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Network traffic demands are forecast to increase for the foreseeable future, with the challenge being to meet the demand while maintaining or lowering network costs. Simply increasing capacity will not be sufficient; overall bandwidth utilization also needs to improve. A combination of improved transport capacity through increased spectral efficiency and bit rate along with better network utilization by integrating subchannel electrical grooming into the transmission system will be required. Smarter ways to utilize optical capacity are key since transmission costs have been decreasing slower than grooming and switching costs. Integrated transport and switching can improve the efficiency of the client network using techniques such as port virtualization and transit traffic reduction. The baseline for transport networks will be 100 Gb/s PM-QPSK using 50 GHz channel spacing. Moving from a fixed DWDM channel arrangement to support flexible grid and super channels will allow tighter channel (carrier) spacing and should increase capacity by 30 to 50 percent. For shorter distances higher-order modulation such as 16-QAM can double network capacity. To better optimize network efficiency, an architecture that flexibly combines lower rate (sub-100 Gb/s) clients to form channels (carriers) and then superchannels will be required.