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The Future of Commercial Drones

I've heard for for the sort of coming ubiquity of drones was made by Darryl Jenkins and I think everybody who's stuck around will be glad they did and everybody who left will regret having left early. So I'm very excited to hear Darryl speak and I you all will are in for a treat.

So I really appreciate the opportunity to be here today. My background is in commercial aviation about three years ago, auvsi called me up and asked me to do a economic impact study on integrating drones into the nest which, which I originally turned down for the simple reason: I'm an economy, tuition emphasis on data and there was No data we thought about it, we chatted about it for two months and decided that we would go ahead.

Anyways and I've had three years think about that sense. We certainly would do it differently now and I'm going to talk about that. I've actually formulated it. The list is expanding matter of fact, Joe eyerman added three more economic laws to my list and we're now up to 20. We had short time so I figured we could get in seven. Let's start and I'm going to kind of give you a critique. What we're missing all of us, I think, is vision, and what I'm going to conclude today is what ahead of us is so daunting that no current governmental regulatory regime can handle all of it, and what we need to do is as stakeholders.

We all need to step up and and be much more active than we've been in the past, and one of the things I'm going to discuss is what I refer to as in to support anticipatory regulation and now i'm going to skip through some of these. I I want you to as I go through this. I want you to keep two things in mind. One is scalability. These are two issues that we're going to have to deal with think 15-20 years down the road and think what the industry is going to look like what institutions do we are we going to need and how many drones are we going to have in the year? That's scalability all right.

The second issue going forward, I think, is just as daunting and that's the technology refresh period in 1966. I was a freshman in college. These are the classes that I took. I was taking calculus chemistry, physics, english and a one-hour tech class. The one our tech class that I took was slide rule now the young kids in here you probably don't even notice slide rule is oh, do it all right all right like we don't use them anymore.

All right technology is changing very rapidly. Now, when I was a little boy technology changed technology refresh was measured in terms of decades now its measured in much much shorter intervals. Oops, let's go through these first fundamental law of commercial drone economics, the higher you fly, the more expensive it becomes all right. Think of capital and operating costs all right. That's that's number one! We're going to go through these not going to give you rash now now appreciate the fact that I am data.

Op intensive and I've had the opportunity to have a lot of private databases and go through some of these things, and I have a series of papers that will be coming out later this year, where we go through some of these in detail, commercial drones are small. All right and and they're small, so they can be more cost competitive. Now I want to think of this, not only commercial, but our drones in general exist because they are less expensive, and this applies both military governmental and commercial.

The the United States government with the drones because they're cheaper it costs a couple million dollars to a train, a a pilot and cost two hundred thousand dollars the terrain. A drone pilot, big difference. All right predators are much less expensive than fighter jets and global Hawks, which are the most expensive and their cost is equivalent to about a 737 800 900. Something like that are kind of unique all right.

I think your battery's running down, sir way we can move this. Oh, I okay, that's different than what I have on the screen. Okay, all right commercial drones are less expensive all right. The reason is simple: all right, they're, less expensive to buy the airplanes and helicopters their usage of expensive fuel is low. All right training costs are considerably lower Jonathan. How long? How much did it cost you or robbed to learn to use a DJI phantom lowered costs? This this reduces costs from your black, our costs, from thousands to hundreds all right, a big deal, the third fundamental law of commercial drone economics.

This was actually suggested to me by somebody who works at the FAA, who cannot be identified all right every three to five years: commercial drone sales will lease double. I believe that all right and here's some reasons why pent-up demand so competitive that they're going to replace a lot of competitors. This is, in fact a destructive technology and the third one which is interesting is the short lifespan of the platform.

Right now, when we originally did the AUVSI initial study Chris Malley and I assumed a lifespan of a drone of ten years - well, it doesn't work right. I've gone through two or three in three years: myself: okay, the fourth fundamental laws right now. This is where it gets kind of interesting about the fifth one I start getting agitated, so just bear with me on this one. When you see me, get really really really agitated all right as we move from Linus site to beyond line-of-sight and I'm not really sure how far beyond line-of-sight is all right.

So it's beyond line-of-sight, but I don't know how far beyond that it extends right. Two autonomous operations, the economic impact, increases each time by an order of magnitude. Ok, now I'm going to just explain this one intuitive line of sight. Drones are small and inexpensive because you don't need a whole lot now surveying and some mapping and stuff like that that you do with line of sight, you might be spending fifteen to thirty thousand dollars, but in general they're a lot less expensive and you have a High volume of them, okay, as we go to beyond line-of-sight a lot of infrastructure, precision, agriculture over very large fields, and things like that - you have more expensive software, and so the price increases in this market here is indeed one order of magnitude bigger than mine.

