Let's say you bought a simple end-to-end ciphering device for $500 to service one terminal.
The alternative would be to put a more sophisticated end-to-end ciphering device between the PAD and the modem for $3000.
Another reason to put a sophisticated ciphering device between PAD and modem: key management.
The advantage of the separate receiver is that it permits the use of ciphering equipment that otherwise might not be compatible with that key-management system, as long as the receiver can be electronically interfaced with the ciphering device and that the data ciphering still takes place in a mutually compatible form.
Since any ciphering unit in a system is capable of generating KVs, it may be used in a central form of management only when that form of management is appropriate.
The requirements stated above have in fact been accomplished by a technique called "multiple key indexing.' In this approach, a large number of KVs (up to 800) are initially loaded into each ciphering device, with each KV identified by an index.