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When discussing computer networks, PPP stands for Point-to-Point Protocol, and PPPoE stands for Point-to-Point Protocol over Ethernet. Therefore, PPPoE is just a specific kind of PPP that only runs on Ethernet networks. And just as you might expect from the name, PPP is a framework that allows any two points (also called nodes, hosts, or gateways) on a network to directly communicate with one another. Technically, PPP belongs to layer 2 (the data link layer) of the seven-level OSI model of digital networking.
PPP is a commonly used protocol on many kinds of networks, including SONET, phone lines, and mobile phone systems, but its primary use on the internet is for home users to access their ISP via a Digital Subscriber Line (DSL) line. Rarely, PPPoA (Point-to-Point Protocol over ATM) is used for this purpose, but the most common way customers access the internet with PPP is by PPPoE using a DSL line.
In other cases, private networks (like an office or school network) will use PPPoE to bridge between their in-house network and the internet. This is sometimes known as a LAN-to-WAN (local area network to wide area network) connection, also sometimes known as a serial connection or leased-line connection because the connection to the internet is leased as a dedicated (and exclusive) service. Other network types function on an “as needed” model where connections are granted on a first come, first served basis.
The majority of users who access the internet from home or an in-house network (like a school or business) do so via a wired connection. The two most common ways this is done is either via a cabled router using DCHP to dynamically assign IP addresses and handle network configurations or via PPPoE via a DSL. The advantage of PPPoE is that the ISP does not have to deal with DHCP or switching connections as PPPoE allows for the direct connection between each customer and the ISP’s internet gateway server.
PPPoE is a relatively older technology, first developed in 1999 when public access to the internet in the United States was starting to take off. In those days, it was common for home customers to use a modem to make a phone call via a landline cable in order to connect to the ISP’s server. This, however, came with some limitations as phone lines are restricted on how much bandwidth they can carry, and the phone system could only switch a limited number of direct connections. Furthermore, connecting via a phone line meant that only one device (computer) could be connected to the network at any given time.
The solution that was developed was called PPPoE. The installation of a DSL line meant that higher bandwidths were now possible. A DSL line is like a special high-bandwidth phone line that physically connects a home (or office, school, etc) computer to a modem/router and onward to the ISP. PPPoE allows for multiple simultaneous connections to the ISP’s internet gateway server, including from the same house/office. This way, multiple computers or devices could have their own simultaneous connection to the internet via a single DSL line using PPPoE.
Another big advantage of PPPoE is that it allows for encryption and data compression. PPPoE’s most important function, however, is authentication. This is the process by which a home computer has to show its credentials (username and password) to connect to the ISP’s server. This authentication process prevents unauthorized access as well as a simple way to meter use.
Note: Most PPPoE connections use the CHAP protocol (challenge handshake authentication protocol) for authentication, but some use the PAP protocol (password authentical protocol). CHAP is more secure as it doesn’t transmit in cleartext and includes periodic reviews of authorization, and both sides of the connection must know a secret password.
PPPoE is very important when dealing with thousands of customers (like an ISP) or managing a private network where each user is connecting to and using the internet separately. Some ISPs also use PPPoE to offer pre-paid internet access with a built-in limit on how much data can be sent and received.
Note: Fiber optic and cable internet never use PPPoE (or any form of PPP). Therefore, it’s almost exclusively used on DSL lines, but not every DSL line relies on PPPoE. There are also limited cases when fixed wireless internet connections use PPPoE. Fixed wireless internet involves beaming radio signals directly at a receiver. It is different from satellite internet because the radio signals are being transmitted and received by ground stations.
PPPoE is considered a tunneling protocol because it creates a direct link (or tunnel) between two nodes on different networks. The first part of the “tunnel” is the home user’s router or modem connecting to the ISP’s server, and the second part of the “tunnel” is the ISP server’s connection to the public internet. PPPoE can also be used in conjunction with a VPN in order to disguise or hide internet activities even from the ISP. In the case of PPPoE and a VPN, an encrypted connection is created between the home computer and the VPN, and the VPN is the node which reaches out and connects with the public internet.
As the name PPPoE suggests, it encapsulates all data being transmitted in the form of Ethernet frames. Ethernet frames or data packets have very strict formatting requirement and are much smaller than standard IP data packets used on the public internet. Ethernet networks, however, are extremely fast, allowing for very high transmission rates of data to and from the ISP and the home network. And since PPPoE is used on wired DSL connections only, very high transmission speeds can be achieved.
Note: Originally, routers were designed either to handle PPPoE connections or DHCP connections but not both. Today, most broadband routers can be configured to handle either type of connection. Since PPPoE access includes an authentication component, the modem or router needs to be precisely configured in order to work. DHCP, on the other hand, requires no configuration as it is designed to configure itself dynamically (otherwise known as “plug and play”) based on instructions sent from the ISP.
Furthermore, your computer (or other device) also needs to be configured in order to use PPPoE to connect to the ISP and the internet. Since the instructions on how to do this vary between operating systems and versions, it’s best to ask your ISP for clarification when setting up a computer/device for making a PPPoE connection. However, on Mac computers, it’s done via the “Network” tab in System Preferences, and on Windows devices, the PPPoE configuration is done via the Network section of the Control Panel.
DHCP and PPPoE are often thought of as two different ways to connect to the internet, but this is somewhat misleading. For the home user, yes, computers and routers (or modems) need to be configured differently to use the two different protocols, but PPPoE is the method by which a direct connection is made while DHCP is just the way that the ISP handles issuing IP addresses and configuring network settings. Furthermore, DHCP allows for wireless connections while PPPoE requires a physical cable connection.
For a DHCP connection, the router requests and is assigned a time-limited IP address along with the current network configuration settings while PPPoE connections are assigned a single IP address for each session, but the network settings are done ahead of time on the home computer and never change. Furthermore, PPPoE works on a fixed, device-by-device basis. Each home computer (or device) will have its own unique settings (including login name and password) that are used to physically connect the computer to the DSL line that then physically connects directly to the ISP, so PPPoE cannot be used wirelessly.
The newer, now more common DHCP home networks work by having the router handle all the authentication and network settings rather than the ISP dictating the network configurations and authentication information ahead of time. In other words, any computer (or device) can easily connect (wirelessly or wired) to the internet via a DHCP router no matter where the computer/device is and without entering a password (unless the router requires one) or login information while PPPoE requires a physical connection to the DSL line and an unchanging and unique network configuration, including a login name and password.
Due to this inflexibility, PPPoE is slowly being phased out in favor of DHCP. But in urban areas where DSL cables already exist in abundance, PPPoE can be a faster and more efficient way to allow customers to connect to the internet.