A method (100) of encoding communications traffic bits onto an optical carrier signal in a pulse amplitude modulation, PAM, format. The method comprises: receiving (102) bits to be transmitted; receiving (104) an optical carrier signal comprising optical pulses having an amplitude and respective phases; performing (106) PAM of the optical pulses to encode at least one respective bit in one of a pre-set plurality of amplitudes of a said optical pulse; and performing (108) phase modulation of the optical pulses to encode at least one further respective bit in a phase difference between a said optical pulse and a consecutive optical pulse.