The government is finally taking the leash off commercial drones and letting them soar higher. Get ready for an acceleration in the drone industrial revolution as companies move from experimentation to everyday uses and FAA drone rules fall into place.
The sight of hobbyists tinkering with drones has become commonplace. But commercial drones have been flying under the radar, despite companies like ConocoPhillips (COP) and Deere (DE) integrating drones into their operations. Now commercial drones are about take off. Why? A more proactive Federal Aviation Administration is crafting rules that will open up more uses for drones in new places.
“I think commercial drones will be the driving force for the space,” said Loup Ventures founder Gene Munster. “Recreational stuff is a rounding error when you think about the business opportunities. The corporate opportunity is significant as it can impact so many different segments, whether it be agtech, security, energy or real estate.”
PwC estimates the total addressable market for commercial drones is $127.3 billion. That includes $45.2 billion in infrastructure, $32.4 billion in agriculture, $13 billion in transport and $10.5 billion in security.
International Data Corporation estimates U.S. shipments of commercial drones will jump to 5.7 million by 2022 from 1.8 million in 2018. For the rest of the world, the market tracker sees shipments climbing to 8.5 million in 2022 from 3.1 million in 2018.
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FAA Drone Rules In The Works
But for commercial drones to reach new heights, enabling regulations must be in place. After languishing under the Obama administration, FAA drone rules are progressing at a faster pace than ever.
Last October’s passage of the FAA Reauthorization Act called for new FAA drone rules. Among the key requirements is the development of a traffic management system that integrates drones in the national airspace alongside planes and helicopters. Such a system will also be vital if drones guided by artificial intelligence are to become a reality. And the data collected will help future commercial drones detect and avoid obstacles.
“True expansion of the market will require investment in air traffic systems, which will allow drones to expand and reach their full potential,” IDC analyst William Stofega said. “This expansion will include personalized delivery services and long-haul cargo services.”
A traffic-management experiment is underway. The final test stage of the NASA-led project will take place in Nevada and Texas between March and June. The FAA will then carry out further testing of its own. By year’s end, Stofega believes we’ll get much closer to understanding how drones will be integrated into the air traffic system.
“Once that happens,” he said, “it’s just going to be building out whatever infrastructure you need to make sure this happens and keep everyone safe.”
This will not happen overnight, but gradually over time. Stofega believes the regulatory details will emerge by 2020. The tech rollout and integration will take another five years.
Skylogic Research analyst Colin Snow told IBD it could be a decade before it gets to the stage where the FAA approves the system’s use for operations beyond visual line of sight.
Drone Uses Are ‘Endless’
The government also has started loosening regulations on when and where commercial drones can fly.
At the moment, operators with a valid license can only fly during daylight hours. The drone also has to be under 55 pounds, travel at less than 100 mph and below 400 feet. Flights are also not allowed over people not involved with the operation. And they have to take place within visual line of sight in authorized airspace.
But in January, the Transportation Department announced pilot projects to allow drones to fly overnight and above people without waivers under certain conditions. These experimental programs will provide data that will inform FAA drone rules in the future.
Transportation Secretary Elaine Chow has said the potential uses of commercial drones are “as endless as the human imagination.”
Professional Drone Pilots vs. Hobbyists
Among the other important FAA drone rules is a requirement that all drone pilots register their aircraft and take an aeronautical knowledge test.
Commercial drone pilots already needed licenses. And last year, the number of FAA-certified remote pilots, basically a tally of commercial drone operators, jumped about 50% to 116,000.
Previously, hobbyist drone operators could fly without a license. Not anymore. Imposing new rules on hobbyist operators may sound like an impediment to the industry. But the idea is to create a safer environment where commercial drones are freer to operate.
The licensing requirement, coupled with drone identification systems, will make it easier to catch people causing mischief, such as flying around airports.
The Commercial Drone Alliance, which includes Alphabet’s (GOOGL) Project Wing, AT&T’s (T) CNN, Ford (F) and the American Fuel & Petrochemical Manufacturers, backed the requirement. Amazon (AMZN) also supported the measure as Amazon drone delivery technology takes shape.
Commercial Drones Go Mainstream
As FAA drone rules look to integrate drones into U.S. airspace, more businesses are integrating them into normal operations.
After tiptoeing into commercial drones with experiments, companies are using them as an everyday tool.
The drones examine full-scale oil wells, gas pipelines and power lines. Avitas is the first operator to get FAA approval to operate beyond visual line of sight without a spotter using radar.
“We’ve got a lot more interest in recent months as a result of our ability to scale in such a way that we are able to reach larger geographical footprints,” Michael Clatworthy, director of flight systems at Avitas Systems, told IBD.
Tech Is ‘Way Ahead’ Of FAA Drone Rules
Oil and gas producer ConocoPhillips uses drones for asset integrity inspections in hard-to-access places, gathering overhead imagery and monitoring methane emissions at oil fields.
ConocoPhillips geoscience fellow Khalid Soofi is eager for new FAA drone rules. Current weight limits mean Conoco’s commercial drones can’t carry heavier, more powerful diagnostic equipment. And the line-of-sight limit means a drone can collect data on one square mile but not on a whole pipeline.
“The technology is way ahead of the regulations at the moment,” he told IBD. “We can do so much more with drones. But we are limited by some of the regulations that are in place.”
New Commercial Drone Uses
Deere uses Kespry commercial drones to provide customers of the farming and construction equipment giant with job-site situational awareness.
The drones initially captured topography data, which are useful for job-site design and material movement calculations. Then they expanded into managing inventories and communicating job-site progress via 3D models.
Andrew Kahler, Deere’s product marketing manager, told IBD that customers are looking at additional drone uses.
“Future use cases could include incorporating these devices as another job-site ‘sensor’ to help manage and connect people, equipment and processes,” he said.
Besides businesses, consumers should find new drone uses as well.
Security drones could keep a watchful eye on a home when the owner is away on a vacation, IDC’s Stofega said. Security drones could also follow children around as they walk to school or play outside.
One Clear Winner As Drone Business Soars
The 2018 Drone Market Sector Report from Skylogic Research shows DJI is the dominant brand for drone purchases. The China-based company has a 74% global market share in sales across all price points.
Already the dominant player in the consumer drone arena, it has been increasing its focus on the commercial space.
In fact, many commercial players will take an off-the-shelf DJI drone and customize it to fit their needs. For example, Conoco said DJI drones are its “drones of choice.”
And Kespry, which also manufactures its own range of drones, said in October its aerial intelligence platform will use the DJI Mavic Pro 2.
Commercial Drones Delivering Packages?
One of the most hyped uses for commercial drones is for delivery. Amazon is continuing its trial program, while Alphabet’s Project Wing also remains under development.
But don’t expect to see commercial drones dropping off packages around homes anytime soon, even as new FAA drone rules move forward. Analysts believe the technology still has to be perfected before it is commercially viable.
Issues such as battery life, creating more aerodynamic designs and developing bulletproof guidance systems are among the outstanding issues.
A more immediate use case for delivery drones will be dispatching medicine in rural areas, where the benefits of delivery speed are clearer, and where a malfunctioning drone is less likely to wreak havoc.
“Its going to be five years at least before you really start getting this vision of drones zipping around the city,” Stofega said. “In that environment, figuring out how to position and control and space is a challenge.”
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