**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | ET Docket No. 99-231         |
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**SECOND REPORT AND ORDER**

**(Proceeding Terminated)**

**Adopted: May 16, 2002 Released: May 30, 2002**

By the Commission: Commissioner Martin issuing a statement.

**INTRODUCTION**

1.  By this action, we amend Part 15 of the Commission's rules to
    provide for the introduction of new digital transmission
    technologies, to eliminate unnecessary regulations for spread
    spectrum systems, and to improve spectrum sharing by unlicensed
    devices operating in the 915 MHz (902 - 928 MHz), 2.4 GHz (2400 -
    2483.5 MHz), and 5.7 GHz (5725 -- 5850 MHz) bands. Specifically,
    this Second Report and Order revises Section 15.247 of the
    Commission's rules to allow new digital transmission technologies
    and direct sequence spread spectrum systems to operate under the
    same rules in the 915 MHz, 2.4 GHz, and 5.7 GHz bands.[^1] We also
    modify the rules to remove the requirement that direct sequence
    spread spectrum systems must demonstrate at least 10 dB of
    processing gain. This Second Report and Order also modifies the
    rules for frequency hopping spread spectrum systems operating in the
    2.4 GHz band to reduce the amount of spectrum that must be used with
    certain types of operation. We take these actions to facilitate the
    continued development and deployment of new wireless devices for
    businesses and consumers.

    **BACKGROUND**

2.  Part 15 of the Commission's rules provides for the operation of
    unlicensed devices. As a general condition of operation, Part 15
    devices may not cause any harmful interference to authorized
    services and must accept any interference that may be received.[^2]
    Section 15.247 contains rules governing the operation of spread
    spectrum devices in the 915 MHz, 2.4 GHz, and 5.7 GHz bands.
    Operation under these rules is limited to frequency hopping and
    direct sequence spread spectrum systems. Spread spectrum modulation
    reduces the power density of the transmitted signal at any
    frequency, thereby reducing the possibility of causing interference
    to other signals occupying the same spectrum. Similarly, at the
    receiver end, the power density of interfering signals is minimized,
    making spread spectrum systems relatively immune to interference
    from outside sources. In frequency hopping systems, an information
    signal, usually a data stream, modulates a radio frequency carrier
    that quickly moves from frequency to frequency in concert with a
    receiver.[^3] In direct sequence systems, the information data
    stream is combined with a high speed digital spreading code that is
    used to modulate a radio carrier, producing a radio signal that has
    a bandwidth covering anywhere from 1 to 100 megahertz.[^4] Both
    frequency hopping and direct sequence systems are permitted to use
    output powers of up to 1 watt in the above bands, however, most
    devices use lower power for various design reasons, such as
    conserving battery life.[^5]

3.  In the *Further Notice of Proposed Rule Making* (*Further Notice*)
    in this proceeding, we proposed to allow alternative digital
    technologies to operate in the bands formerly reserved for frequency
    hopping and direct sequence spread spectrum systems.[^6]
    Additionally, we proposed to eliminate the 10 dB processing gain
    requirement for direct sequence spread spectrum systems. Finally, we
    proposed to permit frequency hopping systems in the 2.4 GHz band to
    use as few as fifteen hopping channels, regardless of the hopping
    channel bandwidth utilized, provided that the output power does not
    exceed 125 mW and the device uses adaptive hopping techniques.[^7]
    Under this proposal, devices that use 75 channels or more would
    still be allowed to operate with output power up to 1 Watt.
    Twenty-three parties filed comments in response to the *Further
    Notice* and thirteen parties filed reply comments. A list of parties
    is included in Appendix A.

    **DISCUSSION**

4.  The Commission's spread spectrum rules have been a tremendous
    success. A wide variety of devices have been introduced under these
    rules for business and consumer use, including improved cordless
    telephones and computer local area networks. Moreover, the past few
    years have witnessed the development of industry standards, such as
    IEEE 802.11b, Bluetooth, and Home RF, that promise to greatly expand
    the number and variety of devices that will operate in the 2.4 GHz
    band.[^8] This will provide the capability necessary for the
    introduction of wireless headsets and computer connections

5.  for cellular and PCS phones, wireless computer peripherals such as
    printers and keyboards, and a host of new wireless Internet
    appliances that will use all of the spread spectrum bands.

6.  Since the time the spread spectrum rules were first introduced some
    15 years ago, we have amended those rules several times to
    accommodate technology developments and promote new and innovative
    use of the 915 MHz, 2.4 GHz, and 5.7 GHz bands.[^9] Over the years,
    the data rates achievable by spread spectrum devices have increased
    from a few kilobits per second to over 20 megabits per second. These
    high data rates were not envisioned when the rules were first
    drafted. Moreover, the original rules were crafted in a manner to
    highlight the interference immunity characteristics of spread
    spectrum devices, even at the expense of higher speeds. Our current
    rules contain provisions that unnecessarily restrict system designs
    that could otherwise achieve data rates of more than about
    20 megabits per second.

7.  We initiated this proceeding to provide for the continued
    development of technologies that spread an RF signal across a wide
    band of spectrum. The rule changes adopted in this Second Report and
    Order are intended to provide manufacturers with the flexibility to
    design and market a more diverse set of products which are able to
    operate efficiently in the unlicensed bands. Manufacturers will have
    the freedom to design products that fit the various needs of users
    who may have differing requirements for data speeds and interference
    resistance. The rule changes will also allow for greater sharing of
    the spectrum by all devices in the 2.4 GHz band by removing
    regulatory barriers to the introduction of new non-interfering
    technologies.

    **A. Digital Systems**

8.  In the *Further Notice*, we observed that a number of new digital
    modulation technologies have been developed that have spectrum
    characteristics similar to direct sequence spread spectrum systems.
    That is, the digital systems spread their transmitted energy across
    a wide bandwidth, thereby minimizing the amount of energy
    transmitted in any one portion of the occupied frequency band.
    Therefore, such digital modulation systems may exhibit no more
    potential to cause interference to other devices than direct
    sequence systems. However, because digital modulation systems do not
    meet the Commission's definition of a spread spectrum system, they
    have not been allowed to operate under Section 15.247.[^10] In the
    *Further Notice*, we proposed to amend Section 15.247 to provide for
    use of these new digital technologies in the 915 MHz, 2.4 GHz, and
    5.7 GHz bands. We invited comment on whether these technologies
    should be allowed to operate at the same power levels as direct
    sequence spread spectrum systems, specifically 1 Watt maximum output
    power with a maximum power spectral density of 8 dBm per 3 kHz.[^11]
    We also invited comment as to whether the flexibility we proposed
    for digitally modulated systems warranted a reduction in permitted
    power levels to reduce the likelihood of any adverse impact on other
    systems operating in this spectrum, similar to the reduced power
    levels adopted earlier for wide-band frequency hopping systems.[^12]
    We further asked if we should make changes in the power level
    adjustments for point-to-point operation in Section 15.247(b)(3) if
    the allowed power for digitally modulated systems was reduced.[^13]
    Finally, we noted that the proposals for new digital devices are
    similar to the rules for Unlicensed National Information
    Infrastructure (U-NII) devices contained in Subpart E of Part 15,
    and sought comment on whether these new digital technologies could
    be accommodated under those rules.[^14] We noted that, in order to
    accommodate these devices, the U-NII rules would need to be amended
    to include the 915 MHz and 2.4 GHz bands. Additionally, the upper
    limit of the 5.725 - 5.825 GHz U-NII band would also need to be
    expanded to 5.850 GHz in order to realign the standards with those
    presently permitted under Section 15.247.

