Continued growth in traffic, an emerging demand for transparency, and the development of new services, all place additional burdens on the capacity of telecommunications transmission and switching systems. Coherent transmission may allow high-density WDM systems and passively-routed networks to be realised using existing optical fibre, combined with simple optical amplifier repeaters, by providing the necessary wavelength selectivity and increased power budget. This paper describes practical progress towards these objectives. The first field demonstration of a 565 Mbit/s DPSK heterodyne system in the operational environment is described, using miniaturised external cavity lasers and automated endless polarisation control. The paper goes on to report improvements in receiver performance, and transmission experiments using a cascade of semiconductor optical amplifiers and an erbium-doped fibre amplifier repeater.