Aside, all right now, the number of operations for autonomous is excessively high. Okay. Now I'm going to take you through some things here. Let's just use Amazon is an example, and I'm going to first take you through what we know about them. Then I'm going to take you through, we don't know about them. Okay, they have between 300, the 500 sales orders per second okay. So since I've said that they've had another thousand okay, eighty-five percent of these are below five pounds.

This is jeff bezos on 60 minutes. It's all public information, anybody out there can do the calculations if we use a fraction of these to be conservative, let's not get down by an order of magnitude 30 to 50. Alright, because when you forecast, you want to be conservative, we multiply that by 60 seconds per minute x, 60 minutes per hour by 24 hours per day. The say 300 days a year with an average daily utilization of four round trips, which I kind of pulled out of nowhere, then dot dot dot.

We have a very big number. It is not a small number. It is a very big number. Now, let's, let's go into what we don't know how many places they can use this. The package shapes that will and will not work, how weather will impact operations. I don't know how they will operate their command and control aspects. I have no clue, but I'm that one's interested. How often are these going to be need to be down for maintenance and then the last one just a whole bunch more things which we don't know? Okay, now, if we look at the entire category of package delivery, I should have had google up there.

It is not unreasonable believed that will be very large. Now, if you were to ask me Constantine, ask me, in your opinion, how many operations per day will this amount to about a million at least a million ops per day? Now, how many ops do we handle a day in the airspace right now? Forty thousand more or less okay. Okay, now I start getting agitated all right. Fifth, fundamental economic law of drones, and this is where it gets interesting.

Listen we're still using Amazon, okay, I've kind of gone through panels to get some of these numbers, but when they start operating they're going to immediately drop the cost per unit delivery from about five bucks go to their annual reports to get these numbers. These are all public numbers. Anybody can do the calculations. The initial drop will probably be about two dollars. Now, I'm a mathematician.

Okay, we have an asymptote here going up to a limit, so we're calculating the limit function. What's the limit function going to be, as as the number of operations grow very large and they're advertising their software in their Hardware over very large numbers, it's going to probably drop down toward about a buck per unit, all right from five dollars per unit. Now this is going to push everybody who is in this area to an adopt or die mode all right and that's when drones are going to explode now, let's put this into perspective, all right, 06 number, the system that will be needed to control this all right Now I like to think of myself as a visionary, but I don't have a clue.

You're bright, you are bright in you're, a sweet boy. All right. You invited me to be here, so I actually adore you and if, if I could, I would adopt you and put you in my will, all right now, all that being said, young man who is bright new. I have a fondness in my heart for all right. How are we going to do this kid? I don't know all right. Does anybody in this room know right, yeah, okay and I I'm willing to go to that all right, all right, it's a big number and it's a daunting task and it's bigger than anything.

We've done before, okay and I had a real nice conversation with PK, while he was in Istanbul on this all right now. Let's ask questions who's going to build this system who's going to operate it who's going to finance it where's the money coming from not from Congress they're too stupid, and there they don't do things anymore. Do they right it's going to come up with protocols who's going to regulate it? Well, I'm pretty sure the only one I know an answer to is the last one is probably the FAA but who's going to do the others.

All right. All right, big questions, big questions. Okay, do we expect the FAA that come up with solutions? Well, they don't have a budget. They don't have manpower right now to me, that's the good news because who's who, who is the onus who gets the responsibility for doing this right? It's the stakeholders right and - and I trust I mean appreciate my beginning - assumption - I'm very fond of this kid.

I hold him dear to my heart and he is excessively bright and I trust him right if the commercial drone industry is to develop and grow, it's going to be because of stakeholder involvement, and we all have to be more involved than we have ever been before. Now, somewhere around early September, I'm going to do a webinar where I'm going to lay out the 20 fundamental laws, and this is the abbreviated version, all right stakeholders don't do it.

Nobody else will it's up to us. Kids. That's me if you'd like to be on my bigger webinar, send me an email, I'm happy to include you in on it, and thank you very much for listening to thanks for that Darrell. It's a pleasure also. I didn't see him as he was coming up in the room before to introduce a Bradford Foley from Gannett, who is a former Air Force pilot and still flies for the US government in the reserve.

