An optical carrier was frequency-modulated by directly modulating a three-electrode DFB laser diode using two-channel 560 Mbit/s subcarrier multiplexed ASK signals, and was transmitted through 122.3 km of single-mode fibre. Both channels were heterodyne-detected and selected simultaneously by a bandpass filter. A receiver sensitivity of -32.4 dBm was obtained and a crosstalk penalty was less than 0.8 dB with channel spacing of 1.8 GHz.