Hello Ananth
Yes, that is correct, only an LSP path is created between PE1 and PE2. However, notice that this path is essentially bound to the FastEthernet 0/0 physical interface of the PE router. So this essentially creates a Layer 2 tunnel between the devices connected to the FastEthernet 0/0 physical interfaces on PE1 and PE2 over the existing MPLS network.
The industry term for this is pseudowire, while Cisco calls it AToM. So the LDP path is itself pseudowire.
Now if you have multiple customers connected to a PE, such a configuration requires that each customer connects to a physical interface of the PE router.
Pseudowires can be used to deliver two types of services:
- Virtual Private LAN Service (VPLS) - VPLS emulates a LAN over an MPLS network, so different sites share the Ethernet broadcast domain. MPLS tunnel is set up between every pair of PEs (full-mesh).
- Virtual Private Wire Service (VPWS) - VPWS is an L2 point-to-point service provisioned by Layer 2 VPN, which delivers the virtual equivalent of a leased line. Any Transport Over MPLS (AToM) is Cisco’s implementation of VPWS for IP/MPLS networks, which is what we saw in this lesson.
I hope this has been helpful!
Laz