7 Commercial Drone Predictions for 2017
BY Alan Perlman14 January 2017
2016 was a HUGE year for drones.
In the US, the FAA released Part 107 regulations concerning commercial drone pilots, and all over the world the drone industry grew, expanding into new commercial sectors and growing its presence in existing ones.
What does 2017 hold for the commercial drone industry? This post from Drone Industry Insights (DroneII.com) makes seven predictions for this year, and we think they are spot on.
Note: This post was originally written by Jeremiah Karpowicz, the Executive Editor for Commercial UAV News.
1. New Questions Around Legality and Authority Will Arise
Many people believed that, in the US, The FAA’s Part 107 would resolve every legal challenge associated with operating a drone for commercial purposes, but that was never the real expectation or intention.
But Part 107 does not cover certain operations like flying beyond visual line of sight (BVLOS) or nighttime flying. Operators can go through a waiver process to receive approval around those kinds of operations, but that process in some ways represents a step backward.
“The fact is that everyone and their brother wants to fly at night and BVLOS. Right now, each operator that wants to do something like that has to file a separate Part 107 waiver with the FAA. A rule that standardizes things for everyone will cut down on the waiver applications the FAA has to cull through, and will save agency resources.”
-Steve Hogan, Drone Lawyer at Ausley & McMullen
While many in the industry have shifted their focus to a rule that will create that kind of standardization, the FAA is not the only government entity that operators need to consider.
The FAA has the authority to regulate all aspects of civil aviation, but the FAA only has authority to determine how drones can fly safely. What’s allowed to be done during an otherwise safe flight is in the jurisdiction of the states, and many states, and even some municipalities, have started to legislate accordingly.
Long before anyone knew what Part 107 was going to look like, Hogan stated that the drone industry needed to pay attention to what was happening at the state level across the nation, as the laws there could kill the drone industry. This is an issue that will come into even greater focus in 2017, as the hyper-focus on the FAA starts to dissipate.
Operators and organizations have been focused on making sure they’re in compliance with FAA rulings, and doing so will remain essential. However, being involved in shaping, enacting, and enforcing state and local drone regulations is going to be crucial going forward.
2. We’ll See a Transition from “Exploring” to “Implementing”
As soon as drones were readily available to consumers, professionals in many different industries wanted to leverage the technology.
What surveyor wouldn’t want to easily be able to capture an entirely different perspective of a site? Similarly, project managers envisioned how drones could be able to impact critical tasks like change detection.
That enthusiasm was something Michael Singer, CEO at DroneView Technologies, saw firsthand.
Over the past few years Singer has talked with hundreds of companies that were developing a curiosity around what drones could mean for them, and in many cases they even bought a drone to run some tests. The challenges they ran into centered on being able to derive value from them, which usually related to regulation and logistics. However, all of that has begun to change.
“What we’ve seen going into 2017 is that large companies have bought into and have validated with field tests the fact that drones actually do bring value to them. They want to make real commitments, and in doing so change their current workflow and behavior. If they were flying with a plane to do aerial acquisitions or walking with field crews and using GPS to do traditional survey, in certain use cases they’re replacing that with drones. The adoption cycle is now focused on implementing to workflow as opposed to R&D or exploring and getting comfortable with the validity of the data.”
-Michael Singer, CEO at DroneView Technologies
The hype and excitement around drones being a “cool” solution was enough to get many professionals interested, but in the end it’s really all about what problems are being addressed and what problems are being solved.
Does this new tool bring greater efficiency to the workflow and solve problems? That’s a question that no longer has an undefined answer, and it has created a transition that will begin to take shape in 2017. It’s not something that will happen instantaneously though.
How enterprises are or aren’t embracing this transition will be a major topic throughout 2017.
3. Insurance Will Become a Priority
Concerns about what it means to operate a drone legally have been top of mind for commercial drone operators since the early days, but needs and requirements relating to insurance haven’t been as much of a priority.
The reasons behind this are varied, but it’s safe to say recent regulation that defines what it means to legally operate a drone has changed the mindset for both operators and stakeholders.
But motivations behind that change aren’t strictly related to regulation.
“There has been a shift in mindset, but this has been primarily driven by the reality of operating a drone for a commercial endeavor. The growth and scope of commercial use cases has led to greater awareness around risk factors and this, coupled with companies’ general risk management procedures, means that any commercial operator who wants to be able to fulfill a variety of commercial contracts needs proper insurance.”
-Chris Proudlove, Senior Vice President of Global Aerospace
What proper insurance looks like can sometimes be an open question though, and it’s complicated by distinctions between general liability (GL) carriers and specialist aviation insurance providers.
