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Research and development of 40-Gb/s-based technologies are very significant for not only increasing the total capacity of wavelength-division multiplexing transmission systems but also providing higher speed interfaces to routers and Ethernet devices in order to create new services in the twenty-first century. The technologies of digital and analog integrated circuits are progressing steadily, and the LiNbO3 Mach-Zehnder external modulator has already reached the performance level required for practical use. Adaptive, intelligent compensation for problems such as chromatic dispersion and polarization-mode dispersion can make the design of optical transport networks more flexible. As an example, we achieved 3.5-Tb/s (43 Gb/s×88 ch) transmission over a 600-km nonzero dispersion-shifted fiber by using LiNbO3 modulators and virtually imaged phased array variable-dispersion compensators.