Global Trend

The Drone Revolution Is Coming
 
Drones are about to revolutionize our lives.

Among the twelve breakthrough technologies of the Fifth Techno-Economic Revolution, drones (like self-driving automobiles) fall into the category we call “service robots.” And they are likely to be among the first types of service robots to go mainstream.

The explosive evolution of drones during the current decade is reminiscent of nature’s Cambrian Explosion. They are simultaneously getting both bigger and smaller. At the same time, they are becoming more reliable and more capable; faster and more powerful; smarter and safer; cheaper and more practical.

Today’s drones are the result of the interaction of multiple sets of development cultures and industrial processes. The first industry created unmanned aerial vehicles (UAVs) targeted mostly at military applications; they required big budgets, cutting-edge specs, and small unit volumes. The second industry makes remote-controlled toys targeting children and hobbyists; this industry must cope with low budgets, but enjoys the advantages of flexible specs and huge volumes.

These dynamic industries both piggy-backed on rapid advances in computing, sensors, smartphones, GPS, electric motors, networking, and batteries that were developed for other applications. Through this cross-disciplinary fertilization process, drones have acquired the features and capabilities that suddenly make them “good enough” for many new applications.
This is the very definition of a disruptive technology - and these drones have the potential to create whole new industries, as well as disrupting existing ones.

Currently, there are about 181,000 drones registered with the Federal Aviation Administration.1 Federal rules around unmanned aerial vehicles were loosened in 2014, enabling the granting of special permits. However, experts say the biggest hurdle is still regulation - the FAA, which oversees American airspace, has been slow to establish clear-cut rules regarding commercial drone use and delivery.
 
That’s why, as recently as the beginning of 2015, only a dozen companies were approved to operate drones commercially in the U.S. Since then, the unmanned aircraft systems industry and the FAA have worked to streamline the approval process. The agency has also loosened certain aspects of its commercial drone regulations to give approved companies greater flexibility in how they use commercial drones.

Those efforts have driven a drastic uptick in the number of companies approved to fly under so-called “Section 333 exemptions,” as well as a broadening of the applications for which these drones are employed, with over 1,000 companies approved as of year-end 2015.2
 
The Association for Unmanned Vehicle Systems International recently examined the first 500 commercial drone permits issued by the FAA and found that exemptions spanned 20 major industries across 48 states.

Given this trend, we offer the following forecasts for your consideration:

First, the military drone market will continue to dominate in dollar terms over the coming decade.

That’s largely because military drones tend to be very expensive and their applications are well defined. Missile-equipped military drones have become the “weapon of choice” against terrorist networks due to their ability to linger and precisely target individuals. Even more importantly, the U.S. Navy has pioneered a range of stealthy, ship-based drones designed to transform almost any navy ship into a de-facto aircraft carrier. At the other end of the spectrum, researchers are developing tiny drones the size of hummingbirds that are nearly undetectable and ideal for gathering intelligence.3 While many allies will purchase U.S. systems, other nations will rapidly work to emulate these capabilities.

Second, in addition to defense applications, other public-sector applications will play a big role in driving drone spending over the coming decade.

The ability of drones to linger over areas and observe activity is particularly useful in applications like law enforcement, wildlife monitoring, environmental monitoring, and search and rescue.

Third, to accommodate the coming flood of commercial drones, America’s air traffic control (ATC) system will be rapidly expanded.

Traditionally, the low altitude airspace in which drones mostly operate has been “uncontrolled” because of the few aircraft and low speeds involved. NASA and its Unmanned Aerial Systems Traffic Management project has been busy developing a drone air traffic control system to ensure that the exploding volume of pilotless aircraft can cruise low altitudes while receiving critical information pertaining to weather conditions, air traffic congestion, terrain, and buildings that may impact flight patterns. Crucial to this air traffic control system will be software NASA is creating with the University of Nevada, Reno.4 That software will act as the link between a drone and the air traffic infrastructure. In its efforts to create a useful drone ATC, NASA is also partnering with a software firm called Skyward.

Fourth, America will continue to lead the rest of world in the drone industry it pioneered, but only by dramatically overhauling the regulatory process.

The newest rules are already better than the old ones - and by 2017, the U.S. is expected to have drone regulations almost as industry-friendly as many EU countries have today. The FAA is continuing to work with the industry on tricky areas like line-of-sight restrictions. Still, for the next two years or so, the complex systems that companies need to devise - such as “sense and avoid” technologies for preventing crashes - will be easier to develop in Canada, France, or Australia. More importantly, those other countries aren’t standing still. By 2018, their regulations are likely to be even more accommodating to changing technological realities than the new American rules.

