  We have improved the hardware and software of our autocompensating system for
quantum key distribution by replacing bulk optical components at the end
stations with fiber-optic equivalents and implementing software that
synchronizes end-station activities, communicates basis choices, corrects
errors and performs privacy amplification over a local area network. The all
fiber-optic arrangement provides stable, efficient and high-contrast routing of
the photons. The low bit error rate leads to high error correction efficiency
and minimizes data sacrifice during privacy amplification. Characterization
measurements made on a number of commercial avalanche photodiodes are presented
that highlight the need for improved devices tailored specifically for quantum
information applications. A scheme for frequency shifting the photons returning
from Alice's station to allow them to be distinguished from backscattered noise
photons is also described.
  OCIS codes: 030.5260, 060.0060, 060.2360, 230.2240, 270.5570.
