Chapter 2 outlines the basic principles of optical direct and basic external modulation. By direct modulation, the injection current to the gain cavity of the laser is manipulated and the maximum modulation bandwidth can be expected to reach about 10 GHz. External modulation requires an independent optical modulator coupled by the lasing lightwaves to preserve the frequency and linewidth of the laser. Manipulation of the lightwaves in the external modulator are via acousto-optic (AO), electro-optic (EO), or magneto-optic (MO) effects in anisotropic crystals or electro-absorption phenomena in semiconductors. These chapters observe the effects of noises on modulated signals before and after transmission. The term error vector magnitudes (EVM) in digital sampling oscilloscope or real-time sampling oscilloscope is used to measure the magnitude of the noise added phasor states of a sampled constellation.