Drone Economies: Emergence from the Military AAG 2015

Drone Economies: Emergence from the Military

Jeremy W. CramptonSusan M. Roberts

New Maps Collaboratory &Department of GeographyUniversity of Kentucky

Outline

1. Drones are “flying the military coop”

• Economic impact

• What kinds of drones are coming

2. A new zone of profit is being

colonized by capital

• We’re in a new “post-permissive” time

• The market is not pre-existing, but is being created

• New terrestrial geographies are being formed

3. Implications and discussion

• Drones as general purpose technologies

• Pervasive, improving, innovative

• Accelerate economic production and consumption

• Uneven benefits

Nature and size of the drone market

• Beyond the military

• Commercial, civil/public safety

• Relatively unexamined

DoD request for FY2016: ~$3 billion on “unmanned systems”

• Cf. $~50 billion on aircraft, $26 billion on navy

• $821 million on MQ-9 Reapers

AUVSI Economic Report. Three years after deregulation:

• 70,000 new jobs

• $13.6 billion ($82 billion by 2025)

1. Drones are “flying the coop” from the

military

• Economic impact

• What kinds of drones are coming

High Altitude, Long Endurance (HALE)

• RQ-4/MQ-4 Global Hawk

Medium Altitude, Long Endurance (MALE)

• MQ-1 Predator

• MQ-9 Reaper

Tactical UAVs

• RQ-7 Shadow

• RQ-21A Blackjack

Small and Micro UAVs

• RQ-11 Raven

• RQ-20 Puma

Unmanned Combat Air Vehicles (UCAVs)

• X-47B (in development, budget reduced)

2015: first billion dollar consumer drone company?

2. A new economic zone of profit is being colonized by capital

• We’re in a new “post-permissive” time

• The market is not pre-existing, but is being created

• New terrestrial geographies are being formed

• “Ban first, regulate later”

Apply and receive a “Certificate of Authorization”

(COA)

• Special Airworthiness Certificate—Experimental Category (SAC-EC)

• Section 333 Exemption from SAC

• 159 granted out of 1,096 received

• 6 month process via Federal Register

Law enforcement, companies, civil

groups, universities (Sec.

333)

• Below 400 feet AGL

• Weigh no more than 55lbs

• Remain in visual line of sight (VLOS)

• Avoid major airports (< 5 miles away)

Conform to model aircraft rules

2014 2015

Opposition by Airline Pilots Association (ALPA), National Agricultural Aviation Association (NAAA), with pushback by Small UAV Coalition.

“[I]t is vitally important that the pressure to capitalize on the technology not lead to an incomplete safety analysis of the aircraft and operations.”

–ALPA Congressional Testimony, March 24, 2015

Source: FAA and Center for the Study of the Drone

Types of Section 333 Exemptions, as of April 6, 2015

Mar

ket

form

atio

n

Mergers and Acquisitions, partnerships

Lobbying

Innovation (IRAD)

The commercial market for drones is made

universities

the state (national, state, and local)

regulatory agencies (most importantly the FAA); and).

“They’ll let somebody small, like an Aurora, or someone like that come forward and establish a foothold. It’s much easier for them to acquire than to develop that market”—Interview

Google acquisitions:

2007: ImageAmerica (undisclosed)2013: Waze $966 million2014: SkyBox $500 million (mini satellites)2014: Titan Aerospace (undisclosed) (HALE drones)

2014: Ascenta $20 million (HALE)

Amazon’s Prime Air

Source: ARK Invest 2015

“At $1 per package, Amazon’s internal rate of return on its UAV investments should exceed 120%. Because delivery of a five pound package will cost $0.14, the margin will allow Amazon to break even after the first year.”

New terrestrial geographies

Built upon older military-industrial complex

But less concentrated, more contested:

“There isn’t a Silicon Valley for unmanned aircraft” –Interview

Source: CB Insights

3. Implications and discussion

• Drones as general purpose technologies

• Pervasive, improving, innovative

• Accelerate economic production and consumption

• Uneven benefits

Aerial filming, research, inspections for insurance, motion pictures, imaging

construction sites, mining, gas, oil, wind turbines, real estate, agriculture, surveys,

telecommunications, patrols, bridges…

Constant innovation. Since 2013 DJI:

Phantom, Phantom 2, Phantom 2 Vision, Phantom FC40, Phantom 3 Professional,

Phantom 3 Advanced

Technology contributing to the wage-productivity gap?

Mark Zuckerberg, CEO Facebook on the next 1 billion people online:

“If we connected a billion more people to the Internet, 100 million more jobs would be created, and more than that would be lifted out of poverty”

Conclusions.

“What’s becoming increasingly clear is that whatever the next war is, it is unlikely to have such permissive airspace as to allow us to fly our current generation of UAV’s with the impunity they enjoyed in those conflicts.” (Interview 2014).

– A “post-permissive” environment beyond the military– Contesting regulations– New economic landscapes of constant innovation