We present a fully implemented 636 Mbit/s coherent polarization diversity SF-FSK system for field use. The system has been designed on the basis of a rigorous mathematical model valid for systems with polarization diversity operation. The system model is outlined in the paper and specific theoretical results are given with respect to the expected sensitivity penalties due to diversity operation with limited local oscillator power and due to laser phase noise.The developed system features a high performance AMI coder in the transmitter, a polarization diversity optical unit for balanced detection with less than 1.1 dB loss and 17 dB extinction ratio, a phase noise robust receiver front-end designed in microstrip technology with 2.4 GHz bandwidth and a record low noise spectral density below 4 pA/J/Hz as well as a nearly ideal square law detector (based on a monolithic integrated mixer) which has 35 dB dynamic range. The system has a sensitivity of -44.7 dBm at 10~9 bit-error-rate (2 33 -1 PRBS) and a maximum penalty due to polarization fluctuations of 1.1 dB.Mounted in standard telephone exchange racks the system has operated at 1.55μηι over 140km standard fiber cable without interruption over 12 days and 7 transmission errors were detected corresponding to a bit-error-rate of 1.2· 10" 14 . It has been installed in two telephone exchanges transmitting over a 155km sea cable between the Danish islands of Zealand and Bornholm. It has been used to transmit live telephone traffic without any problems.

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