A testing circuit is provided for determining the Q-factor of an optical communication system. In the testing circuit, a variable attenuator attenuates a received optical signal in response to an attenuator control signal. A first optical-to-electrical converter converts a first portion of the attenuated optical signal into an electrical data signal. A second optical-to-electrical converter converts a second portion of the attenuated optical signal into a first power indication signal. A decision circuit detects high and low data bits in the electrical data signal based on a plurality of threshold voltage signals, and provides decision signals indicative of the results of these determinations. An error monitoring circuit receives the decision signals, determines the bit error rate of the incoming optical signal for the plurality of threshold voltages, and provides bit error rate signals. A microprocessor receives the power regulation signal and the bit error rate signals, and generates a first attenuator control signal and a plurality of threshold voltage signals. In the testing circuit, the variable attenuator operates to attenuate the received optical signal such that it is at an optimal input level for the operation of the first optical-to electrical converter. The microprocessor determines an optimal bit error rate and an optimal Q-factor for the incoming signal based on the bit error rates of the incoming optical signal for the plurality of threshold voltages