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In this paper, we study the problem of bandwidth allocation for ATM network loaded with real-time VBR compressed video traffic. The compressed video traffic is highly bursty in nature as a result of encoding technique and shows time-variant statistical characteristics due to scene changes. These characteristics make it more difficult to manage network recourses and can cause a significant reduction in network utilization. Our proposed scheme adjusts the allocated bandwidth at regular intervals using a multilayer compressed video in the context of congestion control. The dynamic bandwidth allocation scheme adds and drops layers of the video stream during a renegotiation process to react to congestion on very short timescales. Our simulation results show a significant improvement on the performance of the proposed dynamic bandwidth allocation scheme compared with traditional static bandwidth allocation schemes, and also offers several advantages over static bandwidth allocation schemes including it removes the need of accurate traffic parameters declaration by users at call setup phase, it is valid for a wide variety of traffic sources; and it adapts quickly to the variation of traffic sources with small renegotiation intervals.