Digital pulse position modulation (PPM) is a preferred modulation format for the ideal photon counting channel and optical intersateilite links. Here we examine its potential for the coherent optical fibre communications channel. We present a thorough performance and optimisation analysis. Comparisons, at a wavelength of 1.5 μm, are made with shot‐noise limited coherent PCM (homodyne and heterodyne ASK, FSK and PSK) over a range of fibre band‐widths and varying PPM word size. We conclude that for moderate to high fibre bandwidths homodyne digital PPM should achieve an improvement in sensitivity of typically 5 dB over homo‐dyne PSK PCM.