Right now, many operators simply need to prove they have some sort of insurance to stakeholders, even though exactly what that means to either party is as best ill defined.
How policies deal with issues like privacy, damage and liability will change and become more sophisticated, especially as organizations establish requirements regarding insurance before they hire a service provider.
It’s a change that’s already begun to happen.
“Companies that establish their own internal insurance requirements are becoming increasingly common,” Proudlove continued. “It’s standard practice for high end commercial operators to have to demonstrate significant limits of insurance to fulfill contracts. $10m or even $25m is not unheard of. We certainly see this type of requirement becoming more prevalent during 2017.”
A top priority in 2017 will revolve around sorting through the offerings of organizations like Global Aerospace that provide specialist aviation insurance with ones that offer drone on-demand insurance and even companies that provide a general liability policy that might not cover everything an operator thinks it does will become.
Being able to identify what type of policy works best is something that will become a standard part of drone projects of every size.
4. A Worldwide Drone Market Will Begin to Take Shape
Part 107 might have redefined what it means to operate a drone for commercial purposes in the United States, but countries across the world are all at different stages in terms of how they’re regulating drones.
(Want to know the drones laws by country? Check out this free guide to drone laws from UAV Coach.)
What it means to legally operate a drone in France is different than what it means to do that same thing in Germany, and while that complicates the issue, the interest in the technology is there.
Companies like Sky Futures have operated in 23 different countries, which is just a hint at the sort of worldwide opportunities that are and will soon become available.
Some of those opportunities are related to whether or not entities like the European Union
(EU) are able to create regulation that goes beyond the border of a single country, and progress is being made.
Kay Wackwitz is the CEO & Founder of Drone Industry Insights, a market research and analytics company based in Hamburg, Germany, and he has insight around how that process is shaping up, and also what it means for local regulation.
“The EASA (European Aviation Safety Agency) has planned to have the NPA (Notice of Proposed Amendment) done by the end of 2016,” said Wackwitz. “This NPA is then being commented on by all EU member states and subsequently reviewed by EASA until mid 2017. Based on these comments the EASA will form the ‘EASA opinion’ in early 2018, which will be the basis for the adoption of all the member states (2019). However, local regulations will also evolve during this time in the EU-member states and start to open the skies for certain modes of operation (e.g. BVLOS).”
-Kay Wackwitz, CEO & Founder of Drone Industry Insights
Just as in the United States, the drone industry as a whole is moving forward while regulation details sort themselves out.
This process will create opportunities for operators and organizations across the world that want to leverage drone technology as the needs of so many different people working in so many different places are discussed and worked through.
“The drone space is a melting pot for technologies across all industries,” Wackwitz continued. “There is always a certain thrill to see the latest innovations and the game-changing opportunities that come along with it. We think drones are going to become much smarter and independent combined with a more specific design to fit a certain job. The one-fits-all solution will of course remain available to the recreational and prosumer market while commercial platforms mature and become part of the individual value-chain.”
5. Public Concerns Around What Professionals are Doing with Drones Will Begin to Dissipate
One of the biggest challenges that first responders and even industrial operators have around being able to utilize drone technology is not related to the tools themselves.
Drone pilots and organizations interested in using drones face public scrutiny, as members of the public express concerns about their privacy when they see a drone flying near them or their home.
These concerns and fears will begin to dissipate in 2017, not just because of the public awareness campaigns that are designed to specifically address these concerns, but also because drones will be able to create and showcase so many concrete benefits.
Jeri Donaldson is the CEO and owner of FlyCam UAV, a UAV systems integrator and builder and the US distributor for a UAV that carries sensors that detect radiological, biological and chemical threats.
These are the sorts of capabilities that will help the public understand why seeing a drone in the sky should make them feel relieved, rather than threatened.
“While the general public still has its reservations about UAVs as a whole, I believe that once they see the benefits and life saving capabilities of UAVs they will have a more open mind about them. As stories of their abilities to locate a stranded hiker or detect a radiation leak before it becomes critical become common place, the media will focus on the positives of UAVs which will help the general public become more accepting of them.”
-Jeri Donaldson, CEO and owner of FlyCam UAV
That acceptance will come once members of the public understand that if a swimmer can’t swim back to the beach because of a rip tide, a UAV could be flown out to the swimmer with a flotation device.
A thermal camera mounted on a UAV can be used to find a skier trapped under the snow after an avalanche. These uses can resolve emergency situations in a far quicker manner, but not having to put additional lives at risk is just as important of a consideration.
