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We address the problem of ldquocapacity allocationrdquo in wireless mesh networks (WMNs). In the ldquocapacity allocationrdquo problem, the network topology (namely the desired wireless links) and routing are given. The problem then is to assign capacities to different links (which are carved out of the radio capacity of a wireless node) in such a way that the average network delay is minimized. This classic problem has been solved by Kleinrock for wired networks subject to a cost constraint. The problem of capacity allocation in wireless networks is different because of the following reasons: i) the capacity of a wireless radio is limited by the physical-layer technology; ii) wireless channel is a shared medium; and iii) the overall capacity of the wireless network is limited by interference. These unique features of a wireless network necessitates a cross-layer approach, involving the physical and the network layers, to solve this problem as opposed to a traditional network planning problem. We use queuing theory along with wireless interference modeling to present a cross-layer solution to this problem.