I believe yes, but flies remotely piloted aircraft. One of the many synonyms for these airplanes were discussing today and is also involved in the commercial drone industry, with his firm, Gannett, international and sort of knows all aspects of this industry. Quite well. So Bradford and Darrell will chat for a little bit and then we'll take some questions from the audience. Ok, so I'll stand there I'll sit here up.

So I was an Air Force pilot ynm c-130s. The air force special operations command and I decided to get out of the Air Force, I'm getting a job up in the hill working for a u.S. Senator, but i'm looking for a reserve job call from a guy by the name of snake Clark has literally the First name is really first to a snake. He said. How would you like to go into UAVs, and I said what the hell are you a vs, and I said you know, pilots, we don't fly UAVs, we fly airplanes, we're not going to fly you so in 2006 I got I went to my reserve position over To pentagon and i've been working with the pred Reaper global hawk and even some of the smalls that you see that the Army uses fervor for the last nine years and that interesting part of my job is in the reserve, was having every conceivable industry come in, And say: hey we got this.

We got that when you do this, because if it is scratch your back with all this information and technology, so I getting out, I said we know what I should probably start a company and I started coming with a bunch of guys out of that unit who Have seen all the technologies out there have been developed, research and developed and put over there, and unfortunately, you can't test imperiously test them over in Afghanistan, and the technology is a pretty probation.

So the point is the technologies that we have used in the military and develop that we have one for one brought into the commercial use of UAVs and and is exploding and the UAVs in the commercial side, from the platform's to the data integration capabilities to the Sensors, you have on board are just unbelievable and if they think the objective here is just to kind of it, for the commercial use in the market is to get all these things together and integrated.

I can talk a little briefly on the regulatory process and how we're moving from where we are today and we were going into the future, and so you know a couple years ago. Drones was just a bad word. Everybody didn't like to say drones. It had a horrible comment connotation as a matter of fact at one of the conferences at 80 aside, the password was don't use. The word drone today, though, with the community they've done such a fantastic job of promoting all the good things that young man, Daryl systems can do, and so the community and I think the general public have began to accept the utility of these drugs and not only That but see the for businesses they've seen the cost-effectiveness.

I mean. Really you go out by our 3d robotics a quadcopter for 999 dollars, or you can use a helicopter on it and you or weekly or monthly basis and spent a lot of money doing that to get the same aerial photography that you, you may or may not Want and so the great other thing about this and white exploding, so much is the fact that today it's so it's cost effective, but the technology's really are very basic and the software, the firmware of the platforms using 3d printers to actually print the mechanical parts of Whatever drone you're going to use is out there, and so really it has been a next-generation from what we saw in the modeling community.

So so I think the bottom line and the commercial use is, it really is ascending. It's getting bigger and bigger. Now the regulatory piece is really long pole in the tent. That's the part, thats lagging behind everything else. I will shout out to Jim Williams here he has done a fantastic job when he was leading this with the FAA. A lot of people two years ago was just gripe sessions. It was complaining about the fa, not having rules for this, and you know there's a reason for getting into the sing.

It's called safety and efficiency, and he's done a very good job of where we are today particularly are now. One thing that they didn't do was keep to any of the timelines dictated by public law. 112. 95. But you know what Congress doesn't do their job either. So and not any bit of trim could say, Congress did something that they said they were going to do. Is it's hard to find so the bottom line of the regulatory piece? If you look at what's happened, they put out their proposed their proposed rules back in February, but they they did put out there a roadmap, their comprehensive plan.

The test sites are up and running they're, actually making some money and the great thing about the NPRM of the notes. Reposed rulemaking is, you know a lot of people thought because I don't have people from there with a section 333 exemptions, but they thought the NPRM would reflect that in terms of pilot certification. Well, you don't have that. All you have to do now is take a test, and you are, you know, register with fa and you're certified to fly these things.

The private pilot's license is going away. Now some insurance companies will say, hey, listen. If I'm going to ensure you, I think you need to have more than just a test, so you may add any way you find some certain instances where you do have to have some sort of hands on experience and then the section 333 exemptions themselves have really Been exceptional because the streamlining of the what sort of what they call the certificate of authorizations, not only for industry or individuals, but also for the test sites, but also the summary grants basically last fall.

If you wanted to get a 6 section, 333 exemption, you you, I think you had to deal with the law firm today, there's 822, as of Monday exceptions that the FAA has put out there, there's 822 examples if it ever thinking about writing a 333 to go. Let's go look at so the bottom line, I think, with the regulatory and the way the technologies are going today. They are in a positive trajectory. Now I will say one last thing: the challenges still do remain.

