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A scheme on orthogonal frequency division multiple access (OFDMA) system with dynamic bandwidth allocation is investigated in passive optical networks (PONs). The system supports various applications and enables dynamic bandwidth allocation among these applications. Digital signal processing (DSP) unit as an important component is utilized for flexibility in PON. The simulation results show that the bit error rate (BER) performance of OFDM signal with quadrature amplitude modulation (QAM) is good after fiber transmission.