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DWDM works by combining and transmitting multiple signals simultaneously at different wavelengths on the same fiber. In effect, one fiber is transformed into multiple virtual fibers. So, if you were to multiplex eight OC -48 signals into one fiber, you would increase the carrying capacity of that fiber from 2.5 Gb/s to 20 Gb/s. Currently, because of DWDM, single fibers have been able to transmit data at speeds up to 400Gb/s. And, as vendors add more channels to each fiber, terabit capacity is on its way.
A key advantage to DWDM is that it's protocol and bit-rate independent. DWDM-based networks can transmit data in IP, ATM, SONET /SDH, and Ethernet, and handle bit-rates between 100 Mb/s and 2.5 Gb/s. Therefore, DWDM-based networks can carry different types of traffic at different speeds over an optical channel.