In order to stem the increasing packet loss rates caused by an exponential increase in network traffic, the IETF is considering the deployment of active queue management techniques such as RED . While active queue management can potentially reduce packet loss rates in the Internet, this paper shows that current techniques are ineffective in preventing high loss rates. The inherent problem with these queue management algorithms is that they all use queue lengths as the indicator of the severity of congestion. In light of this observation, a fundamentally different active queue management algorithm called BLUE is proposed. BLUE uses packet loss and link idle events to manage congestion. Using simulation and controlled experiments, BLUE is shown to perform significantly better than RED both in terms of packet loss rates and buffer size requirements in the network. As an extension to BLUE, a novel technique for enforcing fairness among a large number of flows is described. In particular, this paper proposes and evaluates Stochastic Fair BLUE (SFB), a queue management algorithm which can identify and rate-limit non-responsive flows using a very small amount of state information.