Everybody in this room was probably heard of detect and avoid the detect and avoid the detective avoid capabilities and how that applies to be on line of sight operations, because that's really the only. I think that the universal the commonality in terms of a complaint as to what still needs to be done, but it in terms of reference just give you to where the military is on the detective, avoid capabilities, the pred, reapers and even global Hawks.

Have this capability? There's a ninety-nine percent effective capability. It's basically a due regard, radar, it's a TCAs, EDS being a transponder. The problem is it's as big as a stage right: it fits on a predator if it's on a reaper or Global Hawk, it doesn't fit on a quadcopter and so really in order to really get to that Detective avoid capability. I think that makes the FAA very comfortable it's going to it's going to be a while where the miniaturization technology is actually fit.

Now, there's companies out there working on radar and acoustic tech capabilities and they're good, but they're not really, I think, were the true detective Lee capability is so so we'll get there. But - and Jim just said this next week. Up at NASA at Mountain View is a very good. I think, the introductory session for the for NASA on kind of how we're going to deal with. We don't have the detective awake capability, but how are we going to deal with the gap fill and so this UTM or this UAS a traffic management system and how we can actually operated below 500 feet with the drones and do so effectively? We presented and adjudicated you know, there's industry of getting involved to it Google's you want a great job, leveraging existing capabilities to take two drones and have them communicate, and so they don't hit each other and then even the Pathfinder program that the eff is worked on Is going to, I think, produce some good information job, just not just for line of sight, but extended line of sight come on the site, so it's all working.

I think it's all going in a great way. I think the next step, as I will go out and lemons say the suas or the small UAS, is really beginning to come on its own, the baby's beginning to crawl and trying to pull itself up on the furniture. But the next step where the real technology comes in is when we will start talking about the medium out student high-altitude operations. This is where a whole new dynamic of industry comes into play, who really were shut out of the the small us community, who were basically developing these things in their garages? And so you have these massive manufacturers and integrators, because there's going to be a lot of integration issues that come in on.

So where are we going? It's it's the regulatory piece it's coming along and I think the technology is already there, and so I think this commercial use of UAS is is is here to stay and it's really on a very positive trajectory. No that's all. I guess I about that. I guess questions questions for Daryl, on your slides and through a media. We hear a lot about how Amazon's you know talk about the drone delivery.

Where are the other delivery companies in this space? Thank you for asking the question i'll. Give you an honest answer. I don't really know it's not like they tell me anything what's interesting about both of them. When you have a conversation with them, is how little they tell you. I do know. This sensitive void is now down to 200 grams will have a reasonably good systems that can operate with maybe up to five miles within a year.

Some of the bigger problems in terms of command and control, which I consider that in infrastructure, the two biggest daunting problems out there. I don't think anybody has a handle on yet. I think the other things in terms of what I would call first stage beyond a line of sight. I don't think we're that far away from it a year or two years, we certainly will have the ability to do then it'll be some sort of combination of onboard detection and not and a ground-based portable radar.

With that, the things that I'm worried about I'm talking about the commercial space, i'm not talking about hobbyist or anything else, thing, I'm worried about in the commercial space in the short run, a sense and avoid with GA and sense and avoid with birds. Those are my my concerns have almost no concerns whatsoever about running in for commercial guy running into a commercial airliner right. I think there are a lot of things we can do out there in terms of an industry that we need to be talking about.

One of them are standards and licensing. I did a year's work with AUVSI and nothing else other than insurance issues. It was really interesting when you get and talk with the insurance companies, how honest and candid they will be with you two things: one: they want to and they're willing to do: liability insurance, they're, not willing to do whole insurance. The reason they're not willing to do whole insurance is because Germany, the commercial market, started up with no standards whatsoever.

You have every whack job in the world buying a little drone. They turn it on and it's gone. They have no idea where it is and they file a claim. Ok, so you want some standards and you want licensing now if we have licensing a lot of the other issues that we talked about, for example, privacy, are handled and can be handled easily, because if you violate these standards, you can lose your liability insurance.

If you lose your liability insurance, you lose your license and that's your your lifeblood all right now these are industry problems. I don't consider them governmental problems and I think there are things that we can do. This is going back to my fundamental premise, which I believe in above all else is that the industry, so I'm going to be critical of the FAA, because I don't think they do enough and I'm critical of the industry, because they're not doing enough in terms of Organizing and bringing these things together now, unlike my young friend over here, I don't mind bickering.

