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If PPP is enabled for both compression and encryption, which one happens first, compression or encryption, before the PPP sends the data over the physical link?

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Compression technologies rely on the fact that the data has patterns that can be "coded." Here's a simple (simplistic?) example:

Instead of repeating long strings of 1s or 0s, use the string "00" 
followed by the number of 0s.  So a string of 20 0s could be
represented by "0014" (hex 14 = 20).  This would shorten the stream by
16 bytes.

But if you encrypt the data, then it appears to be random -- i.e. there should be no discernible patterns. This would make compression impossible.

So a shorter answer to your question is: compress first, then encrypt.

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