A model established from the rate equations of a near traveling-wave optical amplifier (NTWOA) used as a phase modulator shows that the modulation rate is limited by the carrier lifetime to 500 Mb/s and that the worst-case detection penalty is about 0.7 dB. It is then experimentally demonstrated that close control of the injected light polarization can reduce the detection penalty in a DPSK (differential phase-shift keying) heterodyne system, using an NTWOA phase modulator instead of an LiNbO/sub 3/ modulator, to 0.6 dB. This device and a balance receiver have allowed the implementation of 282-Mb/s DPSK link operating at 1.522 mu m over 242 km of fiber with a 3-dB margin.< <ETX xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">></ETX>