9.  The commenting parties generally support the proposal to permit the
    use of alternative digital modulation techniques in the 915 MHz, 2.4
    GHz, and 5.7 MHz bands.[^15] However, there was a diversity of
    opinion as to the output power and spectral density levels at which
    these devices should be allowed to operate. Several parties express
    support for allowing digital technologies to have the same maximum
    proposed power level and power spectral density limits as direct
    sequence spread spectrum systems.[^16] Wi-LAN, Inc. ("Wi-LAN"),
    notes that, because digital technologies such as OFDM and direct
    sequence spread spectrum generate similar spectral signatures,
    allowing other digital systems the same output levels as spread
    spectrum will not generate any more interference.[^17] They state
    that devices already authorized for use and meeting these
    requirements have not caused interference in the bands. Similarly,
    3Com Corporation, Clearwire Technologies, Inc., InterWAVE
    Communications Inc., LinCom Wireless, Inc., Symbol Technologies,
    Inc, and Vocollect, Inc. ("Joint Commenters") in their collective
    response, advocate operation at 1 Watt.[^18] They state that a
    victim receiver is affected primarily by the amount of incoming RF
    energy, and much less (if at all) by the specific form of
    modulation. Accordingly, Joint Commenters argue that digital systems
    can be authorized under the same regulations at direct sequence
    systems with no significant increase of interference to other
    users.[^19] Likewise, the Information Technology Industry Council
    supports the proposed limits on the basis that digital technologies
    do not have more potential to cause interference than direct
    sequence spread spectrum systems.[^20] Proxim, Inc. ("Proxim") also
    adds support for allowing digital technologies to operate at the
    1 Watt, 8 dBm/3 kHz limits.[^21] Proxim submits a technical
    statement which demonstrates that, in some cases, it is preferable
    to employ one higher-powered transmitter as opposed to multiple
    lower powered transmitters to cover a given area. Proxim states that
    while system designers always have the option and incentive to use a
    lower power to cover an area, the only result that arises from a
    mandatory lowering of the output power for digital transmission
    systems is to require more devices in areas where fewer, at higher
    power, could suffice.[^22]

10. The Wireless Communications Association, International, Inc. ("WCA")
    supports the proposed 1 Watt output power but suggests limiting
    power spectral density to 22 dBm/MHz.[^23] It states that because
    the rules for direct sequence spread spectrum require the digital
    signal to be spread by a pseudo random code, the power spectral
    density is significantly lower than that achieved with normal
    modulations. It states that all modulations in compliance with the
    IEEE 802.11 direct sequence spread spectrum specification, if using
    the full output power of 1 Watt, would have a peak power spectral
    density of 20 dBm/MHz and a bandwidth of 22 MHz. WCA notes that the
    power levels proposed in the *Further Notice* are based on digital
    transmissions with the same characteristics as direct sequence
    systems. It therefore submits that power spectral density should
    also be limited to the levels of direct sequence devices. The IEEE
    Project 802^TM^, Local and Metropolitan Area Networks Standards
    Committee ("IEEE 802") proffers the same argument and states that
    digital transmission systems could heavily interfere with currently
    deployed direct sequence spread spectrum systems if allowed to
    operate at 8 dBm/3 kHz.[^24]

11. Some parties express concern that, if digital devices are allowed to
    operate at 1 Watt and power spectral density of 8 dBm/3 kHz, the
    devices would cause interference to incumbent spread spectrum
    systems.[^25] They believe that, because digital systems are less
    immune to interference, they will tend to operate at higher powers
    and thus cause interference to existing devices. Accordingly,
    several parties suggest alternative operating conditions for devices
    using digital modulation techniques, such as lower output power or
    lower power spectral density, to ensure that energy is evenly
    spread. For example, Agere Systems ("Agere") argues that there is no
    conclusive proof that digital modulation systems can operate at 1
    Watt with power spectral density limited to 8 dBm/3 kHz without
    causing interference.[^26] For that reason, Agere suggests that the
    Commission limit digital modulation systems to 125 mW maximum power
    output, with power spectral density limited to 10 dBm/MHz. Agere
    submits a technical showing which demonstrates that digital systems
    would operate satisfactorily in a number of configurations at these
    levels. Agere notes that its proposed conditions would discourage
    narrowband operation while allowing sufficient operating margin for
    digital systems.[^27] Similarly, Intersil Corporation ("Intersil")
    states that the 1 Watt maximum power proposal could lead to a
    proliferation of inefficient transceivers operating at high power
    levels. Intersil suggests that digital systems be subject to the
    same operating conditions as U-NII devices in the 5.25 -- 5.35 GHz
    band.[^28] Those devices are generally limited to an output power of
    250 mW or less, with power spectral density not exceeding 11 dBm per
    1 MHz. Apple Computer, Inc. ("Apple") notes that the proposed
    regulations would permit a digital system to operate at a full 1
    Watt transmitter output power in a relatively narrow bandwidth of
    500 kHz. Apple says that this would pose a serious interference
    threat to existing networks using the 802.11b protocol. One option,
    according to Apple, would be require new digital systems to operate
    under the conditions outlined in the European Telecommunications
    Standards Institute ("ETSI") rules for direct sequence spread
    spectrum and other forms of modulation. The ETSI rules limit the
    power spectral density of these devices to 10 dBm/MHz.[^29]

12. Based on analysis of the record, we conclude that systems using
    digital modulation techniques can operate under the same rules as
    direct sequence spread spectrum devices in the 915 MHz, 2.4 GHz, and
    5.7 GHz band without posing additional risk of interference.
    Therefore, we will remove any regulatory distinction between direct
    sequence spread spectrum systems and systems using other forms of
    digital modulation. We will amend Part 15 to replace references to
    "direct sequence spread spectrum" with the term "digital modulation"
    and permit all types of digitally modulated systems to be regulated
    under Section 15.247.[^30] This change will permit the authorization
    of newly developing high data rate technologies.

13. We find that some commenters' concerns that digital devices will
    operate inefficiently or at very high power levels resulting in
    interference are unfounded. We note that although direct sequence
    systems are permitted up to 1 Watt output power and 8 dBm/ 3 kHz
    power spectral density, many of such devices operate at much lower
    levels, depending on their application. For example, a search of the
    Commission's equipment authorization database reveals that many
    devices operate at output power levels in the range of 70-500 mW,
    depending on the intended use. Power spectral density levels are
    typically in the range of -10 dBm/3 kHz to 5 dBm/3 kHz. Generally,
    indoor devices use power levels much lower than 1 Watt because
    transmission distances are relatively short. Similarly, devices that
    are used for mobile applications tend to operate at low power levels
    in order to achieve maximum battery life. Additionally,
    manufacturers must also ensure that emissions are at levels low
    enough to prevent users from being exposed to excessive levels of
    radiofrequency radiation.[^31] We find no evidence to indicate that
    these same conditions would not apply to new digital devices.

14. We also believe that manufacturers will take into consideration
    trade-offs in performance from using digital technologies instead of
    direct sequence spread spectrum technology. Some digital systems
    that are capable of delivering high data rates may be more
    vulnerable to receiving interference than conventional direct
    sequence systems. Manufacturers will have the flexibility to
    determine whether increased interference immunity or higher data
    speed is needed under different applications. However, there is no
    evidence that new digital systems are more likely to operate in a
    fashion to cause interference to incumbent technologies. As the
    technical showings from both Agere and Proxim demonstrate, digital
    systems may be configured in a number of ways with varying output
    levels, yet have the same interference potential. Therefore, we find
    that requiring reduced power levels or power spectral density
    levels, as suggested by some parties, would not be necessary to
    ensure operation in a non-interfering manner. Indeed, such action
    would be counterproductive to our goal of minimizing the regulatory
    restrictions on Part 15 devices. Accordingly, we are adopting our
    proposal to permit digital modulation systems to operate under the
    conditions contained in Section 15.247. Under the new rules, digital
    modulation systems will be subject to the same power output maximum,
    1 Watt, and power spectral density limits, 8 dBm per 3 kHz, as
    direct sequence spread spectrum systems.

15. In the *Further Notice*, we asked if digital systems could be
    accommodated by amending the U-NII rules to include the 915 MHz and
    2.4 GHz bands as an alternative to regulation under the spread
    spectrum rules. In response, Intersil suggests that we modify the
    U-NII band rules to allow for digitally modulated devices at 2.4
    GHz.[^32] Intersil states that the U-NII band regulations were
    developed specifically for the operation of digital transmission
    systems and were intended to provide maximum flexibility. Intersil
    notes that the U-NII rules have permitted the digital modulation
    form Orthogonal Frequency Division Multiplexing ("OFDM") to operate
    in the 5 GHz band. They foresee introduction of more innovative
    devices such as dual mode OFDM devices that would operate in both
    the 5 GHz band and 2.4 GHz band. On the other hand, Apple, Silicon
    Wave, and Intel object to modifying the U-NII rules.[^33] They state
    that such a modification should not be made before conducting a more
    thorough analysis of the consequences of such action. Specifically,
    Apple states that the Commission should first identify the exact
    rule changes and explain what it believes the effect of those
    changes would be. Accordingly, Apple states that the matter should
    be left for future consideration. The opposing parties also state
    that the different operating limits between the spread spectrum
    rules and the U-NII rules may cause confusion and slow development
    of products in the 2.4 GHz band. For example, Intel notes that the
    power spectral density limitation for 2.4 GHz spread spectrum
    devices is higher than the limits for devices operating under the
    U-NII rules. Therefore, Intel states that altering the U-NII rules
    to include the 915 MHz and 2.4 GHz bands could disrupt the use of
    existing or planned equipment in these bands. Silicon Wave expresses
    similar concerns.

