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. In this work we successfully demonstrate the simulation model of effective spectrum-sliced 16-channel dense wavelength division multiplexed passive optical network (WDM-PON) system with data rate 2.5 Gbit/s per channel with significant optical link reach improvement by implementation of dispersion compensating fiber (DCF) and fiber Bragg grating (FBG) for chromatic dispersion compensation. We also show the realization of a broadband amplified spontaneous emission (ASE) light source with high output power +23 dBm and flat spectrum in wavelength range from 1545.32 to 1558.98 nm (C-band). Proposed system is built on ITU-T recommended DWDM frequency grid, in this way making it more adaptive and convergent to existing optical access systems.