A method of managing a key for encrypted communication over a communication link between first and second modems, each modem having respective first and second master keys. A first key material for the first modem is transmitted to the second modem in an encrypted message using the first master key, via a time divided frame over the link. Upon receipt, a second key material is generated at the second modem and is sent to the first modem. Then, at each of the first and second modems, session keys are generated based on the key materials, preferably using a hashing algorithm. An encryptor at the first modem and a decryptor at the second modem are programmed with an identified key and a session key. Encryption is enabled at the first modem and information is transmitted in encrypted frames using the identified key. The second modem receives and decrypts the encrypted frames when frames with the identified key are received.