How is a Layer 2 MPLS VPN different from a Layer 3 MPLS VPN?

The main difference, from the service provider’s point-of-view, is that there is no Layer 3 routing information exchange between the customer and the service provider. The other difference is that the service provider does not need to care nor to know what network-layer protocol the customer uses. On the flip side, Layer 2 MPLS VPNs currently require that all sites in the service provider’s customer network connect to the service provider with the same Layer 2 technology (for example, that all use Frame Relay). This Layer 2 dependence gives the customer Layer 3 independence, because the customer can run any Layer 3 protocol. There is also an intermediate solution, called Layer 2 interworking, whereby each

customer site can connect with a different Layer 2 technology, but the Layer 3 protocol is limited to IP. In a Layer 3 MPLS VPN, however, the various sites can connect with any technology.