“Whenever you can take the human element out of a potentially dangerous situation it’s a positive,” Donaldson said. “Before we started using UAVs to carry chemical and radiation detection sensors the job of checking for leaks fell on an individual or group of individuals to put on a hazmat suit and hand carry detection devices into the contamination area. Now radiation levels can be monitored or tested from a safe distance.”
There is no limit to the life-saving capabilities of UAVs, and as the public as a whole begins to understand this concept in 2017, more organizations and departments will be able to adapt the technology.
6. Organizations Will Consider What Scalability and Implementation Actually Mean
We already mentioned the transition from “explore” to “implement” that we’ll see from organizations in 2017, but what will that implementation actually look like?
It’s a question that doesn’t have a simple answer, because implementation for an organization that does business in multiple countries and sectors looks different than it does for a company focused on a single region and in a single market.
Being able to sort through those kinds of details is something that David Boardman, Founder and CEO at URC Ventures, sees happening in a major way in 2017.
“I think a lot of the drivers are going to be on the geographic scale of what you’re trying to accomplish. If someone has a handful of high value mine sites, it’s going to be pretty easy to put a business case together to say that should stay internal and that competency should be built in-house. As you move to broader geographic scale though, that’s when suddenly the economics are going to be more challenging in terms of doing something in-house. Because then it’s a question of how many pilots you have, whether they can get to all the locations and fly at the frequency needed, etc.”
-David Boardman, Founder and CEO at URC Ventures
Seeing these questions asked and answered by stakeholders will lead to the implementation of different kinds of drone programs, which will likely mean we’ll see a number of highly visible scale-up efforts in 2017 within industries such as construction, aggregates and mining.
These efforts will provide some leading indicators around how enterprises decide to scale their programs.
That might sound like a simple process, but there will be considerable challenges and arguments over the specifics, which will take place between stakeholders at different levels within an organization. It’s something Boardman has seen as companies have worked their way through the “experimentation” phase, and will become that much more pronounced with so much more on the line.
“The drone enthusiasts are going to run into the reality of the financial operations of the company,” Boardman said. “There are going to be some big clashes in 2017. The financial people are going to ask to see the measurable ROI. They’re going to want to see a scale-up plan. The cost to build the internal operation around that is going to be a significant investment for a company versus outsourcing that for a few thousand or even a few hundred dollars per job.”
Whether it makes sense for an organization to build their own drone program from scratch or utilize service providers without taking on the costs and risk associated with the former option will be a major point of discussion and contention throughout 2017.
7. There Will be a Slew of Industry Shake Outs
The recent acquisitions, mergers, pivots, sales, and partnerships that we’ve seen in the commercial drone industry are just a hint at what’s in store for hardware and software providers (the case of 3DR’s failure in the commercial hardware market is one useful example of all the change that’s been taking place).
Simply deciphering who does what is a complicated prospect in the industry right now, and these sorts of deals will increase in 2017, further defining what commercial drone solutions are available, and what features they possess.
Such developments are partly related to consolidation for market share, but as ever, it’s mostly an issue of economics.
This is something that Chris Korody, Principal at DroneBusiness.center, has looked at closely.
“The bottom line is that there are not many profitable companies in the drone space. We know that VC investment is down and the F1000 tech company venture funds are for the most part only investing in small ($1-5M) chunks. On the other hand, companies that already have VC investment will only sell for a significant multiple. I think the more likely scenario, and perhaps a trend, is for someone for whom drones are an adjunct rather than a core business to buy a particular technology and the team behind it to round out an offering or reduce time to market.”
-Chris Korody, Principal at DroneBusiness.center
Essentially, what Korody is talking about is a “complete drone solution”, and it’s one that professionals in every industry have been directly and indirectly asking to see developed.
Simplicity is essential for operators of all types and sizes, which means the concept of being able to utilize a system that delivers them actionable information rather than data is what they’re all asking to see in one way or another.
The process to get there will see a number of companies fall to the wayside though. As a quick example, Korody mentioned that the UAV market can’t possibly support ten different LiDAR manufacturers.
A few of the companies fighting for market share will become de facto standards and the rest will fail, which means that anyone making an investment in the technology needs to consider not only how that product will impact their project in the present, but also what the future of that company looks like.
What’s the best way to approach such considerations though?
“The only real protection is to buy carefully and be very clear about where the ROI is going to come from for each individual investment,” Korody concluded.
The drone industry isn’t the first or last to leave certain innovators and stakeholders disappointed with how things shake out with the market.
Luckily, those shake outs will help ensure the technology can be properly leveraged in 2017 and beyond, which makes paying attention to what that process looks like absolutely essential.