The spectrum sliced dense wavelength division multiplexed passive optical network (SS-DWDM PON) is a cost effective and power efficient solution for passive optical access networks to satisfy the growing worldwide demand for transmission capacity. Originally resulting ASE spectrum on the output of EDFA is irregular and manipulation with EDFA parameters must be done to make it more flat. Flat optical spectrum of ASE source is an important premise to achieve minimal output power level fluctuations of obtained channels after spectrum slicing operation and provide stable data transmission with BER<1e-10 over the specified fiber optical link length. In this paper we successfully demonstrate the reach improvement by implementation of chromatic dispersion compensation for cost effective spectrum-sliced 16-channel DWDM PON system with data rate 2.5 Gbit/s per channel as well as realization of broadband ASE light source with output power +23 dBm, channel power variation 0.42 dBm and flat spectrum in wavelength range from 1545.32 nm to 1558.98 nm.