Sunday, June 26, 2016

While Amazon Waits, Drones Fly: Airborne deliveries to retail customers are happening—in China. Thanks, regulators.

The Wall Street Journal
June 26, 2016 5:20 p.m. ET

When Amazon said in 2013 that it could soon deliver products by drone, skeptics dismissed it as a publicity stunt. Never underestimate technology: For the first time, drones this month delivered packages for retail customers.

But not Amazon drones. The packages, from Chinese retailer, made it to a remote area of Jiangsu province. Amazon has built advanced drones, but it can’t use them because American regulators have made it a criminal offense for businesses to use drones. Americans do use millions of drones, but almost all recreationally. In 2012 Congress legalized hobbyists’ use of drones provided it doesn’t endanger “the safety of the national airspace.”

Last week’s big news from the Federal Aviation Administration is that it will finally decriminalize some commercial uses of drones. The new FAA rules could have been adopted years ago, when the industry first asked permission from bureaucrats. Instead they come 10 years after Congress instructed the FAA to allow business use of drones. And they still ban many activities, including deliveries. American innovators will fall further behind their peers in Asia and Europe.

Under the new rules, drones weighing up to 55 pounds can fly during daylight hours so long as they remain within the operator’s line of sight and below 400 feet to avoid airplanes. Operators must pass a safety test every 24 months and be vetted by the Transportation Security Administration.

This partial deregulation comes after the Obama administration missed numerous deadlines set by Congress. Under pressure to begin allowing some commercial use of drones, the FAA in 2014 began issuing permission on a case-by-case basis. The agency has granted 6,100 waivers, with some 7,600 applications languishing on a waiting list. Many companies risk penalties by operating drones without permission.

A former FAA chief counsel now advising drone companies, Gregory Walden, said the good news is “this industry will no longer be identified by exceptions, exemptions and the art of the possible.”

Outside the U.S., many countries have adopted simple rules allowing commercial use of drones, then adjusted the rules based on experience. In Asia and Europe, drones are routinely used for monitoring crops, bridges and construction sites, exploring for oil and minerals, fighting fires, and rescuing lost hikers.

The FAA rules will legalize basic uses such as aerial photography and video that real-estate firms, news companies and movie producers have sought. Google says it could use drones to make constantly updated three-dimensional maps.

But more ambitious uses, including delivery by Amazon and Google, still await bureaucratic approval. FAA requirements effectively ban deliveries by requiring operators to retain a line of sight, avoid flying drones over people, and stick to a low weight limit. Regulators indicated on a conference call they might consider case-by-case waivers, which invite crony capitalism as bureaucrats decide who gets permission to innovate.

A Senate bill would require the Transportation Department to figure out regulations to allow drone delivery by 2018, but the FAA refuses to set a timetable and flouted earlier deadlines. This means there’s no timeline to allow liftoff for Amazon’s Prime Air or Google’s Project Wing.

After the FAA refused to approve Amazon’s application to test drones in a rural area outside Seattle in 2014, the company relocated its research and development to Canada, Britain and the Netherlands. London’s Guardian last year reported on Amazon’s progress in British Columbia, tweaking U.S. regulators by calling its testing facility, “Amazon’s Canadian airstrip-in-exile.” Google tests its drone delivery in Australia and reports it will be ready for deliveries next year, if U.S. regulators allow it.

Washington’s long delay in legalizing commercial use of drones caused a lost decade for the drone industry in the U.S. The world’s largest drone company is SZ DJI Technology, which was founded in 2006 and based in Shenzhen, near Hong Kong. The Economist said DJI is “leading the charge” for drones “rather as Boeing did with commercial airliners in the 1930s.”

America’s heavy regulation of drones is in sharp contrast with the unregulated internet. Until the Obama administration insisted the internet be regulated like a utility, it was a haven for permissionless innovation. No one had to beg a bureaucrat to launch a website or other digital service.

The dominance of drones outside the U.S. shows how much faster permissionless innovation takes off than endless regulation. Drones are also a reminder that the equation for American innovation is what technology makes possible, discounted by what Washington prohibits.

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