Encapsulation at higher layers
ATM over ADSLATM in a nutshell
ATM meets the requirements for a personal broadband
service include handling timing-sensitive transmission of video and audio
services while efficiently transferring large and variable blocks of data
involved in traditional data communications tasks such as web browsing and file
downloads.
ATM uses a short and fixed length cells consisting 53 byte of information,
and these properties of the cells allow ATM to transport both data and real time
information and efficient multiplexing of data from multiple sources. ATM also
offers the advantage of making it easy to interleave different user data streams
into a common connection with no impact on the individual users. ATM is
responsible for the definition of logical connections through the network that
are known as virtual circuits (VCs).
more info on ATM can be found here.
The Architecture
Specific ADSL Reference Model for ATM Mode consists of two primary parts: Access Node (AN) and Broadband Network Termination (B-NT), connected by an interface called U-interface. We will discuss the main components of both parts, which are detailed in the following figure:

Figure 1. ATM over ADSL
architecture
Transport of ATM over ADSL and QoS
In order to implement a medium that can transfer ATM traffic, we
require at least one full duplex capable communication media. To implement this
minimum requirement, we will need to define at least one upstream channel and
one downstream channel. We can add another pair of channels to implement dual
latency traffic.
ATM systems use channelization using different Virtual
Paths and Circuits. This mechanism is also used to provide QoS (quality of
service). ADSL can be used to support ATMs QoS requirements in the
following ways:
The BER(bit error ratios)/ Latency/ Range are fully configurable by the Network Operator to meet the required service quality for the network. BER of 10-7 is recommended.
Most of the Traffic management functions as specified by ATM Forum Traffic Management 4.0 and ITU-T I.371 are not supported by the underlying ADSL transport layer, and thus have to be supported by the U and V interfaces. An operator having control of control of the traffic endpoint, can shape the traffic to conform to the agreed upon contract.
ADSL-based protocol stacks
ADSL requires no dial-up. When ATM connection is set up between the ATU-R and
the ATU-C, this connection is named a permanent virtual circuit (PVC). Each PVC
is connecting between the DSL line and the ATM network, and to an ISP.
Therefore, the user has a connection to the internet through the ISP as long as
the ATU-R is turned on.
ADSL infrastructure is build upon the current dial-up system, which uses point-to-point protocol (PPP) to support network services such client addressing. PPP-over-ATM-over-ADSL model has become the standardized method for accessing data networks over ADSL.
The question of choosing the most suitable protocol stack for the higher layers above the ADSL is not a simple one and depends on the existing network, the services we expect to receive, and more. Figure2 summarizes the most common schemes for ADSL based protocol stacks.

Figure 2. ADSL based
protocol stacks.
Ethernet frames over ATM
(EoA)
Ethernet frames are encapsulated into the ATM Adaptation Layer 5 (AAL5) using RFC1483, the "Multi-protocol Encapsulation over AAL5". Both routing (i.e. forwarding messsages using IP addresses) and bridging (i.e. forwarding messages using MAC address) are supported.
IP packets over ATM (IPoA)
Uses the same type of encapsulation as EoA, only adds address resolution function to the ATM PVCs, in order to enable the IP stack obtain the IP address for another IP host connected to its local ATM subnet (RFC 2225 - "Classical IP and ARP over ATM").
PPP over ATM (PPPoA)
Based on the standard RFC 2364 "PPP over AAL5", along with RFC1483, this is the most logical choice to connect between the individual customer's CPE and the service provider over existing ATM network. The combination of the PPP layer makes its great features available for use. Those include:
PPP over ETHERNET (PPPoE)
Similiar to PPPoA, this is the most logical
choice to connect between the individual customer's CPE and the service provider
over existing Ethernet-based network. The only difference involves the
encapsulation technology used. PPPoE uses Ethernet networking with PPP in
an encapsulation scheme which enables multiple PCs to connect to multiple
destinations through a single, shared CPE using only one PVC, based on RFC
2516
PPPoE also enjoys the benefits of PPP as PPPoA, but pay with a higher packet
overhead.
Native ATM
A method which uses ATM all the way, without the use of any other layers which increses overhead. Ideal for voice and video applications.