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A multi-channel optical fiber network is designed and simulated on a bus network for local area network environment. A new algorithm is proposed, based on the Ethernet protocol. Multiple channels or wavelengths are used for transmission to increase the fiber capacity. There are M number of channels connected to N number of nodes with a central control unit placed at the center of the bus. One vital problem is the receiver contention, which occurs when more than one signal arrives at the receiver at about the same time. The proposed algorithm solves this problem and at the same time increases the throughput of the network.