This paper considers the problem of selecting the optimum capacities o
f the links in a computer communication network which employs unreliab
le links. Given the nodes, links, link probabilities, grade of service
and cost functions of the network, the objective of this problem is t
o find the optimum link capacities that minimize the network design co
st, subject to the constraint equation involving the grade of service.
This is essentially a combinatorial optimization problem. A general m
ethematical model for this problem is formulated and a set of feasible
solutions is obtained using Lagrangean relaxation and subgradient opt
imization techniques. A simulation study has been performed to verify
the model, and favourable results obtained for a variety of nontrivial
networks.