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I connected my router and DSL Router (in bridged mode) together like this:

(click for full image)

Strange setup, I know. :) The reason was I wanted my DSL router to continue to work as a switch and WiFi AP, while it's in bridge mode and let router on second floor to handle the rest (traffic control/QoS, port forwarding, and so on). However I'm concerned about the security with this setup. Since the DSL does not provide internet connection in itself, it just handles the digital signal to TX/RX, and only router does connect to the internet through PPPoE. That being said am I exposing my whole network to the internet? By the brief tests I did on my server that's outside my network it looks like my network is protected by router. I couldn't get ping to my internet address after activating "Ignore Ping Packet from WAN Port to Router" on my router.

But I'm not really expert on these things. What should I look for to test my security? And what are your opinions?

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up vote 3 down vote accepted

However I'm concerned about the security with this setup

You should be.

That being said am I exposing my whole network to the internet?

No, you are not. But you are exposing your network to your ISP's infrastructure. You are using a bridge to connect your internal network to your ISP's network without any kind of traffic filters. Do you trust your ISP's abilities to protect you from malicious traffic even when the ISP is not claiming that they will take the effort to do so? You should not. The other end, a DSLAM, is a bridge too. It might have weaknesses, it could be susceptible to something like a CAM table overflow attack, effectively connecting your internal network to a lot of other customers on the same DSLAM without your knowledge.

So if you need the switch and WLAN access point functionality, either just buy a separate DSL modem which you could use exclusively at the WAN interface of your router(s) or grab a switch and an access point of your liking and use the combo device which is serving as the DSL modem right now as a modem only.

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