We report a particular implementation of a quantum cryptographic device ope
rating at 1540-nm wavelength and involving interference between phase-modul
ated sidebands produced by a pair of phase modulators in the transmitting a
nd receiving modules. The principle of operation is described in terms of b
oth classical and quantum optics. The method has been demonstrated experime
ntally using a strongly attenuated semiconductor laser diode. Single photon
interference has been obtained with a fringe visibility greater than 90%,
indicating that the system can be used for quantum key distribution. [S1050
-2947(99)06608-1].