An arrangement is disclosed for recovering from faults in transmission equipment or facilities forming so-called virtual circuits for transmitting packets in a network. Faults are detected in transmission paths associated with a network node and a fault indication is generated for any virtual circuits passing through the node that are affected by the fault. The fault indications are then transmitted on corresponding ones of the affected virtual circuits or on other designated virtual circuits. If any of the affected virtual circuits are terminated in the node, no fault indications are generated for them and they are switched to alternate virtual circuits. Otherwise, the fault indications are transmitted on corresponding virtual circuits or on other designated virtual circuits over facilities connected to the node to other unknown nodes. A node receiving a fault indication message determines whether the corresponding virtual circuit is terminated at the node, has one or more alternate virtual links in the node, or passes through it to some other unknown node. If an affected virtual circuit is terminated in the node, or has one or more alternate virtual links in the node, it is switched to an alternate virtual link. If the affected virtual circuit is not terminated in the node, and has no alternate virtual link present, the corresponding fault indication message is passed, i.e., switched, through it on that virtual circuit over a facility to some other unknown node.