I think it's good and I want to see some bickering, which just means an exchange of different ideas. But I want an adult in the room to bring these ideas to some sort of a point at which we can all agree and go forward. All right and those are the things that is an industry that we are not doing now and shame on all of us for not having tackle these issues earlier. Did I answer your question? Well, I'm not sure the answer.

There's you know, Google Amazon is a company called qui qui that does that wants to do pharmaceutical delivery. There's a company flirty that just proved here recently in Virginia to deliver my thing matter: nets with Swiss post of have partnered up on delivery, so there's their companies that are beginning to move out on that. Okay, thank you all right. I actually have some empirical basis for that.

I get room, I get a room full of engineers and we start talking about these issues and I asked the question: if Amazon were to make a hundred thousand drones more or less at 50 pounds each? How much would it cost if they make two hundred thousand drones? How much would it cost if they really have 500,000? How much would it cost okay, so you can set bounds here, and so I I'm working on the assumption here are my working assumptions somewhere they're going to be paying between ten and twenty thousand dollars per drone.

So if you amortize that over the number of deliveries, that's where I come up with it, the probably it's going to start somewhere around two bucks and over time it's going to drift down and trend towards a dollar okay. So I I didn't pull it entirely out of my, but there is some data behind it in and it could be wrong, but somewhere it's going to be at least half as expensive as it currently is, which is why these guys are so excited to do it All right stock prices reflect future earnings right and they want to keep stock prices going.

Amazon is going to be worth their going to have a market cap of a trillion dollars. How do you maintain that? This is how you maintain market caps of trillion dollars? They're, bigger than GE, to put it in perspective, okay, so somewhere around there, I think they're going to at least half it and as they get the system going and I'm not even. I think they could probably go 10 miles right. So, if you're talking a 50-pound drone with 4.

5 pounds, which is your max, how far given current batteries, can you travel right well, 10 to 15 miles more or less, not not beyond it? So what I think we have in this numbers, I think we have accurately measured the constraints. All right. I can be off by a little bit, but it's going to be initially a big drop and as they get economies of scale by going from a hundred thousand to 500,000, then that that cost curve goes down drastically again.

Did that answer your question? Is it I think you lose to the fact that if Amazon is going for a one Chilean market cap, then they essentially have the cash to do this development, whereas a lot of, whereas in comparison, other delivery delivery companies may not have to cash, and we okay? Okay and you're correct on that they have the cash. I mean amazon, breather and your report. They have the ability they get 30 days, credit from other vendors they can sell.

Under that 30 days period. They can sell one book five to six times where borders would sell five to six of that book per year, so think of that in terms of cash flow, so they they generate enormous cash flow. By having that volume, they might not be the most profitable in the world, but these guys are sitting on beaucoup cash, and so the reason I I used them is because they're the ones who are going to drive the market because they have the cash to actually Go out and spend the tens of millions of dollars needed to develop all of the systems that go along with this and they're the ones that have the biggest incentive.

A trillion dollar market cap, which they're approaching right now and so they're, the ones or Google, or something like that who is also cash flushed right, who have the ability to go out and change markets and make things like this happen. We're getting am I approaching and answer to your question s and topically, yet all right perfectly good question. Thank you. Yes, I am willing to adopt you, since the economies of drone delivery are obviously going to be very sensitive to energy costs.

I'm wondering if you have any perspective on what the expectations would be for the impact on co2 emissions for this future that we're talking about of possibly a million deliveries, a day, expertise, okay, here's, here's what I I most likely or battery driven. So you have a power plant somewhere, that's working to do it some further assumptions. It's all going to have to be automated so from the launch to the delivery to the landing of the drone robots will handle it so you're not going to see a line of drones coming into the warehouse and landing on the ground and a technician picking them Up and taking them in so robots going to have to catch them in the air.

The robots going to have to put them into a case the robots going to have to recharge the battery, and then an assembly line will move that drone down to some sort of a conveyor belt where somebody probably physically attaches the product. And that might be the only place where a human being is located in that system in terms of co2 emissions. You're way out of my area of expertise, there are platforms out there now that are being developed, that use hydrogen fuel cells, solar fuel cells, a lot of the persistence now, instead of having something that has to go up for eight or nine hours.

There are companies out there that are looking to have five year persistence and so obviously doing something like that. Using a solar fuel cells allows them to stay at pretty high altitude for very long time, and not only that, but they have to drive the pretty powerful engines when you're talking about it. You know air air space that high up you're talking about pretty significant win. So you have to have pretty robust engines, so the co2 emissions itself.

I don't know the answer to that. Well, I certainly enjoyed being here and I hope to go to Peru, someday

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