As the demand for transmission bandwidth and system capacity is increasing, several ways to enhance the optical system have been proposed. Increasing the bandwidth can either be done by providing more channels in a Wavelength Division Multiplexing (WDM) system or by using Time Division Multiplexing (TDM) (which increases the already existing bit rate) or by a combination of both (Weinert et al., 1999). Theoretically, fibers have large high bandwidths. However, it is extremely difficult to exploit complete bandwidth of a single fiber using high capacity wavelength channel due to mismatch of optical-electronic bandwidth or electronic bottleneck (Siva and Mohan, 2004). Dense Wavelength Division Multiplexing (DWDM) is a technique to send many light beams of different wavelengths simultaneously down the optical fiber, which turned out to be a reliable solution to this problem. With the advent of Erbium Doped Fiber Amplifiers (EDFA), the attenuation is no longer a problem because it amplifies various signals of different wavelengths simultaneously. Conversely, the dispersion becomes a major limiting factor as far as WDM is concerned (Jean-Pierre, 2002). The question which arises is: What is the modulation technique suited for DWDM systems? At the time when this research was being carried out, there was no absolute modulation technique which could be used. Rather, there were some which were suggested due to their behavior in reducing dispersion and nonlinear effects present in multichannel transmission systems. Duo-binary (DB) is one such technique due to its resilience to dispersion. There are so many techniques that have been proposed to be used in conjunction with modulation techniques in order to reduce the dispersion. Some techniques are: Dispersion Compensating Fiber (DCF), Higher Order Mode (HOM) devices, Phase Conjugator and Fiber Ragg Grating (FBG). In this paper, Non-Return to Zero (NRZ), Return to Zero (RZ), Carrier Suppressed Return to Zero (CSRZ) and Modified Duo-binary Return to Zero (MDRZ) modulation formats have been implemented in 4-channel WDM system at 20 Gbps data rate. The systems are designed using two types of fibers: Single Mode Fiber (SMF) is chosen in the system whose dispersion is uncompensated; and DCF is chosen in the system whose dispersion is compensated.
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