diff -uNr ppp-2.4.4.orig/pppd/auth.c ppp-2.4.4/pppd/auth.c
--- ppp-2.4.4.orig/pppd/auth.c	2006-06-18 13:26:00.000000000 +0200
+++ ppp-2.4.4/pppd/auth.c	2010-10-05 13:54:13.000000000 +0200
@@ -875,7 +875,7 @@
      */
     ecp_required = ecp_gotoptions[unit].required;
     mppe_required = ccp_gotoptions[unit].mppe;
-    if (!ecp_required && !mppe_required)
+    if (!ecp_required && (!mppe_required || allow_mppe_fallback))
 	continue_networks(unit);
 }
 
diff -uNr ppp-2.4.4.orig/pppd/ccp.c ppp-2.4.4/pppd/ccp.c
--- ppp-2.4.4.orig/pppd/ccp.c	2010-12-08 15:38:30.000000000 +0100
+++ ppp-2.4.4/pppd/ccp.c	2010-12-10 12:46:14.000000000 +0100
@@ -120,6 +120,8 @@
       "don't allow MPPE encryption", OPT_PRIO },
     { "-mppe", o_bool, &ccp_wantoptions[0].mppe,
       "don't allow MPPE encryption", OPT_ALIAS | OPT_PRIO },
+    { "mppe-optional", o_bool, &allow_mppe_fallback,
+      "allow falling back to unencrypted connection mode", OPT_PRIO | 1 },
 
     /* We use ccp_allowoptions[0].mppe as a junk var ... it is reset later */
     { "require-mppe-40", o_bool, &ccp_allowoptions[0].mppe,
@@ -516,8 +518,12 @@
 
 #ifdef MPPE
     if (ccp_gotoptions[unit].mppe) {
-	error("MPPE required but peer negotiation failed");
-	lcp_close(unit, "MPPE required but peer negotiation failed");
+        if(!allow_mppe_fallback) {
+	    error("MPPE required but peer negotiation failed");
+	    lcp_close(unit, "MPPE required but peer negotiation failed");
+        } else {
+            error("MPPE protocol reject. MPPE is optional. Falling back to non-mppe");
+        }
     }
 #endif
 
@@ -563,40 +569,64 @@
 	    auth_mschap_bits >>= 1;
 	} while (auth_mschap_bits);
 	if (numbits > 1) {
-	    error("MPPE required, but auth done in both directions.");
-	    lcp_close(f->unit, "MPPE required but not available");
-	    return;
+            if(!allow_mppe_fallback) {
+                error("MPPE required, but auth done in both directions.");
+                lcp_close(f->unit, "MPPE required but not available");
+                return;
+            } else {
+                go->mppe = 0;
+                error("MPPE required, but auth done in both directions. Falling back and disabling MPPE.");
+            }
 	}
 	if (!numbits) {
-	    error("MPPE required, but MS-CHAP[v2] auth not performed.");
-	    lcp_close(f->unit, "MPPE required but not available");
-	    return;
+            if(!allow_mppe_fallback) {
+                error("MPPE required, but MS-CHAP[v2] auth not performed.");
+                lcp_close(f->unit, "MPPE required but not available");
+                return;
+            } else {
+                go->mppe = 0;
+                error("MPPE required, but MS-CHAP[v2] auth not performed. Falling back and disabling MPPE.");
+            }
 	}
 
