If EAP-TTLS is a EAP method that establishes a TLS tunnel, what goes in the tunnel? It could be another EAP method, but it could also be PAP. What decides? The server, the supplicant, or do they somehow negotiate? How does this phase of the protocol work?
What it decides is what the clients can speak. This is accomplished in the last step of phase 1 in EAP namely the ChangeCipherSpec.
An easy example: The client wants to authenticate and can only speak PAP, then the server will select PAP because the server itself can also speak PAP. If a client can speak other "protocols" the most secure protocol will be used.