Multi-class network is becoming a more attractive solution to provide Quality-of-Service guarantee, as more quality-demanding applications are emerging. This research considers networks that provide connection-oriented services, as in ATM and MPLS technologies, for example. A common scheme for Dynamic Bandwidth Allocation (DBA) in connection-oriented communications is to dynamically segregate bandwidth between different traffic categories. These categories can represent topological Virtual Paths or different Classes-ofService with different Quality-of-Service requirements. Bandwidth segregation can be efficient if and only if demands for different Classesof-Service or different Virtual Paths can be predicted accurately. This led us to develop a novel algorithm that has a much wider vision in allocating resources than classical distributed algorithms. We call the proposed algorithm, Virtual Demand Distribution (VDD) algorithm. This algorithm utilizes signaling packets to broadcast info...