AbstractA distributedexplicit‐rate (ER)capacity allocation algorithm for handlingavailable‐bit rate (ABR)services in ATM networks is described. The algorithm uses a measurement‐based approach to achieve max‐min bandwidth fairness and to provide priority service mechanisms for heterogeneous traffic, e.g.,constant‐bit rate (CBR), variable‐bit rate (VBR), ABR, etc. Explicit provisions are made for handlingminimum cell rate (MCR)guarantees forABRconnections and minimizing RM cell buffering delays at the network switches. It is also proposed that the sources measure their average rates to properly handle variability and to improve bandwidth utilization. An extensive simulation study for a number of network scenarios, which shows that the proposed scheme adapts well to network dynamics and converges to max‐min fairness,