16. At this time, we decline to modify the U-NII rules to add the 915
    MHz and 2.4 GHz bands. We conclude that operation of digital devices
    in the 915 MHz, 2.4 GHz, and 5.7 GHz bands is best accommodated
    under the revised Section 15.247 rules for digitally modulated
    systems. The current emission specifications and operating bands
    available for U-NII operation were adopted only after an exhaustive
    rulemaking proceeding which included submission of detailed studies.
    We have not had the opportunity to examine similar information with
    regard to other bands. As a consequence of the action we are taking
    in this proceeding, digital devices will be permitted to operate in
    the 5.725 -- 5.850 GHz band under the Section 15.247 rules as well
    as in the 5.725 -- 5.825 GHz band under the U-NII rules. We expect
    that manufacturers will examine the different bandwidth requirements
    of the Section 15.247 rules and the U-NII rules to determine which
    requirements are best suited for a particular 5.7 GHz digital
    device.[^34]

17. In the *Further Notice*, we also sought comment on whether it would
    be necessary to make any changes in the power level adjustments for
    point-to-point operation if we were to reduce the allowed power for
    new digitally modulated systems below 1 Watt. In this Second Report
    and Order we have determined that digital systems will be allowed to
    operate at a maximum 1 Watt power output. Therefore, consideration
    of further power adjustments for point-to-point operations is
    unnecessary.

    **B. Processing Gain**

18. The rules currently require direct sequence spread spectrum devices
    to have a processing gain of at least 10 dB.[^35] Processing gain
    represents the improvement to the received signal-to-noise ratio,
    after filtering to the information bandwidth, from the
    spreading/dispreading function. The processing gain is also a
    measure of a direct sequence systems ability to withstand
    interference. In the *Further Notice* we stated that as the spread
    spectrum industry has matured, it is not clear that the processing
    gain requirement continues to be necessary.[^36] Manufacturers have
    an incentive to design their systems to include processing gain in
    order for their device to operate properly when located near other
    radio frequency devices. We further noted that it has become
    increasingly difficult to determine true processing gain of certain
    direct sequence spread spectrum systems due in part to a diversity
    of opinion within the industry as to the definition of processing
    gain for these systems and the proper way to measure it. We also
    noted that uncertainties about the processing gain requirement can
    be a significant impediment to the introduction of new technologies.
    In light of these factors, the *Further Notice* proposed to
    eliminate the processing gain requirement for direct sequence spread
    spectrum systems.

19. Parties were divided on whether to remove the processing gain
    requirement. Adtran, Apple, Cisco Systems, Inc. ("Cisco"), Joint
    Commenters, OFDM Forum, Silicon Wave, Inc., Western Multiplex
    Corporation, Wi-LAN, and WCA agree with our assessment that the
    marketplace will demand that manufacturers design systems with
    adequate interference rejection and performance, and support the
    elimination of the processing gain requirement. Apple states that
    the our digital transmission system proposal obviates the need for
    the processing gain requirement because a digital transmission
    system would not be required to spread its signal anyway, and thus
    the fundamental reason for requiring processing gain
    disappears.[^37] Apple further argues that subverting the processing
    gain test is not difficult because it is possible to design a device
    to exhibit processing gain based on a certain test without using a
    true spread spectrum signal. It states that a Part 15 communications
    system manufacturer's survival depends in part on the ability to
    produce devices with low interference potential and high
    interference resistance. The Joint Commenters state that it is
    unfair to burden manufacturers with a technical requirement that
    cannot plainly be shown to accomplish its purpose. They further
    state that the interference threat of a spread spectrum device
    depends on how it spreads energy, while processing gain measures how
    it spreads information.[^38] WCA states that the processing gain
    requirement may actually create an artificial barrier to the
    introduction of new technologies for users of the 2.4 GHz band.[^39]
    Western Multiplex states that processing gain is an ineffective
    countermeasure for reuse and interference mitigation and therefore
    should be abandoned.[^40]

20. Agere, Ademco Group ("Ademco"), American Radio Relay League
    ("ARRL"), and Intersil oppose the elimination of the processing gain
    requirement. Ademco states that in the unlicensed bands there is a
    high probability that different types of systems will operate at the
    same location. It further adds that to ensure communication
    reliability, interference immunity achieved through processing gain
    can be traded off against higher transmit power in a direct sequence
    spread spectrum system design. As a result, Ademco argues, everyone
    in the unlicensed bands benefits from reduced spectral power density
    achieved in part by the system benefits provided by processing
    gain.[^41] Ademco states that the continuous wave ("CW") jamming
    margin method, which is used to demonstrate processing gain,
    represents a worst-case real-life test and is readily verified.[^42]
    It further states that that if the processing gain requirement is
    eliminated, the allowable RF power output should also be
    reduced.[^43] Agere states that the CW jammer test, while not
    perfect, is adequate because it is an established, well-documented
    method that has not resulted in undue interference problems from
    direct sequence spread spectrum systems to date. Agere further
    states that keeping the established requirements and testing
    procedures for processing gain in place would facilitate the ability
    of manufacturers to obtain certification on new, lower cost, more
    highly integrated versions of existing systems, which will benefit
    consumers.[^44] ARRL states that the processing gain requirement
    gives amateurs some assurance that Part 15 spread spectrum devices
    will distribute their power uniformly over the bandwidth utilized
    without spectral lines.[^45] ARRL is unconvinced that manufacturers
    have any incentive to design their systems to include processing
    gain. Because amateur stations operate in close proximity to
    residential spread spectrum consumer devices, ARRL is concerned that
    the elimination of processing gain would reduce the Part 15
    receivers' immunity to interference from amateurs' narrowband
    signals.

21. Consistent with our decision to allow operation of digital
    modulation systems with spectrum characteristics similar to those of
    spread spectrum systems, we find that it is no longer desirable to
    maintain the processing gain requirement for direct sequence
    systems. The processing gain requirement was incorporated into the
    rules to ensure that systems taking advantage of the higher power
    levels afforded spread spectrum systems were indeed direct sequence
    spread spectrum systems and therefore have some tolerance to
    interference. We believe that manufacturers have a market-driven
    incentive to design their systems with the ability to operate
    properly when located near other radio frequency devices. Ademco's
    concern that direct sequence spread spectrum systems will trade off
    interference immunity achieved by processing gain for higher
    transmit powers is unfounded. As we noted in paragraph 12 herein,
    the intended application generally dictates the operating power of
    these devices. Again, we find no evidence to indicate that power
    levels will increase. Additionally, although processing gain does
    provide a measure of interference protection, other methods, such as
    including error correction coding, may also achieve the same result.
    Systems using some form of error correction may have the same
    interference immunity as those with processing gain. However, this
    property may not be verifiable using the current processing gain
    measurement test. Therefore, we disagree with Ademco and Agere's
    assertion that the jamming margin method is an adequate measure of
    system performance. We find no indication that manufacturers will
    not continue to employ processing gain or error coding to provide
    the quality of service needed for the effective operation of a
    particular device. Contrary to Agere's statement, we disagree that
    retaining processing gain will facilitate manufacturers' ability to
    certify new products. Instead, we hold that the requirement
    unnecessarily hinders development of innovative products.

22. We are not persuaded by ARRL's arguments for preserving the
    processing gain requirement. First, ARRL presents no evidence that
    new digital technologies will tend to concentrate emissions in
    narrow spectral lines causing interference to amateur receivers. On
    the contrary, these new digital devices will likely be used for high
    data rate applications where wide bandwidths are preferable.
    Therefore, amateur receivers should see no increase in narrowband
    interference. Additionally, ARRL seems concerned that Part 15
    receivers without processing gain will be more susceptible to
    interference from amateur devices. As we stated previously, although
    manufacturers may design digital systems to trade-off interference
    immunity and data rates, these new systems should be designed to
    operate effectively for their intended purposes in the presence of
    other signals. Accordingly, we will remove the processing gain
    requirement.

