Internet telephony is promising for long-distance calls because of its low service charge and value-added functions. To provide Internet telephony to the general public, a service provider can operate a telephone gateway in each servicing city to bridge the local telephone network and the Internet, so that users can use telephones or fax machines to access this gateway for services. In this paper, we propose a dynamic bandwidth allocation scheme for two purposes: (1) each telephone gateway can fully utilize the available bandwidth to serve more telephone and fax sessions and (2) it can respond to the changing environments. We exploit three properties for dynamic bandwidth allocation. First, in a telephone session, each user usually alternates between speaking and listening. When a user is not speaking, she does not send any voice stream and hence the bandwidth can be dynamically released from this session for the other sessions. Second, voice traffic is elastic because it can be further compressed at the cost of a lower quality. Third, fax traffic is flexible because it can be temporarily delayed. We exploit these three properties to allocate bandwidth to telephone and fax sessions dynamically. When a telephone gateway adopts dynamic bandwidth allocation, it can serve more telephone and fax sessions while providing acceptably good quality-of-service (QoS), and it can give more stable QoS when the available bandwidth varies.