Layer 1 is the physical layer of the ISO/OSI reference model. As such, the primary security that can be provided is physical protection. This includes protected conduit and other means. At Layer 2 (Data Link Layer) one can actually start encrypting data. Layer 2 Tunneling Protocol (L2TP) was developed to effectively make a layer 2 encrypted stream across another network. Microsoft's Point to Point Tunneling Protocol (PPTP) is based on L2TP. The ISO Lower Layer security model (ISO/IEC TR 13594) and its companion Upper Layer security model (ISO/IEC 10745:95) are both available from the ISO (for a fee) at http://www.iso.ch.
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