This feature enables negotiation between Broadband Network Gateway (BNG) and customer premises equipment (CPE) so that CPE is allocated to both ip-address and associated subnet.
Some CPEs use the network up-link in PPPoE mode and perform dhcp-server function for all ports on the LAN side. Instead of wasting 1 subnet for p2p uplink, CPEs use allocated subnet for the LAN portion as shown in Figure: CPEs network up-link mode.
From a BNG perspective, the specific PPPoE host is allocated a subnet (instead of /32) by RADIUS, external dhcp-server, or local-user-db. And locally, the host is associated with managed-route. This managed-route is subset of the subscriber-interface subnet (on a 7450 ESS or 7750 SR), and also, subscriber-host ip-address is from managed-route range. The negotiation between BNG and CPE allows CPE to be allocated both ip-address and associated subnet.