handling Issues
• PPPoE is designed for unicast communication, meaning multicast streams (e.g., IPTV) are effectively converted into unicast within PPPoE tunnels, resulting in a loss of multicast replication efficiency
How IPoE Made Its Way into ISP Broadband Networks
With the rise of modern IP/MPLS transport networks, ISPs began shifting toward IPoE (IP over Ethernet) as an alternative to PPPoE.
At its core, IPoE is a DHCP-based LAN technology, originally designed for enterprise and local area networks (LANs), not broadband subscriber management. However, with the evolution of BNGs and advancements in IP/MPLS network capabilities, IPoE was successfully adapted for ISP broadband networks, offering improved performance and scalability over traditional PPPoE-based infrastructures.
How Was IPoE “Adapted” for ISP Broadband environment
Despite IPoE’s numerous disadvantages, such as lack of built-in authentication, absence of a keepalive mechanism and no strictly defined wholesale model, it has still found its way to becoming the dominant technology in ISP networks. Here’s how:
☑️ Authentication & Policy Enforcement
• Unlike PPPoE, IPoE has no built-in authentication, so ISPs rely on BNG-based authentication using DHCP options. This is primarily done using DHCP Option 82 (Relay Agent Information), where access nodes (DSLAMs, OLTs and switches) insert metadata to help identify subscribers.
☑️ Client Isolation & Security
• In modern IP/MPLS networks, Layer 2 isolation is enforced through advanced mechanisms, such as preventing device-level or instance-level switching and implementing hub-and-spoke transport typologies. These techniques effectively prevent direct communication between subscribers within the same broadcast domain.
☑️ Redundancy & High Availability
• Unlike PPPoE, which includes a built-in session keepalive, IPoE redundancy relies on complex network-layer best practices. High availability is achieved using BNG stateful failover, VRRP (Virtual Router Redundancy Protocol), Anycast IP routing and short DHCP lease failover mechanisms.
☑️ Wholesale Model Shift
• Instead of L2TP-based wholesale model, IPoE wholesale has shifted toward direct Layer 2 traffic offloading to reseller BNGs. This reduces reliance on session-based tunneling while simplifying broadband service distribution.
To Summarize
PPPoE played a crucial role in helping ISPs transition from dial-up to Ethernet-based broadband while preserving authentication, session management and billing controls. Although it introduces performance overhead and MTU limitations, it provided a structured and reliable approach for efficient subscriber management.
However, as IP/MPLS transport network technologies evolved, ISPs began shifting toward IPoE, which eliminates session-based overhead, enhances scalability and simplifies broadband service delivery. The trade-off? IPoE requires a more advanced transport IP/MPLS network and intelligent BNG devices to ensure seamless functionality.
In networking, there’s no single “right” answer—whether you choose PPPoE or IPoE, both have their place depending on your network design, operational requirements and technology strategy. 🚀
Author: Mario Jurcevic, 5×9 Networks
