Optical Instrument Transformers (OIT) have been developed as an alternative to traditional instrument transformers (IT). The question "Can optical instrument transformers substitute for the traditional transformers?" is the main motivation of this study. Finding the answer for this question and developing complete models are the contributions of this work. Dedicated test facilities are developed so that the steady state and transient performances of analog outputs of a magnetic current transformer (CT) and a magnetic voltage transformer (VT) are compared with that of an optical current transformer (OCT) and an optical voltage transformer (OVT) respectively. Frequency response characteristics of OIT outputs are obtained. Comparison results show that OITs have a specified accuracy of 0.3% in all cases. They are linear, and DC offset does not saturate the systems. The OIT output signal has a 40~60 μs time delay, but this is typically less than the equivalent phase difference permitted by the IEEE and IEC standards for protection applications. Analog outputs have significantly higher bandwidths (adjustable to 20 to 40 kHz) than the IT. The digital output signal bandwidth (2.4 kHz) of an OCT is significantly lower than the analog signal bandwidth (20 kHz) due to the sampling rates involved. The OIT analog outputs may have significant white noise of 6%, but the white noise does not affect accuracy or protection performance. Temperatures up to 50oC do not adversely affect the performance of the OITs. Three types of models are developed for analog outputs: analog, digital, and complete models. Well-known mathematical methods, such as network synthesis and Jones calculus methods are applied. The developed models are compared with experiment results and are verified with simulation programs. Results show less than 1.5% for OCT and 2% for OVT difference and that the developed models can be used for power system simulations and the method used for the development can be used to develop models for all other brands of optical systems. The communication and data transfer between the all-digital protection systems is investigated by developing a test facility for all digital protection systems. Test results show that different manufacturers' relays and transformers based on the IEC standard can serve the power system successfully.