Fifth, in the coming decade, agriculture will become a major consumer of drones and related services.

In this application, Japan is currently the leader, but the United States is ripe for this technology. Agricultural drones are adept at tasks ranging from crop dusting to monitoring livestock to observing crop conditions. According to the Boston Globe, the impact of drone efficiency on the U.S. farm sector could be huge; we could see billions of dollars in economic returns and many more jobs salvaged and/or created.5 An American Farm Bureau Federation study estimates farmers’ return-on-investment alone could be $12 per acre for corn and $2 to $3 per acre for soybeans and wheat. That’s why some experts believe so-called AgDrones could make up as much as 80 percent of commercial drones in the sky by 2050.

Sixth, after getting off to a strong start overseas, drone-based delivery services will literally take off in the United States by 2020.

Package delivery services are one of the most publicized commercial applications, because they are likely to touch the average consumer directly. Amazon’s drone delivery service, called Amazon Prime Air, will launch in the UK in 2016. In November 2015, Amazon showed off a highly polished prototype drone, which can deliver packages to customers within 30 minutes. But the big question is “Will consumers pay for a 30-minute package delivery service?” Fortunately, if a recent report by ARK Invest analyst Tasha Keeney is correct, Amazon Prime Air could cost Amazon only 88 cents per delivery. If Amazon charged customers $1 per delivery, Keeney estimates, the company could earn a 50 percent return on its investment in its drone infrastructure while offering same-day delivery more cheaply than with current alternatives.
 
Keeney’s analysis assumes that 6,000 operators who earn $50,000 per year will operate 30,000 to 40,000 drones. Each drone will make thirty deliveries per day. The rest of her analysis incorporates the costs of electricity, backup battery packs, bandwidth, upgrades to facilities, and so on.

Seventh, by 2025, commercial drone technology will assimilate the commuter air taxi market discussed in the November 2015 issue of Trends, creating a whole new multibillion-dollar industry.

A viable proof-of-concept device called the EHang 184 premiered in late 2015.6 The single-seat vehicle is primarily designed for traveling an average of ten miles each way, at around sixty miles per hour. EHang’s independently developed Fail-Safe System ensures that if any components malfunction, or if there’s damage while the vehicle is in flight, the aircraft will immediately take the necessary precautions, such as landing to ensure the passenger’s safety.
 
Eighth, most companies will hire drone-based service providers rather than buying their own fleets of drones.

So many aspects of drone operations are subject to scale and scope economies, that it will make sense for most companies to rely on specialized third parties to handle mapping, monitoring, and delivering via drone-based solutions. Several startups in this space include Fly4Me, Measure, Gofor, Skycatch, and Workmode.

References
1. Reuters, January 6, 2016, “FAA Says 181,000 U.S. Drones Registered in Its Database.” ⓒ 2016 Thomson Reuters. All rights reserved.

http://www.reuters.com/article/us-usa-drones-registration-idUSKBN0UK2MC20160106

2. Fortune, August 9, 2015, “FAA Approves More than 1,000 Commercial Drone Permits,” by Clay Dillow. ⓒ 2015 Time, Inc. All rights reserved.

http://fortune.com/2015/08/09/faa-commercial-drone-permits/

3. Popular Science, May 29, 2015, “Special Forces Test Hummingbird-Size Drone,” by Kelsey D. Atherton.   ⓒ 2015 Popular Science, a Bonnier Corporation Company. All rights reserved.

http://www.popsci.com/american-special-forces-test-hummingbird-sized-drone

4. Fortune, August 7, 2015, “NASA’s Drone Air Traffic Management Project Just Got a Software Boost,” by Jonathan Vanian. ⓒ 2015 Time, Inc. All rights reserved.

http://fortune.com/2015/08/07/nasa-drone-air-traffic-management-project-software/

5. The Boston Globe, August 22, 2015, “Agricultural Drones May Change the Way We Farm,” by John Wihbey. ⓒ 2015 Boston Globe Media Partners, LLC. All rights reserved.

https://www.bostonglobe.com/ideas/2015/08/22/agricultural-drones-change-way-farm/WTpOWMV9j4C7kchvbmPr4J/story.html

6. Daily Mail, January 6, 2016, “The MEGADRONE Big Enough to Carry a Passenger,” by Ellie Zolfagharifard. ⓒ 2016 Associated Newspapers Ltd. All rights reserved.

http://www.dailymail.co.uk/sciencetech/article-3387542/The-MEGADRONE-big-carry-passenger-Chinese-firm-says-self-flying-craft-used-smart-taxi.html