2.5 Gbit/s all-optical wavelength conversion is reported with a novel monolithically integrated Mach-Zehnder interferometer realised in InGaAsP/InP MQW technology. The three-port MZI wavelength converter enables strong improvement of extinction ratios up to 11 dB in dynamic operation and signal chirp reduction by optical crossphase modulation. This improvement of signal quality by wavelength conversion is confirmed by a gain of 2.3 dB in system sensitivity after transmission over 100 km (nondispersion-shifted) fibre compared to the standard 2.5 Gbit/s direct modulation performance of a DFB laser.
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