Abstract
We consider a threshold type control mechanism for dynamic setup/release of λ-channels in optical networks. There are two types of costs for the control mechanism: the setup/release cost and the operation cost. For such a control mechanism, there is a corresponding Markov model with high complexity. By state aggregation, we are able to identify a semi-Markov process that is simpler to analyze. Based on the semi-Markov process, we derive the average cost formula for the threshold type control mechanism and carry out several numerical examples to find the optimal thresholds that minimize the average cost.