Commercial Drone Innovation and the Regulatory Landscape

commercial-drone-innovation-and-the-regulatory-landscape

In December 2013, 60 Minutes aired a segment about Amazon called “Prime Air” – focused on delivery of packages by small multi-copter drones.  Amazon’s Prime Air program has yet to get off the ground in the United States due to Federal Aviation Administration (FAA) restrictions. While Amazon has drone R&D centers in the U.S., the company is looking to begin testing in the United Kingdom due to current restrictions and continuing lack of clarity on the future of regulatory policy on commercial drones in the U.S.

The planning for regulation of commercial drones under the FAA began approximately 9 years ago and the commercial drone industry is yet not legally able to fly in the nation’s airspace.  Many in the industry are concerned about the slow progress of creating a regulatory framework, in light of the time and resources the FAA has invested in attempting to design a safe program for the integration of drones into U.S. airspace.  By way of comparison, it took less than 9 years to get Neil Armstrong on the moon, from concept to implementation.

The FAA does permit testing so long as it is done in one of the six approved test sites and copious amounts of paperwork are completed.  To date, less than 20 companies have received approval to fly.  The approval application that Amazon is waiting on is known as a Section 333.  Section 333, in brief, is a workaround provision that allows companies to receive approval to fly commercial drones on a case-by-case basis.  Amazon’s Section 333 is still pending.

In the meantime, most commercial drone industry participants have concentrated their testing activities in other parts of the world, where the regulatory climate is more conducive to drone R&D and innovation work.  In assessing the market innovation landscape as part of our forthcoming Drones for Commercial Applications report, Tractica has assembled the following set of case study examples to provide a bit of additional color behind the key players involved in this sector, and the various types of drone delivery applications they are examining in different parts of the world.

China

Online commerce giant Alibaba has been given the green light to proceed with the testing of drone delivery of tea over a 3 day period.  Does this mean that Alibaba is ahead of Amazon with regard to drone deliveries?  Not necessarily, as tea bags aren’t exactly representative of an average package weight.  What Alibaba’s testing does reflect is an openness on the part of the Chinese government to introduce commercial drones into their country’s airspace.

In China, regulations are being created with a focus similar to that of the U.S. FAA – based on China’s national security and safety.  A company needs to receive permission to do airborne testing and there are restrictions to flying, particularly in cities.  Still, China is ahead of the U.S. when it comes to testing drones for delivery applications.

Brazil

In the state of São Paulo, the bakery Pão To Go Piracicaba is testing delivery within about a half-mile radius using delivery drones.  Customers place an order via PayPal and off goes the hexcopter drone.  The owner of the bakery, Tom Ricettie, liked the idea of Amazon’s Prime Air and thought he would give it shot.   Ricettie’s main clients are those that live in condominiums near the bakery.  Anyone that has had to deal with a São Paulo traffic jam would surely appreciate the convenience of baked goods delivered via drone.  Brazil is proposing legislation regarding commercial drones but as of yet, there are no rules against the use of commercial drones for test purposes.

Australia

Google is testing drone delivery in the Australian Outback with hybrid fixed wing/helicopter drone.  The program is called Project Wing and began 2 years ago.

Australia’s aviation regulatory body, the Civil Aviation Safety Authority, is more open to research and testing than the FAA has been.  Commercial drone regulations are still being crafted in Australia, but current regulations permit testing by companies so long as they receive an operator’s certificate and submit their test site approval.  This liberal approach has attracted companies such as Google to conduct their drone testing in Australia.

Russia

In June 2014, DoDo Pizza, in the town of Syktyvkar in northern Russia, began delivery of pizzas via hexcopter drone. Customers order via phone or the internet and prepay.

Russia does have strict unmanned aerial vehicle (UAV) regulations but the owner of DoDo has successfully argued that this copter drone doesn’t fall under regulations due to its size, weight, and radio frequency.

Then there is the startup venture company Copter Express, which claims to be able to deliver any package within 30 minutes within an approximate radius of 2.5 miles.  They are still at the testing stage with drone delivery and have kept their deliveries to strictly to pizzas.

Proper Regulation Can Be an Enabler of Commercial Drone Innovation

Amazon left America for the U.K. to test their delivery drones, Google headed to Australia for testing, and commercial drones are not yet legal to fly in the skies of America.  The slow pace of the FAA is putting American innovators at a disadvantage.  As a result, other countries with more permissive regulations have a clear advantage over the U.S. in the early days of commercial drone innovation.

So while the FAA and U.S. dig their heels into policy debates, the rest of the world is testing, innovating, and building the foundation for a bustling commercial drone industry.  Until this situation is resolved, American inventions, talent, and resources will probably continue to emigrate to countries with friendlier regulations.

In my next blog post, I will focus on how the FAA can look at other countries’ regulations and consider them as options, in the interest of fostering an environment of open innovation in the commercial drone sector.

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