Network designers choose the capacity necessary to provide the desired level of network services. The quality of service also determines the capacity required to deliver the specified quantity of network services. Because the architecture of the network is optimized by the network designers, the level of network capacity determines the underlying configuration. Different configurations are likely to accompany different capacity levels.

Choosing the aggregate level of services determines how much capacity to build into each node and link and the architecture of the network. In a telecommunications network, the capacity of switches and lines and the design of the network create constraints on the volume and type of traffic that the network can handle. Capacity usage might take the form of the number of calls and the time spent on each call in a circuit-switched network. In a packet-switched data network, capacity usage is measured by more complex definitions of bandwidth.

Pricing, that is, the selection of prices by decision makers, serves two general functions. First, prices ration consumer demand, because consumers reduce their capacity usage in response to higher prices. Second, prices stimulate capacity supply, because suppliers increase capacity offered for sale in response to higher prices. Prices implicitly communicate the scarcity of network capacity to consumers and also signal the strength of demand to suppliers. At a market equilibrium, prices tend to reflect consumer demand for network services and the supply of network capacity by firms.