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Direct modulation at 40 Gb/s of a 1.3-mum InGaAlAs distributed feedback ridge waveguide laser is experimentally demonstrated. By combination of the high differential gain of an InGaAlAs multiquantum well active layer, a short cavity length of 100 mum, and a low-resistance notch-free grating, it achieves high bandwidth of 29 GHz and high-extinction ratio of 5 dB at 40-Gb/s modulation. Moreover, the laser operates at a record maximum ambient temperature of 60degC under 40-Gb/s directly modulation. It also achieves 40-Gb/s modulated transmission over 2 km with a low power penalty of 0.25 dB at 25degC .