Amazon and Others Pioneer the Future of Commercial Drone Use
On April 11th of this year the FAA finally granted Amazon a two-year permit for the commercial operation of its newest Prime Air delivery drone as it looks to continue conducting tests in the US. Drones have burst into the global zeitgeist over the last few years due to their popularity among hobbyists and the futuristic applications that companies like Google ascribe to them. But these drones have capacities far beyond mere cool factor and instantly gratifying Amazon impulse buys.
Companies all over the world are expanding how we think about drones, from what they’re called (Unmanned Aircraft System, or UAS, is the industry preferred term) to what we use them for. The emergence of UAS as a commercial asset has the potential to completely alter the way the world transports physical goods as well as services infrastructure within supply chains. New applications and industries ripe for drone disruption are rapidly being identified but regulatory hurdles and barriers to adoption still remain.
Last Mile Delivery
Amazon’s public spat with the FAA highlights a supply chain issue that has been gaining more attention in recent years: last mile delivery. As e-commerce continues to displace brick and mortar retail and necessitate direct-to-consumer delivery, the market for last mile delivery is predicted to grow at 7% CAGR through 2020. This growth has already exacerbated issues in an increasingly fragmented logistics landscape, causing retailers’ delivery costs to rise. In a recent study conducted by Barclays, 30% of retailers reported that increased online purchases have had a ‘slightly’ to ‘very’ detrimental affect on their delivery costs – enter the promise of delivery by drone, with the capacity to make last mile delivery faster, cheaper, and less wasteful.
The declining state of the United State’s industrial infrastructure has drawn a lot of attention in recent weeks as the US government continues to put off passing a spending bill to address the situation. One significant challenge in combating this decline has been keeping up with field service and inspection. Currently done by skilled professionals, these jobs are often lengthy, costly, and dangerous. Unmanned drones have the capability to perform these jobs faster, more accurately, and at a fraction of the cost across applications spanning from oil pipelines to power lines to wind turbines.
Take America’s bridges for example—the United States has 600,000 that need to be inspected once every 24 months. If inspectors were allowed to use drones, these inspections would drop from an average time of several weeks to 2-3 days and costs would fall from $10,000 per inspection to $1,000. By reducing the time, cost and hazards of infrastructure inspections, UAS promise significant reductions to the total cost of field service and allow those savings to be made available instead for infrastructure upgrades and improvements. A better US infrastructure means that your supply chain is more likely to run smoothly with fewer surprises and reduced delays across the map.
FAA Regulation Lags Behind International Peers
Given the significant upside of drone adoption, why haven’t more companies adopted the technology? The answer hinges on the complex and cautious regulatory environment faced by hopeful civilian commercial drone operators in the United States, the most congested and highly regulated airspace in the world.
Currently the FAA bans all commercial operation of UAS in the United States. Companies wishing to test commercial drone capabilities must file a petition for an exemption, called Section 333 exemptions, to the FAA’s ban—a process that can take anywhere from six months to a year. Since 2012 the FAA has been under increasing pressure to implement a comprehensive and streamlined pathway for companies wishing to obtain commercial drone operating licenses. The agency is already significantly behind on its September 2015 deadline, set by Congress, to draw up rules and standards to regulate all drone flight in the United States.
Amazon brought attention to the sluggish nature of this process while waiting for the FAA to approve its Section 333 petition. The company did not mince words as it repeatedly criticized the regulatory agency’s lack of “impetus” in front of Congress. During a meeting with members of the Senate Subcommittee on Aviation, Operations, Safety and Security, Paul Misener, Amazon’s Vice President of Global Public Policy, lamented that, “Although the United States is catching up in permitting current commercial UAS testing, the United States remains behind in planning for future commercial UAS operations.”
Mr. Misener has a point—to date, the FAA has only issued 214 ‘Section 333 exemptions’, authorizing commercial drone use, while over 1,700 applications remain pending. Compare that to France, one of the most liberal countries when it comes to drone regulation, where 1,600 different companies have obtained a commercial drone operation license using the country’s standardized regulatory pathway. Furthermore, the permissions the FAA grants with its Section 333 exemptions are very limited by comparison. In France commercial drones can be operated distances up to 9 miles, out of line of sight of the operator, as long as video cameras are used for guidance. In the US, under the FAA’s current regulations, commercial drones can only operate below 400 feet, 5 miles away from any airport, and within the line-of-sight of the operator with a private pilot certificate.
But criticisms of the FAA are not falling on deaf ears. On February 15th of this year the FAA released a notice of proposed rulemaking (NPRM) for small UAS that included expanding the maximum operating altitude to 500 feet, setting a speed limit at 100 mph and requiring the operator to pass only a newly-conceived drone certification test instead of holding a full private pilot license. Though the new NPRM doesn’t go as far as some commercial operators would have preferred, like expanding operation of commercial drones to outside line of sight, it does show the agency’s commitment to addressing the needs of commercial operators.
Deliberate FAA Regulation May Cause the US to Miss Out On The Global Drone Wave
While the FAA’s reluctance to pass swift drone regulation will continue to frustrate companies looking to cash in on the rapidly growing market, the regulatory agency’s pace should be seen as deliberate and not lethargic. At a recent conference attended by Elementum on the future of unmanned aircraft, Ted Ellett, former Chief Counsel for the FAA, emphasized that, “FAA culture is safety at all cost,” and for good reason. US airspace is the safest in the world—the FAA must ensure that integration of commercial UAS operation does not put that in jeopardy.
The lingering question is whether new FAA regulation will be rolled out too slowly to fully capitalize on this burgeoning commercial opportunity. Man first took to powered flight from US soil; now the United States is in danger of falling far behind other countries in the race towards commercializing civilian unmanned flight. The global civilian commercial UAS market is poised to grow from $2.8 Billion to $82 Billion over the next ten years, and if cultivated to its fullest potential, could add over 200,000 jobs in US economy. The speed and permissiveness of the FAA’s regulatory action will directly impact the US’s share of the global drone pie.
Red Tape Will Delay But Not Discourage the Future of Autonomous Vehicles
Last year Rolls-Royce unveiled a virtual prototype for unmanned freight cargo ships, showing that the future of drones isn’t exclusively airborne. Eliminating personnel costs could reduce the total operating expenses of large freight shipping operations by as much as 44%, directly translating to lower shipping costs for supply chains around the world. Before this vision is realized however, like with airborne drones, a plethora of international regulations including minimum crew requirements and cargo safety must be overcome before the first autonomous cargo ship is christened.
And that seems to be the persisting narrative: while the road towards complete supply chain autonomy will be littered with regulatory red tape, drones will inevitably play a key role in the future of supply chain.