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A novel optical model for a tunable dispersion compensator is realized by a deliberate packaging scheme ensuing from intensive interactions of mechanical design, materials science and numerical simulation techniques including computational fluid dynamics and finite element analysis. The compensator is comprised of multiple cascaded single cavity Gires-Tournois etalons, each under independent temperature control. Three critical issues are addressed: etalon temperature uniformity, thermal insulation and optical surface deformation of the etalons. With etalon optical surface deformation minimized and etalon temperature uniformity successfully controlled within a range of ±0.1°C, this small (232 × 139 × 16 mm) compensator achieves extremely low group delay ripple (<2.0 ps), low insertion loss ripple (<0.5 dB, insertion loss <6.3 dB), low polarization dependent loss [(PDL),<0.15 dB] and low polarization mode dispersion [(PMD),<0.7 ps]. The dispersion tuning range is from -700 ps/nm to +700 ps/nm in a dispersion passband of 0.2 nm which is sufficient for 10-Gb/s transmission. Thermal insulation design makes the tuning process take effect within 1 min at maximum power consumption 5 W.