The first part of this paper reviews the spectrally resolved erbium-doped fiber model by Saleh, Jopson et al. (1990, IEEE Photon Technol. Lett.2, 714; 1991, Fiber Laser Sources and Amplifiers III, Vol. 1851, pp. 114–119, SPIE). This model is adequate for fast simulation of erbium-doped fiber amplifiers pumped at 980 or 1480 nm which are not self-saturated by amplified spontaneous emission noise. The second part of this paper reviews the wavelength-domain representation of optical signals and network components at the optical transport layer of multiwavelength optical networks. This representation stems from the spectrally resolved model of erbium-doped fiber amplifiers. Optical signals are represented by their carrier wavelength and average power exclusively and not by their temporal waveform, as is customary in simulation of analog and digital communication systems. In addition, network components are fully characterized by their loss or gain as a function of wavelength. The wavelength-domain representation is adequate for efficient steady-state and transient power-budget computations; i.e., it can be used to evaluate the optical signal, amplified spontaneous emission noise, and linear optical crosstalk average powers at all points in a multiwavelength optical network. To illustrate the capabilities of the spectrally resolved erbium-doped fiber model by Saleh, Jopson et al. and the wavelength-domain representation, transient power fluctuations caused by the dynamic interaction of saturated erbium-doped fiber amplifiers and servo-controlled attenuators in a bidirectional ring composed of four wavelength add–drop multiplexers are studied. The mechanisms responsible for this oscillatory behavior are identified and remedies are proposed.