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This paper investigates the physical layer optimization as a means of improving the utilization of limited network resources. A transparent optical network operating in the nonlinear transmission regime using coherent optical technology is considered. A physical layer model is described that allows the transmission signal quality to be included in the optimization process. Initially a fixed power, route-adapted modulation format approach is taken using integer linear programming to solve the static route allocation problem. It is shown that for the 14-node, 21-link NSF mesh network adaptation of the modulation formats leads to increases in data throughput of 17%. Optimization of the individual transmitter launch powers and spectral channel allocation results in a SNR margin of 2.3 dB, which is used to further increase the overall network traffic throughput exceeding the fixed PM-QPSK modulation format by as much as …