    **C. Frequency Hopping Spread Spectrum Systems**

23. The *First Report and Order* (\"*First R&O*\") in this proceeding
    amended the spread spectrum rules to allow frequency hopping spread
    spectrum systems in the 2.4 GHz band to use bandwidths greater than
    1 MHz but equal to or less than 5 MHz at a reduced power output of
    up to 125 mW.[^46] These wideband frequency hopping systems are
    allowed to use as few as fifteen non-overlapping channels provided
    that the total span of hopping channels is at least 75 MHz.
    Frequency hopping systems with a bandwidth of up to 1 MHz were still
    required to use at least 75 non-overlapping hopping channels. In
    response to the *First R&O,* thirteen parties filed a Joint Petition
    for Clarification or, in the Alternative, Partial Reconsideration
    ("Joint Petition").[^47] The Joint Petition requested that the
    Commission clarify the rules adopted in the *First R&O* to specify a
    minimum of 15 hopping channels for any system that uses adaptive
    hopping techniques to avoid operating on occupied frequencies and
    limits its output power to 125 mW, regardless of hopping channel
    bandwidth.[^48]

24. In the *Further Notice*, we proposed to adopt the changes requested
    in the Joint Petition. Specifically, we proposed to allow frequency
    hopping devices in the 2.4 GHz band to use as few as 15 hops,
    irrespective of the bandwidth utilized. We proposed that a device
    using the minimum number of hops would have to limit output power to
    125 mW and also use adaptive hopping techniques to avoid
    transmitting on occupied channels, thus reducing the potential to
    interfere with others. The *Further Notice* invited comment as to
    whether use of adaptive hopping techniques should be mandatory and
    how compliance with this requirement should be determined when
    evaluating specific devices for purposes of equipment certification.
    Comment was also requested regarding alternative conditions that
    would provide the flexibility to market new types of frequency
    hopping devices while keeping interference risks at minimal levels.
    For example, we asked if the goals could be achieved by requiring
    that adaptive hopping systems use a minimum amount of bandwidth with
    a power reduction in relationship to the amount of spectrum used. We
    also asked if fewer than 15 hops could be used efficiently and
    effectively with a corresponding reduction in power.

25. The majority of the commenters support the proposal to allow
    frequency hopping systems to use as few as fifteen hopping channels
    with output power not exceeding 125 mW.[^49] The commenters
    generally agree that a reduction in maximum allowed power from 1
    Watt to 125 mW is an acceptable compromise in exchange for using
    fewer hopping channels. Proxim alone argues that the Commission has
    provided no justification to require a power reduction for systems
    using a reduced hopset.[^50] Proxim states that there is no need to
    treat the 2.4 GHz band differently than the 5.7 GHz band where 1
    Watt output power is allowed. Additionally, Proxim notes that some
    applications that would benefit from using adaptive hopping would be
    more effective with greater output power.

26. Agere and Silicon Wave support a mandatory adaptive hopping
    requirement.[^51] Agere argues that the public interest objective
    should be to maximize co-existence among devices in the 2.4 GHz
    band. Agere believes that the benefits of adaptive hopping
    techniques in minimizing or eliminating interference is reason
    enough to require the use of such techniques for systems that employ
    reduced hopsets and channel bandwidths of 1 MHz or less. Silicon
    Wave states that, although it generally believes that adaptive
    hopping implementation should be a choice made by the manufacturer,
    adaptive hopping should be required for any system that uses a
    reduced hopset. Other parties state that the proposal to require the
    use adaptive hopping techniques is overly restrictive and should not
    be adopted. For example, Texas Instruments asserts that if adaptive
    hopping were mandatory, other performance standards may also have to
    be defined, such as how quickly hopsets must change in response to
    interference or the interference threshold level at which the hopset
    must change.[^52] It submits that, because these conditions may vary
    from one system to the next, a set of performance standards that is
    beneficial to the operation of one system may be detrimental to
    another. Similarly, Apple believes that different devices should be
    allowed to implement adaptive hopping, as needed, without a
    Commission mandate.[^53]

27. Proxim objects to allowing as few as fifteen hopping channels for
    systems in the 2.4 GHz band. Proxim believes that this proposal
    could lead to frequency hopping systems that do not spread their
    energy through a wide portion of the band, and therefore increase
    interference potential to other receivers. It points to the 5.7 GHz
    band and notes that systems operating in that band use up to 60% of
    the available bandwidth.[^54] Proxim proposes that frequency hopping
    systems in the 2.4 GHz band also be required to use at least 60% of
    the available band. It contends that the 60% threshold would serve
    the needs of manufacturers while preserving the underlying sharing
    philosophy of the Part 15 rules. Ademco also proposes that a minimum
    amount of bandwidth be used. Although Ademco does support the
    proposed reduction in the minimum number of hopping channels, it
    states that the fifteen channels should be required to be spread
    over a minimum of 90% of the band.[^55] It submits that such a
    requirement would prevent any segment of the 2.4 GHz band from being
    over used.

28. We will allow frequency hopping spread spectrum systems to use as
    few as fifteen hopping channels with bandwidths up to 5 MHz and no
    minimum band occupancy requirements, provided output power is
    reduced to 125 mW. This modification of our regulations for
    frequency hopping systems will provide greater flexibility without
    significantly increasing the risk of interference to other users. In
    the *First R&O* in this proceeding, we determined that frequency
    hopping systems with bandwidths between 1 MHz and 5 MHz may operate
    in the 2.4 GHz band with a minimum of 15 hopping channels and 125 mW
    output power with minimal interference potential.[^56] Nothing in
    the record of this proceeding demonstrates that frequency hopping
    systems with bandwidths of 1 MHz or less cannot also operate
    effectively with a minimum of fifteen hopping channels with a
    similar power reduction. The reduction of maximum peak power from 1
    Watt to 125 mW will offset any increased potential for interference
    caused by use of the reduced hopset, regardless of channel
    bandwidth. In addition, we find it unnecessary to require frequency
    hopping systems to occupy a minimum percentage of the 2.4 GHz band
    as Proxim and Ademco suggest. Our primary concern for the operation
    of devices in the 2.4 GHz band is interference avoidance. Although a
    minimum bandwidth occupancy requirement may, in some cases, reduce
    the interference potential of frequency hopping systems, it is not
    the only method by which the systems can efficiently share the band.
    Indeed, such a requirement may actually negate the possibility for
    system designers to implement more efficient spectrum sharing
    techniques as they see fit. The simple, unambiguous rules we are
    adopting in this Second Report and Order will allow manufacturers
    the freedom to design an array of frequency hopping systems that
    effectively share the 2.4 GHz band.

29. We will not require frequency hopping systems that use a reduced
    hopset to employ adaptive hopping techniques. We agree with those
    parties who contend that the power reduction we are adopting for
    these devices is sufficient to mitigate any possible increase in
    interference potential due to the smaller number of hopping
    channels. Furthermore, operation pursuant to the modified rules will
    not pose a greater interference threat than systems authorized under
    our former rules.[^57] We also note that Section 15.247(h) of the
    rules permits the use of intelligent or adaptive hopping techniques
    in order to avoid transmitting on occupied frequencies.[^58] We
    believe that Section 15.247(h) provides sufficient flexibility for
    manufacturers to design products which incorporate adaptive hopping
    in circumstances where it would be beneficial. For example, the
    amended rules would permit manufacturers to build products that
    include adaptive techniques such as a product that includes both a
    digital and a frequency hopping transmitter, where the frequency
    hopping transmitter avoids or suppresses its transmissions when the
    digital transmitter is operating.

    **D. Other Issues**

30. Sirius Satellite Radio Inc. ("Sirius") filed comments and XM Radio
    Inc. ("XM") filed reply comments that address the out-of-band
    emission limits for Part 15 devices. Sirius and XM hold licenses to
    provide satellite digital audio radio service ("SDARS") in the 2310
    -- 2360 MHz band. They contend that the Commission's regulations,
    which limit out-of-band emissions from devices operating in the 2.4
    GHz band to 500 uV/m as measured at 3 meters, are insufficient to
    protect SDARS receivers from experiencing interference from Part 15
    transmitters.[^59] Sirius asserts that out-of-band emissions from
    2.4 GHz devices should be limited to 14.6 dB uV/m at 3 meters for a
    single Part 15 device and 18.6 dBuV/m at 3 meters for multiple Part
    15 devices operating within a given area.

31. The adequacy of the current out-of band emission limits applicable
    to Part 15 spread spectrum devices operating in the 2.4 GHz band is
    beyond the scope of this proceeding. We initiated this proceeding in
    1999 in an effort to facilitate continued development and deployment
    of spread spectrum technology.[^60] At no time has out-of-band
    emission limits been at issue. Hence, no record on Sirius' proposal
    has been established in the docket of this proceeding. Furthermore,
    Sirius does not provide sufficient information for the Commission or
    interested parties to evaluate the validity of its claims. For
    example, Sirius does not identify the basis of its proposed
    out-of-band emission limits, and it fails to address implementation
    or enforcement aspects of its proposal. If Sirius wishes the
    Commission to give its concerns full consideration it may file
    appropriate documentation with the Commission detailing its
    interference claims and describing what action might be appropriate
    to ameliorate such interference. However, we will not act on this
    matter herein.

    **PROCEDURAL MATTERS**

32. [Final Regulatory Flexibility Analysis]{.underline}. The Final
    Regulatory Flexibility Analysis, required by the Regulatory
    Flexibility Act, *see* 5 U.S.C. § 604, is contained in Appendix C.

