An automatic closed loop power control system is described for simultaneously
adjusting an output power and an extinction ratio P1/P0 of
a laser diode in order to maintain a desired average output power and a desired
extinction ratio. The bias current component of a laser diode drive current is
adjusted to compensate for changes in the average output power caused by ambient
characteristics such as temperature and aging. Simultaneously, a modulation current
component of the laser diode drive current is adjusted to maintain an extinction
ratio of the laser diode output signal. The bias current and modulation current
adjustments are based on the second order statistics of an average output power
of the laser diode and a variance in the power output of the laser diode.