Layer 2 Tunneling Protocol version 3 is an IETF standard related to L2TP that can be used as an alternative protocol to Multiprotocol Label Switching (MPLS) for encapsulation of multiprotocol Layer 2 communications traffic over IP networks.
[1] Like L2TP, L2TPv3 provides a pseudo-wire service, but scaled to fit carrier requirements.
L2TPv3 can be regarded as being to MPLS what IP is to ATM: a simplified version of the same concept, with much of the same benefit achieved at a fraction of the effort, at the cost of losing some technical features considered less important in the market.
However, there is no reason these features could not be re-engineered in or on top of L2TPv3 in later products.
The protocol overhead of L2TPv3 is also significantly bigger than MPLS.