diff -ruNp 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 14:26:00.000000000 +0300
+++ ppp-2.4.4/pppd/auth.c	2008-02-13 18:24:08.000000000 +0200
@@ -875,7 +875,7 @@ start_networks(unit)
      */
     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 -ruNp ppp-2.4.4.orig/pppd/ccp.c ppp-2.4.4/pppd/ccp.c
--- ppp-2.4.4.orig/pppd/ccp.c	2005-07-09 03:23:05.000000000 +0300
+++ ppp-2.4.4/pppd/ccp.c	2008-02-13 18:31:16.000000000 +0200
@@ -156,6 +156,11 @@ static option_t ccp_option_list[] = {
       "allow MPPE stateful mode", OPT_PRIO },
     { "nomppe-stateful", o_bool, &refuse_mppe_stateful,
       "disallow MPPE stateful mode", OPT_PRIO | 1 },
+      
+    /* allow falling back to unencrypted connection mode */
+    { "mppe-optional", o_bool, &allow_mppe_fallback,
+      "allow falling back to unencryped connection mode", OPT_PRIO | 1 },
+	            
 #endif /* MPPE */
 
     { NULL }
@@ -516,9 +521,14 @@ ccp_protrej(unit)
 
 #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 required but peer negotiation failed.");
+	    error("Falling back and disabling MPPE");
+	}
+    }					    
 #endif
 
 }
@@ -1004,11 +1014,17 @@ ccp_rejci(f, p, len)
 #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");
-	p += CILEN_MPPE;
-	len -= CILEN_MPPE;
+	if(!allow_mppe_fallback) {
+	    error("MPPE required but peer refused. Closing LCP");
+	    lcp_close(f->unit, "MPPE required but peer refused");
+	} else {
+	    try.mppe = 0;
+	    error("MPPE required but peer refused.");
+    	    error("Falling back and disabling MPPE");
+        }
     }
+    p += CILEN_MPPE;
+    len -= CILEN_MPPE;
 #endif
     if (go->deflate_correct && len >= CILEN_DEFLATE
 	&& p[0] == CI_DEFLATE && p[1] == CILEN_DEFLATE) {
diff -ruNp 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 12:02:26.000000000 +0200
+++ ppp-2.4.4/pppd/ccp.h	2008-02-13 19:03:43.000000000 +0200
@@ -43,6 +43,8 @@ typedef struct ccp_options {
     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[];
@@ -50,3 +52,5 @@ extern ccp_options ccp_allowoptions[];
 extern ccp_options ccp_hisoptions[];
 
 extern struct protent ccp_protent;
+
+
diff -ruNp 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 03:01:23.000000000 +0300
+++ ppp-2.4.4/pppd/pppd.8	2008-02-13 18:41:31.000000000 +0200
@@ -770,6 +770,9 @@ available under Linux.
 .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