By reserving transmission capacity on a series of links from one node to another within an ATM or SDH/SONET network, making a virtual path connection (VPC) between these nodes, several benefits are obtained. VPCs will simplify routing at transit nodes, connection admission control, and QoS management by traffic segregation. As telecommunication traffic exhibit variations in the number of calls per time unit due to office hours, quick changes in traffic loads (New Year's Eve), and changes in the types of traffic (as in introduction of new services), there is a need to cope for this by adaptive capacity reallocation between different VPCs. We present a type of VPC capacity management policy that uses an allocation function to determine the needed capacity for the coming updating interval based on the current number of active connections. A method for estimating individual VPC congestion states is described together with an adaptive parameter setting of the allocation function.