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This paper presents a generalized mathematical model of a PCM/PL system. The analysis demonstrates that any two orthogonal polarizations may be used to represent the binary bits. The generalized approach also facilitates the derivation of the system bit error rate when polarization errors are introduced. Six types of polarization errors are assumed for the discussion. The various cases of polarization errors are presented as operations on the Poincaré sphere. These operations are then formalized in terms of the Mueller Matrix theory. The matrix algebra permits the derivation of the bit error-rate curves for the six polarization error cases. Assuming that the atmospheric-induced fading is log normally distributed, the bit error rate for a PCM/PL fading channel is computed.