    **ORDERING CLAUSES**

33. Accordingly, IT IS ORDERED that Part 2 and Part 15 of the
    Commission\'s Rules ARE AMENDED as specified in Appendix B. This
    action is taken pursuant to the authority contained in Sections
    4(i), 301, 302, 303(e), 303(f), and 303(r) of the Communications Act
    of 1934, as amended, 47 U.S.C. Sections 154(i), 301, 302, 303(e),
    303(f), and 303(r).

34. IT IS FURTHER ORDERED that the Commission\'s Consumer and
    Governmental Affairs Bureau, Reference Information Center, SHALL
    SEND a copy of this Second Report and Order, including the Final
    Regulatory Flexibility Act, to the Chief, Counsel for Advocacy of
    the Small Business Administration.

35. IT IS FURTHER ORDERED that this proceeding IS TERMINATED.

    FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

**APPENDIX A**

**Comments**

1.  Ademco Group

2.  Adtran, Inc.

3.  Agere Systems

4.  American Radio Relay League

5.  Apple Computer, Inc.

6.  Axonn, LLC

7.  Bluetooth SIG, Inc.

8.  Bret Boren

9.  Cisco Systems, Inc.

10. IEEE Project 802^TM^, Local and Metropolitan Area Networks Standards
    Committee

11. Intel Corporation

12. Intersil Corporation

13. Joint Comments of 3Com Corporation; Clearwire Technologies, Inc.;
    InterWAVE Communications, Inc.; LinCom Wireless, Inc.; Symbol
    Technologies, Inc.; VOCOLLECT, INC.

14. Peter Nurse, OFDM Forum

15. Proxim, Inc.

16. Silicon Wave, Inc.

17. Sirius Satellite Radio Inc.

18. Texas Instruments Incorporated

19. The Wireless Communications Association International, Inc.

20. The Wireless Ethernet Compatibility Alliance

21. Western Multiplex Corp.

22. WIDCOMM

23. Wi-LAN, Inc.

**Reply Comments**

1.  Agere Systems

2.  Alvarion Ltd.

3.  Apple Computer, Inc.

4.  Axonn, LLC

5.  Information Technology Industry Council (ITI)

6.  Intersil Corporation

7.  Joint Reply Comments of 3Com Corporation; Clearwire Technologies,
    Inc.; InterWAVE Communications, Inc.; LinCom Wireless, Inc.; Symbol
    Technologies, Inc.; and VOCOLLECT, INC.

8.  Proxim, Inc.

9.  Silicon Wave, Inc.

10. Telecommunications Industries Association (TIA)

11. Texas Instruments Incorporated

12. Wireless Communications Association International, Inc.

13. XM Radio, Inc.

**APPENDIX B**

For the reasons set forth above, Parts 2 and 15 of Title 47 of the Code
of Federal Regulations is amended as follows:

PART 2 -- FREQUENCY ALLOCATIONS AND RADIO TREATY MATTERS; GENERAL RULES
AND REGULATIONS

1\. The authority citation for Part 2 continues to read as follows:

Authority: 47 U.S.C. 154, 302a, 303, and 336, unless otherwise noted.

2\. Section 2.1033 is amended by removing paragraph (b)(10) and
re-designating paragraphs (b)(11) and (b)(12) as (b)(10) and (b)(11),
respectively.

PART 15 -- RADIO FREQEUNCY DEVICES

3\. The authority citation for Part 15 continues to read as follows:

Authority: 47 U.S.C. 154, 302, 303, 304, 307, and 544A.

4\. Section 15.247 is amended as by revising paragraphs (a), (a)(1)(ii),
(a)(1)(iii), (a)(2), (b)(1), (c), and (d); re-designating paragraphs
(b)(3) and (b)(4) as (b)(4) and (b)(5), respectively; adding a new
paragraph (b)(3); re-designating paragraph (e) as reserved; and revising
paragraph (f).

Section 15.247 **Operation within the bands 902-928 MHz, 2400-2483.5
MHz, and 5725-5850 MHz.**

\(a\) Operation under the provisions of this section is limited to
frequency hopping and digitally modulated intentional radiators that
comply with the following provisions:

\(1\) \* \* \*

\(i\) \* \* \*

\(ii\) Frequency hopping systems operating in the 5725-5850 MHz band
shall use at least 75 hopping frequencies. The maximum 20 dB bandwidth
of the hopping channel is 1 MHz. The average time of occupancy on any
frequency shall not be greater than 0.4 seconds within a 30 second
period.

\(iii\) Frequency hopping systems in the 2400 - 2483.5 MHz band shall
use at least 15 non-overlapping channels. The average time of occupancy
on any channel shall not be greater than 0.4 seconds within a period of
0.4 seconds multiplied by the number of hopping channels employed.
Frequency hopping systems which use fewer than 75 hopping frequencies
may employ intelligent hopping techniques to avoid interference to other
transmissions. Frequency hopping systems may avoid or suppress
transmissions on a particular hopping frequency provided that a minimum
of 15 non-overlapping channels are used.

\(2\) Systems using digital modulation techniques may operate in the
902 - 928 MHz, 2400 - 2483.5 MHz, and 5725 - 5850 MHz bands. The minimum
6 dB bandwidth shall be at least 500 kHz.

\(b\) \* \* \*

\(1\) For frequency hopping systems in the 2400 -2483.5 MHz band
employing at least 75 hopping channels, and all frequency hopping
systems in the 5725-5850 MHz band: 1 Watt. For all other frequency
hopping systems in the 2400 - 2483.5 band: 0.125 Watt

\(2\) \* \* \*

\(3\) For systems using digital modulation in the 902 - 928 MHz, 2400 -
2483.5 MHz, and 5725 - 5850 MHz bands: 1 Watt.

\(4\) Except as shown in paragraphs (b)(4)(i), (ii), and (iii) of this
section, if transmitting antennas of directional gain greater than 6 dBi
are used, the peak output power from the intentional radiator shall be
reduced below the stated values in paragraphs (b)(1), (b)(2), and (b)(3)
of this section, as appropriate, by the amount in dB that the
directional gain of the antenna exceeds 6 dBi.

\(i\) Systems operating in the 2400-2483.5 MHz band that are used
exclusively for fixed, point-to-point operations may employ transmitting
antennas with directional gain greater than 6 dBi provided the maximum
peak output power of the intentional radiator is reduced by 1 dB for
every 3 dB that the directional gain of the antenna exceeds 6 dBi.

\(ii\) Systems operating in the 5725-5850 MHz band that are used
exclusively for fixed, point-to-point operations may employ transmitting
antennas with directional gain greater than 6 dBi without any
corresponding reduction in transmitter peak output power.

\(iii\) Fixed, point-to-point operation, as used in paragraphs (b)(4)(i)
and (b)(4)(ii) of this section, excludes the use of point-to-multipoint
systems, omnidirectional applications, and multiple co-located
intentional radiators transmitting the same information. The operator of
the spread spectrum or digitally modulated intentional radiator or, if
the equipment is professionally installed, the installer is responsible
for ensuring that the system is used exclusively for fixed,
point-to-point operations. The instruction manual furnished with the
intentional radiator shall contain language in the installation
instructions informing the operator and the installer of this
responsibility.

\(5\) Systems operating under the provisions of this section shall be
operated in a manner that ensures that the public is not exposed to
radio frequency energy levels in excess of the Commission\'s guidelines.
*See* § 1.1307(b)(1) of this Chapter.

\(c\) In any 100 kHz bandwidth outside the frequency band in which the
spread spectrum or digitally modulated intentional radiator is
operating, the radio frequency power than is produced by the intentional
radiator shall be at least 20 dB below that in the 100 kHz bandwidth
within the band that contains the highest level of the desired power,
based on either an RF conducted or a radiated measurement. Attenuation
below the general limits specified in §15.209(a) is not required. In
addition, radiated emissions which fall in the restricted bands, as
defined in § 15.205(a), must also comply with the radiated emission
limits specified in § 15.209(a) (see § 15.205(c)).

\(d\) For digitally modulated systems, the peak power spectral density
conducted from the intentional radiator to the antenna shall not be
greater than 8 dBm in any 3 kHz band during any time interval of
continuous transmission.

\(e\) Reserved

\(f\) For the purposes of this section, hybrid systems are those that
employ a combination of both frequency hopping and digital modulation
techniques. The frequency hopping operation of the hybrid system, with
the direct sequence or digital modulation operation turned off, shall
have an average time of occupancy on any frequency not to exceed 0.4
seconds within a time period in seconds equal to the number of hopping
frequencies employed multiplied by 0.4. The digital modulation operation
of the hybrid system, with the frequency hopping operation turned off,
shall comply with the power density requirements of paragraph (d) of
this section.

