  We analyze the achievable rate in interference-free wireless networks with
physical layer fading channels and orthogonal multiple access. As a starting
point, the point-to-point channel is considered. We find the optimal physical
and network layer rate trade-off which maximizes the achievable overall rate
for both a fixed rate transmission scheme and an improved scheme based on
multiple virtual users and superposition coding. These initial results are
extended to the network setting, where, based on a cut-set formulation, the
achievable rate at each node and its upper bound are derived. We propose a
distributed optimization algorithm which allows to jointly determine the
maximum achievable rate, the optimal physical layer rates on each network link,
and an opportunistic back-pressure-type routing strategy on the network layer.
This inherently justifies the layered architecture in existing wireless
networks. Finally, we show that the proposed layered optimization approach can
achieve almost all of the ergodic network capacity in high SNR.
