We determine the capacity and numbers of users that can be supported by CDMA networks that use coherence multiplexing. The analysis takes into account reduced optical beat noise due to differential detection of the decoder outputs. The analysis also includes the effect of fibre dispersion and shows that there is an optimum source linewidth for a given link length and user bit rate. We confirm that the capacity is severely restricted by optical beat noise. However, our calculations show that performances achievable may be adequate for certain local area and access network type applications. For example, at 40 Mb/s per user a maximum of 50 users can be supported over 12 km. We compare our calculations with the measured performance of our recent network demonstration and find good agreement. (C) 1997 Elsevier Science B.V.