(g) \* \* \*

(h) \* \* \*

> NOTE: \* \* \*

**APPENDIX C**

**Final Regulatory Flexibility Analysis**

As required by the Regulatory Flexibility Act (\"RFA\"),[^61] an Initial
Regulatory Flexibility Analysis (\"IRFA\") was incorporated in the
*Further Notice of Proposed Rule Making* ("*Further Notice*") in this
docket, ET Docket 99-231.[^62] The Commission sought written public
comment on the proposals in the *Further Notice*, including comment on
the IRFA. As described more fully below, we find that the rules we adopt
in the Second Report and Order will not have a significant economic
impact on a substantial number of small entities.[^63] We have
nonetheless provided this Final Regulatory Flexibility Analysis
(\"FRFA\") to provide a fuller record in this proceeding. This FRFA
conforms to the RFA.[^64]

**A. Need for and Objective of the Rules.**

The Commission's spread spectrum rules have been a tremendous success. A
wide variety of devices have been introduced under these rules for
business and consumer use including cordless telephones and computer
local area networks. Moreover, the past few years have witnessed the
development of industry standards, such as IEEE 802.11b, Bluetooth, and
Home RF, that promise to greatly expand the number and variety of
devices that will operate in the 2.4 GHz band. We anticipate the
introduction of wireless headsets and computer connections for cellular
and PCS phones, wireless computer peripherals such as printers and
keyboards, and a host of new wireless Internet appliances that will use
this band.

The rules adopted in this Second Report and Order provide for the
introduction of new digital transmission technologies, eliminate
unnecessary regulations for spread spectrum systems, and improve
spectrum sharing by unlicensed devices operating in the 915 MHz (902 -
928 MHz), 2.4 GHz (2400 - 2483.5 MHz), and 5.7 GHz (5725 -- 5850 MHz)
bands. Specifically, this Second Report and Order revises Section 15.247
of the Commission's rules to allow new digital transmission technologies
and direct sequence spread spectrum systems to operate under the same
rules in the 915 MHz, 2.4 GHz, and 5.7 GHz bands.[^65] We also remove
the requirement that direct sequence spread spectrum systems must
demonstrate at least 10 dB of processing gain. Finally, this Second
Report and Order modifies the rules for frequency hopping spread
spectrum systems operating in the 2.4 GHz band to reduce the amount of
spectrum that must be used with certain types of operation. We take
these actions to facilitate the continued development and deployment of
new wireless devices for businesses and consumers.

**B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA.**

Only the Information Technology Industry Council ("ITI") filed comments
in response to the IRFA.[^66] ITI supports the Commission's proposal.
They state that the proposals contained in the *Further Notice of
Proposed Rule Making* will significantly improve sharing of the spectrum
by wireless devices operating in the 2.4 GHz band.

ITI supports the proposal to modify Section 15.247 of the Commission's
rules governing frequency hopping spread spectrum devices in the 2.4 GHz
band to allow as few as fifteen hopping channels. However, ITI requests
that the Commission consider further modifications to permit even fewer
than fifteen channels. It states that wireless devices using less than
fifteen channels can be designed not to interfere with other equipment.
It further states that adopting a minimum limit of hopping channels is
contrary to the Commission's intent to improve flexibility for
manufacturers an does not contribute to additional clarifying
rulemakings.

ITI also supports the Commission's other proposals. Specifically, ITI
urges the Commission to modify its rules to accommodate new digital
modulation systems in the 915 MHz, 2.4 GHz, and 5.7 GHz bands. It states
that the changes will provide manufacturers with flexibility to design
non-interfering products for these bands without the need for frequent
rule changes to address each new technology. Finally, ITI supports the
proposal to remove the requirement that direct sequence spread spectrum
systems must demonstrate at least 10 dB of processing gain. It states
that the requirement is no longer necessary since manufacturers have an
incentive to include processing gains to ensure that their devices
operate properly when located near other radio frequency devices.

**C. Description and Estimate of the Number of Small Entities to Which
the Rules Will Apply.**

The RFA directs agencies to provide a description of, and, where
feasible, an estimate of the number of small entities that may be
affected by the rules adopted herein.[^67] The RFA generally defines the
term \"small entity\" as having the same meaning as the terms \"small
business,\" \"small organization,\" and \"small governmental
jurisdictions.\"[^68] In addition, the term \"small business\" has the
same meaning as the term \"small business concern\" under the Small
Business Act.[^69] A \"small business concern\" is one that: (1) is
independently owned and operated; (2) is not dominant in its field of
operation; and (3) meets any additional criteria established by the
Small Business Administration (\"SBA\").[^70]

The Commission has not developed a definition of small entities
specifically directed toward manufacturers of unlicensed communications
devices. Therefore, we will utilize the SBA definition applicable to
manufacturers of Radio and Television Broadcasting and Communications
Equipment. According to the SBA regulations, unlicensed transmitter
manufacturers must have 750 or fewer employees in order to qualify as a
small business concern.[^71] Census Bureau data indicates that there are
858 U.S. companies that manufacture radio and television broadcasting
and communications equipment, and that 778 of these firms have fewer
than 750 employees and would be classified as small entities.[^72] This
action will not have a negative impact on small entities that
manufacture unlicensed spread spectrum devices.

According to SBA regulations, an electronic computer manufacturer must
have 1,000 or fewer employees in order to qualify as a small
entity.[^73] Census Bureau data indicates that there are 716 firms that
manufacture electronic computers. Of those, 659 have fewer than 500
employees and qualify as small entities.[^74] The remaining 57 firms
have 500 or more employees; however, we unable to determine how many of
those have 1,000 or fewer employees and therefore also qualify as small
entities under the SBA definition.

According to SBA regulations, a computer terminal manufacturer must have
1,000 or fewer employees in order to qualify as a small entity.[^75]
Census Bureau data indicates that there are 757 firms that manufacture
computer terminals. Of those, 162 have fewer than 500 employees and
qualify as small entities.[^76] The remaining 11 firms have 500 or more
employees; however, we unable to determine how many of those have 1,000
or fewer employees and therefore also qualify as small entities under
the SBA definition.

According to SBA regulations, a computer peripheral equipment
manufacturer must have 1,000 or fewer employees in order to qualify as a
small entity.[^77] Census Bureau data indicates that there are 757 firms
that manufacture computer terminal equipment. Of those, 701 have fewer
than 500 employees and qualify as small entities.[^78] The remaining 56
firms have 500 or more employees; however, we unable to determine how
many of those have 1,000 or fewer employees and therefore also qualify
as small entities under the SBA definition.

According to SBA regulations, a manufacturer of household appliances
must have 500 or fewer employees in order to qualify as a small
entity.[^79] Census bureau indicates that there are 55 firms that
manufacture household equipment in the \"catch all\" category for such
data. Of those, 42 have fewer than 500 employees and qualify as small
entities.[^80] The remaining 13 firms have 500 or more employees, and
therefore, unless one or more has exactly 500 employees do not qualify
as small entities under the SBA definition.

**D. Description of Projected Reporting, Recordkeeping and Other
Compliance Requirements.**

Part 15 transmitters are already required to be authorized under the
Commission\'s certification procedure as a prerequisite to marketing and
importation. See 47 C.F.R. §§ 15.101, 15.201, 15.305, and 15.405. The
new regulations will add permissible methods of operation for frequency
hopping spread spectrum systems and permit systems that use digital
modulation techniques to operate in the bands formerly reserved for
spread spectrum operation. No new reporting or recordkeeping
requirements will be required for the manufacturers of frequency hopping
spread spectrum devices or systems using digital modulation.

This Second Report and Order removes the requirement that direct
sequence spread spectrum systems exhibit a minimum 10 db of processing
gain. Therefore, manufacturers will no longer be required to test
products and submit confirmation of compliance with this regulation.

**E. Steps Taken To Minimize Significant Economic Impact on Small
Entities and Significant Alternatives Considered.**

The rule modifications made in this Second Report and Order will
facilitate the continued development and deployment of new wireless
devices for business and consumers. These actions will benefit
manufacturers of digitally modulated unlicensed devices and direct
sequence and frequency hopping spread spectrum devices, including small
entities.

In the *Further Notice*, we proposed to amend Section 15.247 of the
Commission's rules to provide for the use of systems which use new
digital modulation technologies. Specifically, we proposed to allow
these devices to operate in the 915 MHz, 2.4 GHz, and 5.7 GHz bands
under the same technical requirement as spread spectrum systems. We
invited comment on whether these technologies should be allowed to
operate at the same power levels as direct sequence spread spectrum
systems, specifically 1 Watt maximum output power with a maximum power
spectral density of 8 dBm per 3 kHz. We also noted that the proposals
for new digital devices are similar to the rules for Unlicensed National
Information Infrastructure (U-NII) devices contained in Subpart E of
Part 15, and sought comment on whether these new digital technologies
could be accommodated under those rules.

