We determine the capacity and numbers of users that can be supported b
y CDMA networks that use coherence multiplexing. The analysis takes in
to account reduced optical beat noise due to differential detection of
the decoder outputs. The analysis also includes the effect of fibre d
ispersion and shows that there is an optimum source linewidth for a gi
ven link length and user bit rate. We confirm that the capacity is sev
erely restricted by optical beat noise. However, our calculations show
that performances achievable may be adequate for certain local area a
nd access network type applications. For example, at 40 Mb/s per user
a maximum of 50 users can be supported over 12 km. We compare our calc
ulations with the measured performance of our recent network demonstra
tion and find good agreement. (C) 1997 Elsevier Science B.V.