 	/* A plugin (eg radius) may not have obtained key material. */
-	if (!mppe_keys_set) {
-	    error("MPPE required, but keys are not available.  "
-		  "Possible plugin problem?");
-	    lcp_close(f->unit, "MPPE required but not available");
-	    return;
+	if (go->mppe) {
+		if (!mppe_keys_set) {
+		    if(!allow_mppe_fallback) {
+		        error("MPPE required, but keys are not available.  "
+		              "Possible plugin problem?");
+		        lcp_close(f->unit, "MPPE required but not available");
+		        return;
+		    } else {
+		        go->mppe = 0;
+		        error("MPPE required, but keys are not available.  "
+		              "Possible plugin problem?  "
+		              "Falling back and disabling MPPE");
+		    }
+		}
 	}
-
-	/* LM auth not supported for MPPE */
-	if (auth_done[f->unit] & (CHAP_MS_WITHPEER | CHAP_MS_PEER)) {
-	    /* This might be noise */
-	    if (go->mppe & MPPE_OPT_40) {
-		notice("Disabling 40-bit MPPE; MS-CHAP LM not supported");
-		go->mppe &= ~MPPE_OPT_40;
-		ccp_wantoptions[f->unit].mppe &= ~MPPE_OPT_40;
-	    }
+	
+	if (go->mppe) {
+		/* LM auth not supported for MPPE */
+		if (auth_done[f->unit] & (CHAP_MS_WITHPEER | CHAP_MS_PEER)) {
+		    /* This might be noise */
+		    if (go->mppe & MPPE_OPT_40) {
+			notice("Disabling 40-bit MPPE; MS-CHAP LM not supported");
+			go->mppe &= ~MPPE_OPT_40;
+			ccp_wantoptions[f->unit].mppe &= ~MPPE_OPT_40;
+		    }
+		}
 	}
-
-	/* Last check: can we actually negotiate something? */
-	if (!(go->mppe & (MPPE_OPT_40 | MPPE_OPT_128))) {
-	    /* Could be misconfig, could be 40-bit disabled above. */
-	    error("MPPE required, but both 40-bit and 128-bit disabled.");
-	    lcp_close(f->unit, "MPPE required but not available");
-	    return;
+	
+	
+	if (go->mppe) {
+		/* Last check: can we actually negotiate something? */
+		if (!(go->mppe & (MPPE_OPT_40 | MPPE_OPT_128))) {
+		    /* Could be misconfig, could be 40-bit disabled above. */
+		    error("MPPE required, but both 40-bit and 128-bit disabled.");
+		    lcp_close(f->unit, "MPPE required but not available");
+		    return;
+		}
 	}
 
 	/* sync options */
@@ -925,8 +955,13 @@
 	}
 
 	if (!try.mppe) {
-	    error("MPPE required but peer negotiation failed");
-	    lcp_close(f->unit, "MPPE required but peer negotiation failed");
+            if(!allow_mppe_fallback) {
+                error("MPPE required but peer negotiation failed");
+                lcp_close(f->unit, "MPPE required but peer negotiation failed");
+            } else {
+                error("MPPE required but peer negotiation failed. Falling back and disabling MPPE");
+                try.mppe = 0;
+            }
 	}
     }
 #endif /* MPPE */
@@ -1004,8 +1039,13 @@
 #ifdef MPPE
     if (go->mppe && len >= CILEN_MPPE
 	&& p[0] == CI_MPPE && p[1] == CILEN_MPPE) {
-	error("MPPE required but peer refused");
-	lcp_close(f->unit, "MPPE required but peer refused");
+        if(!allow_mppe_fallback) {
+            error("MPPE required but peer refused");
+            lcp_close(f->unit, "MPPE required but peer refused");
+        } else {
+            try.mppe = 0;
+            error("MPPE required but MPPE is optional. Falling back and disabling MPPE");
+        }
 	p += CILEN_MPPE;
 	len -= CILEN_MPPE;
     }
@@ -1346,8 +1386,10 @@
     }
 #ifdef MPPE
     if (ret == CONFREJ && ao->mppe && rej_for_ci_mppe) {
-	error("MPPE required but peer negotiation failed");
-	lcp_close(f->unit, "MPPE required but peer negotiation failed");
+    if(!allow_mppe_fallback) {
+		error("MPPE required but peer negotiation failed");
+		lcp_close(f->unit, "MPPE required but peer negotiation failed");
+	}
     }
 #endif
     return ret;
diff -uNr ppp-2.4.4.orig/pppd/ccp.h ppp-2.4.4/pppd/ccp.h
--- ppp-2.4.4.orig/pppd/ccp.h	2004-11-04 11:02:26.000000000 +0100
+++ ppp-2.4.4/pppd/ccp.h	2010-10-05 14:02:36.000000000 +0200
@@ -43,6 +43,8 @@
     short method;		/* code for chosen compression method */
 } ccp_options;
 
+bool allow_mppe_fallback;
+
 extern fsm ccp_fsm[];
 extern ccp_options ccp_wantoptions[];
 extern ccp_options ccp_gotoptions[];
diff -uNr ppp-2.4.4.orig/pppd/pppd.8 ppp-2.4.4/pppd/pppd.8
--- ppp-2.4.4.orig/pppd/pppd.8	2006-06-16 02:01:23.000000000 +0200
+++ ppp-2.4.4/pppd/pppd.8	2010-10-05 14:03:07.000000000 +0200
@@ -770,6 +770,9 @@
 .B nomppe
 Disables MPPE (Microsoft Point to Point Encryption).  This is the default.
 .TP
+.B mppe\-optional
+Makes MPPE optional, allowing both MPPE and non-MPPE clients
+.TP
 .B nomppe\-40
 Disable 40-bit encryption with MPPE.
 .TP