Drone Wars – 3 Ways to Look at Drones

Generally, innovation comes about when that which is invented either solves a problem that hasn’t been solved before (cars revolutionized mobility), is cheaper in solving it than previous efforts (Uber vs Taxi), or provides us with an entirely new tool or gadget that we happily include in our lives (we didn’t need iPads). Drones, or unmanned aircraft system (UAS), can have the ability to do all three, which is why they potentially are such a valuable invention.

 

The Good: Opportunities

To remain in sync with the opening argument, drones have a vast array of applications that solve severe issues (US fighter drones prevent risking pilots’ lives); are cheaper (Chile and Peru can now monitor their maritime borders and fishing rights via drone applications instead of sending expensive observation teams via boats or planes). If thus another example is needed please change to the following: Peru’s Ministry of Culture can now monitor its archeological sites from the sky instead of sending expensive observation teams and the new drone-camera gadget all of a sudden has allowed my friend’s wedding pictures to be taken from the most surprising angles.

To understand the value of drones, PWC did a great effort in aggregating markets with a high potential of operations to be replaced by drone powered solutions: infrastructure, transport, insurance, media & entertainment, telecommunications, agriculture, security and mining can achieve a total aggregate of 127,3$ bn USD (approx. 112€ bn).

With over 35% of this aggregate, infrastructure is by far the largest sector to benefit from drones as investment monitoring, maintenance and inventory management can now be done remotely. Agriculture fares about 25%, the transport sector just over 10% and security around 8% (see PWC). Currently the US security sector is assumed to be the largest worldwide user of current drone solutions. However, as security related billing in connection with the use of drones currently only amounts to 50% of invoices extended for the use of drones, these figures provide us with a fair idea of the strong opportunity that lies in those still unexplored waters when after maximum exhaustion the security sector will be a mere 8% of the drone use.

According to the market research company Drone Industry Insights, there are already 711 UAS companies worldwide, developing from platforms, components and systems to even drone insurance. Whilst more than half of these companies are based in the US, a good 30% are in Europe, making both markets key arenas for its development and application.

 

The Bad: Regulations & Risks

The key issue: EU-wide rules for UAS might give Europe a competitive advantage but it is hard to arrive there – 18 EU countries already have national rules in place and EASA, the European Aviation Safety Agency, which has released a technical opinion on the operation of drones in December 2015, does not yet have the legal authority to regulate the use of drones. The European Commission has adopted a proposal for the revision of EASA’s basic regulation which would introduce an EU-wide regulation to cover drones of all sizes. However, currently the use of drones under 150kg is regulated at national level.

Changes for the regulation on common EU rules in the field of civil aviation must be adopted by the European Parliament Transport Committee – at present it is not clear, when such steps will be taken. Meanwhile the US applies federal legislation for amateur small drones, but pilot requirements for larger UAS are not yet available.

The reason it is so complicated to draft regulation is because there are high risks and legitimate issues concerning the privacy (i.e. is a drone allowed to fly over my property?), safety (drones have already dangerously grazed comercial flights), security (drones could fly say close to a presidential home) and the need for air traffic separation (flight routes need to be respected), which are all worlds of their own. And then, it is an inevitable reality that by the time regulation catches up with the new technology needs, the next invention is impatienty waiting at the door ready to be regulated.

 

The Ugly: regulatory solutions take time – but the ugly duckling can turn into a swan

There is no pretty way to say this: the timeliness, thoroughness and universality of the application of regulations – at least in the EU – will determine whether the EU can seize the opportunity to be at the forefront of the DronEvolution or not, and how this market will develop. By experience we know that EU regulation, which in all cases needs to be proposed by the European Commission, takes time as, depending on whether it is a mere EU matter, or a matter of mixed EU and national competence (then also the national parliaments of EU member states need to ratify). But once it stands- as with so many other issues (think: EU environmental policy is the most extensive world wide policy), the EU can be the welcome primary innovator.

For European investors, drone developers and drone users, this is a key moment: the use of drones could become an exponentially growing market (as we believe it should) revolutionizing industries and services, guided by reasonable and forceful regulation, or alternatively grow slowly and precariously as the necessary guiding regulation is not there to safely support the unpathed waters and their unexplored shores.