Based on analysis of the record, including comments from small business
concerns, we have concluded that systems using digital modulation
technologies may operate in the 915 MHz, 2.4 GHz, and 5.7 GHz bands
under the same rules as direct sequence spread spectrum devices without
posing a risk of creating additional interference. We declined to
regulate these devices under an alternative set of rules.

The *Further Notice* also proposed to remove the requirement that direct
sequence spread spectrum systems demonstrate a minimum of 10 dB of
processing gain. One alternative the Commission considered was to
decline to remove the requirement. However, we determined that retaining
the requirement would unnecessarily hinder the introduction of new
non-interfering devices in the bands.

The *First Report and Order* (\"*First R&O*\") in this proceeding
amended the spread spectrum rules to allow frequency hopping spread
spectrum systems in the 2.4 GHz band to use bandwidths greater than 1
MHz but less than 5 MHz at a reduced power output of up to 125 mW.[^81]
These wideband frequency hopping systems are allowed to use as few as
fifteen non-overlapping channels provided that the total span of hopping
channels is at least 75 MHz. Frequency hopping systems with a bandwidth
of up to 1 MHz were still required to use at least 75 non-overlapping
hopping channels. In response to the *First R&O,* thirteen parties filed
a Joint Petition for Clarification or, in the Alternative, Partial
Reconsideration ("Joint Petition").[^82] The Joint Petition requested
that the Commission clarify the rules adopted in the *First R&O* to
specify a minimum of 15 hopping channels for any system that uses
adaptive hopping techniques to avoid operating on occupied frequencies
and limits its output power to 125 mW, regardless of hopping channel
bandwidth.[^83] In the *Further Notice*, we proposed to adopt the
changes requested in the Joint Petition.

The majority of the commenters support the proposal to allow frequency
hopping systems to use as few as fifteen hopping channels with output
power not exceeding 125 mW.[^84] The commenters generally agree that a
reduction in maximum allowed power from 1 Watt to 125 mW is an
acceptable compromise in exchange for using fewer hopping channels.

Proxim objects to allowing as few as fifteen hopping channels for
systems in the 2.4 GHz band. Proxim believes that this proposal could
lead to frequency hopping systems that do not spread their energy
through a wide portion of the band, and therefore increase interference
potential to other receivers. It points to the 5.7 GHz band and notes
that systems operating in that band use up to 60% of the available
bandwidth.[^85] Proxim proposes that frequency hopping systems in the
2.4 GHz band also be required to use at least 60% of the available band.
It contends that the 60% threshold would serve the needs of
manufacturers while preserving the underlying sharing philosophy of the
Part 15 rules. Ademco also proposes that a minimum amount of bandwidth
be used. Although Ademco does support the proposed reduction in the
minimum number of hopping channels, it states that the fifteen channels
should be required to be spread over a minimum of 90% of the band.[^86]
It submits that such a requirement would prevent any segment of the 2.4
GHz band from being over used.

We will allow frequency hopping spread spectrum systems to use as few as
fifteen hopping channels with bandwidths up to 5 MHz and no minimum band
occupancy requirements, provided output power is reduced to 125 mW. This
modification of our regulations for frequency hopping systems will
provide greater flexibility without significantly increasing the risk of
interference to other users. The reduction of maximum peak power from 1
Watt to 125 mW will offset any increased potential for interference
caused by use of the reduced hopset, regardless of channel bandwidth. In
addition, we find it unnecessary to require frequency hopping systems to
occupy a minimum percentage of the 2.4 GHz band as Proxim and Ademco
suggest. Our primarily concern for the operation of devices in the 2.4
GHz band is interference avoidance. Although a minimum bandwidth
occupancy requirement may, in some cases, reduce the interference
potential of frequency hopping systems, it is not the only method by
which the systems can efficiently share the band. Indeed, such a
requirement may actually negate the possibility for system designers to
implement more efficient spectrum sharing techniques as they see fit.
The simple, unambiguous rules we are adopting in this Second Report and
Order will allow manufacturers the freedom to design an array of
frequency hopping systems that effectively share the 2.4 GHz band.

We will not require frequency hopping systems that use a reduced hopset
to employ adaptive hopping techniques. We agree with those parties who
contend that the power reduction we are adopting for these devices is
sufficient to mitigate any possible increase in interference potential
due to the smaller number of hopping channels. Furthermore, operation
pursuant to the modified rules will not pose a greater interference
threat than systems already authorized under our rules.[^87] We also
note that Section 15.247(h) of the rules permits the use of intelligent
or adaptive hopping techniques in order to avoid transmitting on
occupied frequencies.[^88] We believe that Section 15.247(h) provides
sufficient flexibility for manufacturers to design products which
incorporate adaptive hopping in circumstances where it would be
beneficial. For example, in accordance with the rules, manufacturers may
design devices that incorporate both a frequency hopping spread spectrum
transmitter and a digital modulation transmitter. Each transmitter must
individually comply with applicable rules. However, the frequency
hopping transmitter may adapt its hopset in order to avoid causing
interference to the digital modulation transmitter.

**Report to Congress.** The Commission will send a copy of the Second
Report and Order, including this FRFA, in a report to Congress pursuant
to the Congressional Review Act.[^89] In addition, the Commission will
send a copy of the Second Report and Order, including the FRFA, to the
Chief Counsel for Advocacy of the SBA. A copy of the Second Report and
Order and FRFA (or summaries thereof) will also be published in the
Federal Register.[^90]

**SEPARATE STATEMENT OF\
COMMISSIONER KEVIN J . MARTIN**

*Re: Amendment of Part 15 of the Commission's Rules Regarding Spread
Spectrum Devices*, Second Report and Order, ET Docket No. 99-231

I am pleased to join in approving this item, which amends our Part 15
rules to enable the introduction of new technologies and allow for more
flexibility in design for systems operating in the unlicensed bands.
Among other things, this item allows new digital transmission
technologies to operate under the current rules for spread spectrum
systems and provides new flexibility for frequency hopping spread
spectrum systems in the 2.4 GHz band. These actions will further promote
the already impressive development of devices and services in the
unlicensed bands.

Increased spectral efficiency -- particularly through spectrum sharing
-- is becoming more and more important as we face ever increasing
demands for spectrum. I have thus encouraged the Commission to move
toward policies that enable and encourage sharing. Our Part 15 rules
have been a huge success in that regard, allowing applications such as
Bluetooth and 802.11 to flourish by sharing spectrum.

Today's item continues this trend and enables new and better means of
spectrum sharing in the unlicensed bands. For example, the item permits
the use of as few as fifteen hopping channels for frequency hopping
spread spectrum systems, allowing these systems to better avoid occupied
channels and thereby evade interference. I am optimistic that this
change and the other modifications we make in this item will encourage
even greater sharing and result in a more diverse set of products to
operate in the unlicensed bands.

[^1]: 47 C.F.R. § 15.247

[^2]: 47 C.F.R § 15.5.

[^3]: *See* 47 C.F.R. § 2.1(c).

[^4]: *Id.*

[^5]: Frequency hopping systems that use fewer than 75 hopping channels
    are limited to 125 mW output power. *See* 47 C.F.R. § 15.247(b).

[^6]: *Further Notice of Proposed Rule Making and Order, ET Docket
    99-231*, 16 FCC Rcd. 10036 (2001).

[^7]: *Id.* at paragraph 13.

[^8]: These operating standards provide manufacturers with guidance for
    developing spread spectrum devices for the 2.4 GHz band. The IEEE
    802.11b standard applies to direct sequence devices, while the
    Bluetooth and Home RF standards apply to frequency hopping devices.

[^9]: *First Report and Order, GEN Docket 81-413*, 1 FCC 2^nd^ 419
    (1985), 58 RR 2^nd^ 251 (1985).

[^10]: The Commission defines a direct sequence system as a spread
    spectrum system in which the carrier has been modulated by a high
    speed spreading code and an information data stream. The high speed
    code sequence dominates the "modulating function" and is the direct
    cause of the wide spreading of the transmitted signal. *See*
    47 C.F.R. § 2.1(c).

[^11]: *See* 47 C.F.R. § 15.247(b)(1) and (d).

[^12]: *See First Report and Order* in ET Docket 99-231, 15 FCC Rcd
    16244(2000).

[^13]: *See* 47 C.F.R. § 15.247(b)(3).

[^14]: *See* 47 C.F.R. Subpart E -- Unlicensed National Information
    Infrastructure Devices. This rule section provides for the operation
    of intentional radiators which use wideband digital modulation
    techniques in the 5.15 - 5.35 GHz and 5.725 -- 5.825 GHz bands.
    U-NII devices operating in the lower frequency bands are restricted
    to output powers of between 50 mW to 250 mW. Devices operating in
    the 5.725 -5.825 GHz U-NII band are allowed 1 Watt output power, the
    same output power allowed for spread spectrum devices in the 5.725
    -- 5.850 GHz band. However, digital systems operating under the
    U-NII rules at the full 1 Watt are required to have a wider
    bandwidth than a spread spectrum system operating at 1 Watt. *See*
    47 C.F.R. § 15.407(a)(3).

