Implementing a Layer 2 VPN on a router is similar to implementing a VPN using a Layer 2 technology such as ATM or Frame Relay. However, for a Layer 2 VPN on a router, traffic is forwarded to the router in Layer 2 format. It is carried by MPLS over the service provider’s network and then converted back to Layer 2 format at the receiving site. You can configure different Layer 2 formats at the sending and receiving sites. The security and privacy of an MPLS Layer 2 VPN are equal to those of an ATM or Frame Relay VPN.
On a Layer 2 VPN, routing occurs on the customer’s routers, typically on the CE router. The CE router connected to a service provider on a Layer 2 VPN must select the appropriate circuit on which to send traffic. The PE router receiving the traffic sends it across the service provider’s network to the PE router connected to the receiving site. The PE routers do not need to store or process the customer’s routes; they only need to be configured to send data to the appropriate tunnel.
For a Layer 2 VPN, customers need to configure their own routers to carry all Layer 3 traffic. The service provider needs to know only how much traffic the Layer 2 VPN needs to carry. The service provider’s routers carry traffic between the customer’s sites using Layer 2 VPN interfaces. The VPN topology is determined by policies configured on the PE routers.