All-optical networks (AON) facilitat~ the transportation of heterogeneous services made up of diverse technologies, protocols and formats with minimal impact to the network infrastructure. This is in contrast to the technologies in opaque networks that are typically protocol and format specific. Emerging solutions for next generation AON will simultaneously allow mesh connectivity of services with different bit rates and/or modulation formats over common fibre infrastructure, thus providing a flexible transport platform for current and future services. Consequently, it is an inefficient use of network resource to provision endto- end lightpaths without considering the different optical perfor~ance requirements of.t~e different service interfaces. This thesis proposes a resource allocation mechanism that works in a heterogeneolls environment where the considered services are lO-Gb/s non-return-to-zero (NRZ) , 40-Gb/s optical duobinary (ODB) and 40-Gb/s return-to-zero differential quadrature phase shift keying (RZ-DQPSK). In particular, the focus is on the wavelength dependent nature of chromatic dispersion (CD) effect. Note that very high . . requirement is imposed on CD compensation capability in future reconfigurable network environment as the path changes dynamically. vVhile this does not have serious implication on lO-Gb/s NRZ, the same effect could highly affect 40-Gb/s services due to very low CD tolerance at the corresponding bit rate. The reduction of network layer blocking due to CD violation is proposed through resource allocation process where CD information is utilised in three different sub-problems; routing, wavelength assignment and wavelength conversion algorithms. From analytical and numerical studies, significant improvements in network blocking performance have been demonstrated when compared to the conventional techniques. This is achieved mainly by allocating services in accordance with their physical layer requirements. In particular, the best wavelength channels are reserved for 40-Gb/s services with stringent physical layer requirements. Further reduction in CD-induced blocking is obtained through dynamic dispersion compensation by pairing wavelengths with complementary CD characteristics, resulting in low net residual dispersion.