Layer 3 and Layer 2 VPN Characteristics

From: http://www.sanog.org/resources/sanog7/waris-l2vpn-tutorial.pdf

The critical information here is that Layer 3 VPNs needs the service provider to get involved in customer routing.

With Layer 2 VPNs the frames are forwarded right through to the other side.

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In an L2VPN service, the ISP does not require information about the customer’s network topology, policies, routing information, point-to-point links, or network point-to-point links from other ISPs.

There are two fundamentally different kinds of Layer 2 VPN service that a service provider could offer to a customer: Virtual Private Wire Service (VPWS) and Virtual Private LAN Service (VPLS). There is also the possibility of an IP-only LAN-like Service (IPLS).

A VPWS is a VPN service that supplies an L2 point-to-point service. As this is a point-to-point service, there are very few scaling issues with the service as such. Scaling issues might arise from the number of end-points that can be supported on a particular PE.

A VPLS is an L2 service that emulates LAN service across a Wide Area Network (WAN). With regard to the amount of state information that must be kept at the edges in order to support the forwarding function, it has the scaling characteristics of a LAN. Other scaling issues might arise from the number of end-points that can be   supported on a particular PE.

https://supportforums.cisco.com/document/146416/l2vpn-using-bgp-auto-discovery-signaling

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