[^15]: *See, e.g.,* comments of Proxim, Inc. and Wi-LAN, Inc., and reply
    comments of Information Technology Industries Association.

[^16]: *See, e.g.*, comments of Wi-LAN, Inc., Information Technology
    Council, and Proxim, Inc.

[^17]: Wi-LAN, Inc. comments at pages 2-4.

[^18]: *See* Joint Comments at page 3.

[^19]: Joint Commenters at page 4.

[^20]: *See* ITI reply comments.

[^21]: *See* Proxim reply comments at pages 5-7.

[^22]: *Id*. at page 6.

[^23]: WCA comments at page 2.

[^24]: *See* IEEE 802 comments at page 6.

[^25]: *See, e.g.*, comments of Adtran, Inc., Intersil Corporation, and
    The Wireless Communications Association International, Inc.

[^26]: *See* Agere comments at page 8.

[^27]: *Id*.

[^28]: Intersil comments at page 6.

[^29]: *See* Electromagnetic compatibility and Radio spectrum Matters
    (ERM); Wideband Transmission systems; Data transmission equipment in
    the 2,4 GHz ISM band and using spread spectrum modulation
    techniques; Part 1: Technical characteristics and test conditions,
    ETSI EN 300 328-1, V1.2.2.

[^30]: "Digital modulation" in the context of 47 C.F.R. §15.247 will
    have the same meaning as defined in 47 C.F.R. §15.403(b).

[^31]: *See* 47 C.F.R. § 15.247(b)(4).

[^32]: Intersil comments at page 5.

[^33]: *See* Apple comments at page 7, Silicon Wave comments at page 9,
    Intel comments at page 3.

[^34]: *See supra* note 13 on the U-NII requirements.

[^35]: *See* 47 C.F.R. § 15.247(e).

[^36]: *See Further Notice* at paragraph 22.

[^37]: *See* Apple comments at page 9.

[^38]: *See* Joint Comments at page 5.

[^39]: *See* WCA at page 3.

[^40]: *See* Western Multiplex at page 1.

[^41]: *See* Ademco at page 2.

[^42]: *See* 47 C.F.R. § 15.247(e)(2).

[^43]: *See* Ademco at page 2.

[^44]: *See* Agere at paras 31-32.

[^45]: *See* ARRL at page 4.

[^46]: *First Report and Order* in ET Docket 99-231, 15 FCC Rcd 16244
    (2000).

[^47]: *Joint Petition For Clarification or, in the Alternative, Partial
    Reconsideration*, submitted on October 25, 2000, by 3Comm, Apple
    Computer, Cisco Systems, Dell Computer, IBM, Intel Corporation,
    Intersil, Lucent Technologies, Microsoft, Nokia Inc., Silicon Wave,
    Toshiba America Information Systems, and Texas Instruments.

[^48]: Adaptive hopping is accomplished by the incorporation of
    intelligence within a frequency hopping spread spectrum system that
    permits the system to recognize other users within the band so that
    it individually and independently chooses and adapts its hopset to
    avoid occupied channels.

[^49]: *See, e.g.,* comments of Adtran, Inc.; The Wireless
    Communications Association International; Silicon Wave, Inc.;
    Wi-LAN, Inc.; WIDCOMM; Agere; Intel Corporation; Bluetooth SIG;
    Intel Corporation; and Apple Computers. *See also* reply comments of
    Telecommunications Industry Association.

[^50]: Proxim comments at page 5.

[^51]: *See*, *generally*, Agere comments and reply comments and Silicon
    Wave comments at footnote 3.

[^52]: Texas Instruments comments at page 4.

[^53]: *See* Apple comments at page 7.

[^54]: 125 MHz of spectrum is available at 5.7 GHz. A system using
    maximum a hopping channel bandwidth of 1 MHz would be required to
    use 75 MHz, or 60%, of the available spectrum.

[^55]: *See* Ademco comments at page 1.

[^56]: *See First Report and Order* at paragraph 15.

[^57]: *See* 47 C.F.R. § 15.247(a)(1)(iii). The rules allowed frequency
    hopping systems to use as few as fifteen hopping channels provided
    the total span of hopping channels was at least 75 MHz. These
    systems were not required to incorporate adaptive hopping
    techniques.

[^58]: 47 C.F.R. § 15.247(h).

[^59]: *See* 47 C.F.R. §15.209.

[^60]: *See Notice of Proposed Rule Making*, ET Docket 99-231, 14 FCC
    Rcd 13046 (1999).

[^61]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 - 612, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857
    (1996).

[^62]: *See* ET Docket 99-231, FCC 01-158, 66 Fed. Reg. 31585 (2001).

[^63]: Thus, we could certify that an analysis is not required. *See* 5
    U.S.C. § 605(b).

[^64]: *See* 5 U.S.C. § 604.

[^65]: 47 C.F.R. § 15.247

[^66]: *See* Information Technology Industry Council comments.

[^67]: 5 U.S.C. § 604(a)(3).

[^68]: 5 U.S.C. § 601(6).

[^69]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    \"small-business concern\" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies \"unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such term which are appropriate to the activities of
    the agency and publishes such definition(s) in the Federal
    Register.\"

[^70]: 15 U.S.C. § 632.

[^71]: *See* 13 C.F.R. § 121.201, (NAICS) Code 334220.

[^72]: *See* U.S. Dept. of Commerce, *1992 Census of Transportation,
    Communications and Utilities* (issued May 1995), NAICS Code 334220.

[^73]: 13 C.F.R. 121.201, NAICS Code 334111.

[^74]: U.S. Small Business Administration 1995 Economic Census Industry
    and Enterprise Report, Table 3, NAICS Code 334111. (Bureau of the
    Census data adapted by the Office of Advocacy of the U.S. Small
    Business Administration).

[^75]: 13 C.F.R. 121.201, NAICS Code 334111.

[^76]: U.S. Small Business Administration 1995 Economic Census Industry
    and Enterprise Report, Table 3, NAICS Code 334111. (Bureau of the
    Census data adapted by the Office of Advocacy of the U.S. Small
    Business Administration).

[^77]: 13 C.F.R. 121.201, NAIC Code 334119.

[^78]: U.S. Small Business Administration 1995 Economic Census Industry
    and Enterprise Report, Table 3, NAICS Code 334119. (Bureau of the
    Census data adapted by the Office of Advocacy of the U.S. Small
    Business Administration).

[^79]: 13 C.F.R. 121.201, NAICS Code 333298.

[^80]: U.S. Small Business Administration 1995 Economic Census Industry
    and Enterprise Report, Table 3, NAICS 333298 (Bureau of the Census
    data adapted by the Office of Advocacy of the U.S. Small Business
    Administration).

[^81]: *First Report and Order* in ET Docket 99-231, 15 FCC Rcd 16244
    (2000).

[^82]: *Joint Petition For Clarification or, in the Alternative, Partial
    Reconsideration*, submitted on October 25, 2000, by 3Comm, Apple
    Computer, Cisco Systems, Dell Computer, IBM, Intel Corporation,
    Intersil, Lucent Technologies, Microsoft, Nokia Inc., Silicon Wave,
    Toshiba America Information Systems, and Texas Instruments.

[^83]: Adaptive hopping is accomplished by the incorporation of
    intelligence within a frequency hopping spread spectrum system that
    permits the system to recognize other users within the band so that
    it individually and independently chooses and adapts its hopset to
    avoid occupied channels.

[^84]: *See, e.g.,* comments of Adtran, Inc.; The Wireless
    Communications Association International; Silicon Wave, Inc.;
    Wi-LAN, Inc.; WIDCOMM; Agere; Intel Corporation; Bluetooth SIG;
    Intel Corporation; and Apple Computers. *See also* reply comments of
    Telecommunications Industry Association.

[^85]: 125 MHz of spectrum is available at 5.7 GHz. A system using
    maximum a hopping channel bandwidth of 1 MHz would be required to
    use 75 MHz, or 60%, of the available spectrum.

[^86]: *See* Ademco comments at page 1.

[^87]: *See* 47 C.F.R. § 15.247(a)(1)(iii). The rules allow frequency
    hopping systems to use as few as fifteen hopping channels provided
    the total span of hopping channels is at least 75 MHz. These systems
    are not required to incorporate adaptive hopping techniques.

[^88]: 47 C.F.R. § 15.247(h).

[^89]: *See* 5 U.S.C. § 801(a)(1)(A).

[^90]: *See* 5 U.S.C. § 605(b).