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Commentary By Charles Hughes

Drone Innovation Closer to Reality

Economics Regulatory Policy

Drone delivery in the United States inched one step closer with the recent Presidential Memorandum directing the Secretary of Transportation to make it easier for commercial drone development and testing to take place in the United States. Even after the regulations surrounding commercial drone use were loosened in August 2016, companies have been hindered by a slow and restrictive framework. In response, many ambitious drone testing and operations have shifted overseas. The president’s requested changes are a good first step. They are a welcome sign that the administration recognizes the economic potential of the industry and is committed to fostering an environment conducive to innovation.

Unmanned aircraft systems (UAS) have a range of potential commercial uses, from helping farmers inspect their crops, to monitoring hundreds of miles of natural gas pipelines, to helping a busy parent by delivering the pasta sauce they forgot to buy for that night’s dinner directly to their residence. Commercial drones could improve productivity and efficiency, and the possibilities will only grow as companies continue to develop new ways to utilize UAS. Regulatory concerns are one of the main factors that could impede progress in the United States.

The president’s memo directs Secretary Chao to establish a pilot program within 90 days, and asks the Department of Transportation to solicit proposals from state and local governments to allow testing of UAS in new ways in their jurisdictions. These programs would be able to obtain waivers to try flights that are now prohibited and currently require a waiver that is difficult to obtain, such as flights over people or beyond the range-of-sight of the operator.

Flights for proposed programs will be limited to 200 feet, but the memo does permit the Secretary to allow an extension of up to 400 feet if she determines that adjustment would be appropriate. After receiving and reviewing the proposals, the Secretary will move forward with at least five pilot programs within 180 days of establishing the program.  

The government will collect data during the course of these tests and use the experience with these pilot programs to help inform future regulations.

Developing a better understanding of a rapidly-developing industry will be important in creating a framework that is conducive to innovation. In recent years, restrictive regulations and a slow-moving process have encouraged some companies to do testing in other countries.

Amazon applied for a U.S. permit for a testing program in 2014, but then endured a lengthy wait of almost a year before it received permission, by which time the drone in the application was outdated. The U.K. Civil Aviation Authority was more prompt and responsive to Amazon’s application, and the company has since shifted much of its drone operation efforts to that country, instead of the United States.

The United States at least has played some role in Google’s Project Wing’s efforts through a limited pilot program delivering burritos to lucky Virginia Tech students in an open field. However, Project Wing’s larger more ambitious efforts are taking place in Australia, where it is partnering with a chain of Mexican restaurants and a chain of pharmacies to deliver orders to testers directly to their residences.

The memo recognizes that the previous process was too rigid and slow, and calls for the regulatory framework to “be sufficiently flexible to keep pace with the advancement of [drone] technology.” The Federal Aviation Administration made some small progress in creating a more permissive environment in August of 2016 when it enacted new rules for non-recreational drones, but it still included restrictions that limited the room for testing and innovation.

The growth potential for the drone industry is substantial. More than 75,000 drones have already been registered for commercial use even under the confines of the current rules. The number is expected to rise to more than 400,000 by 2021. A report commissioned by the FAA projected that drones would result in 100,000 more jobs and an additional $82 billion in GDP. These benefits will not be realized if regulations in the United States are significantly more restrictive than other countries.

The memo and the pilot projects it directs Secretary Chao to pursue will contribute to creating a regulatory environment that supports innovations in commercial drone use. This is an important initial step in helping the United States become an attractive destination for testing and development of this rapidly developing industry.

Charles Hughes is a policy analyst at the Manhattan Institute. Follow him on Twitter @CharlesHHughes

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