We present full-band structure calculations of temperature- and wavelength-dependent two-photon absorption coefficients and free-carrier absorption cross sections in GaAs, InP, and 0.92 eV-band gap Ga64In36As and InP60As40 alloys. The calculated coefficient decreases with increasing wavelength and band gap but increases with temperature. Using detailed band structure analysis, we identify various contributions to the free-carrier absorption in GaAs and InP. Although the free-carrier absorption is found to arise predominantly from hole absorption, we show that direct absorption by excited electrons is possible, leading to an enhanced free-carrier absorption coefficient. This excited state absorption could be exploited to modulate the transmission of light at communication wavelengths of 1.33 or 1.55 m with, for example, the more commonly available 0.8 m diode laser. We further show that the high-intensity transmission calculated with our values of nonlinear parameters in GaAs agrees very well with the measured values. © 2011 American Institute of Physics.