A transport tunnel can either use an MPLS or GRE encapsulation.

In the Nokia SR OS, a transport tunnel is implemented using a Service Distribution Path (SDP). When configuring an SDP, the operator must specify the encapsulation type to be used for tunneling service traffic across the provider core network. The SR OS supports multiple encapsulation types for SDPs, with the two primary options being MPLS and Generic Routing Encapsulation (GRE). This allows flexibility in how Layer 2 and Layer 3 VPN services are transported over the IP/MPLS backbone.

B. (The statement is False) This is incorrect because both MPLS and GRE are explicitly supported and commonly used encapsulation types for SDPs in Nokia's service architecture.

1. Nokia 7750 SR OS, Services Architecture Guide, Release 21.10.R1, Chapter: Service Distribution Paths (SDPs), Section: SDP Encapsulation Types. This section explicitly lists "GRE" and "MPLS" as supported encapsulation types.

2. Nokia 4A0-104 Course Material, Nokia Multiprotocol Label Switching, Module 6: Virtual Private Network Services. The module details the configuration of SDPs and shows the options for encap-type including gre and mpls.