Since their emergence from standards bodies around 1990, SDH and its variant, SONET, have helped revolutionize the performance and cost of telecommunications networks based on optical fibers.

SDH has provided transmission networks with a vendor-independent and sophisticated signal structure that has a rich feature set. This has resulted in new network applications, the deployment of new equipment in new network topologies, and management by operations systems of much greater power than previously seen in transmission networks.

As digital networks increased in complexity in the early 1980s, demand from network operators and their customers grew for features that could not be readily provided within the existing transmission standards. These features were based on high-order multiplexing through a hierarchy of increasing bit rates up to 140 Mbps or 565 Mbps in Europe and had been defined in the late 1960s and early 1970s along with the introduction of digital transmission over coaxial cables. Their features were constrained by the high costs of transmission bandwidth and digital devices. The multiplexing technique allowed for the combining of slightly nonsynchronous rates, referred to as plesiochronous, which lead to the term plesiochronous digital hierarchy (PDH).

The development of optical fiber transmission and large-scale integrated circuits made more complex standards possible. There were demands for improved and increasingly sophisticated services that required large bandwidth, better performance monitoring facilities, and greater network flexibility. Two main factors influenced the form of the new standard:

1. Proposals in the Comité Consultif International Telegraphique et Telephonique (CCITT) (now International Telecommunications Union–Telecommunications Services Sector [ITU–TS]) for a broadband integrated services digital network (BISDN) opened the door for a new, single-world multiplexing standard that could better support switched broadband services.

2. The 1984 breakup of the Bell operating companies (BOCs) in the United States produced competitive pressures that required a standard optical interface for interexchange carriers' use and new features for improved network management.

It was widely accepted that the new multiplexing method should be synchronous and based not on bit interleaving as was the PDH, but on byte interleaving, as are the multiplexing structures from 64 kbps to the primary rates of 1,544 kbps (1.5 Mbps) and 2,048 kbps (2 Mbps). By these means the new multiplexing method was to give a similar level of switching flexibility both above and below the primary rates (though most SDH products do not implement flexibility below primary rate). In addition, it was to have comprehensive management options to support new services and more centralized network control.