 One of the questions that was posed earlier was to what extent Drones will become ubiquitous or will remain a niche technology and the most persuasive case I've heard for for the sort of coming ubiquity of drones was made by Daryl 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 Daryl speak and you all will earn for a treat. So I really appreciate the opportunity to be here today My background is in commercial aviation about three years ago AUV SI Called me up and asked me to do a economic impact study on integrating drones into the NAS which which I originally turned down For the simple reason I'm an econometrician 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 to think about that since we certainly would do it differently now And I'm gonna talk about that I've actually formulated it the list is expanding matter of fact Joe Ironman 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 I'm gonna kind of give you a critique What 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 I'm gonna skip through some of these 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 to we are we going to need and how many drones are we going to have in the air 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-hour tech class that I took was slide rule Now the young kids in here you probably don't even know what a slide rule is. Oh, do you? All right, we don't use them anymore All right Technology is changing very rapidly now one when I was a little boy technology changed Technology refresh was measured in terms of decades now. It's 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 cost all right. That's that's number one We're going to go through these and I'm going to give you rationale now appreciate the fact that I am data 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 and I want to think of this not only commercial But all drones in general Exist because they are less expensive and this applies both military governmental and commercial the United States government with the drones because they're cheaper it cost a couple million dollars to Train a a pilot it costs two hundred thousand dollars to train 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 seven three seven eight hundred nine hundred something like that Are kind of unique? All right. I think your batteries running down Is there a 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 is simple all right. They're less expensive to buy than airplanes and helicopters Their use seeds of expensive fuel is low All right Training costs are considerably lower Jonathan. How long how much did it cost you or Rob to learn to use a DJI phantom? Lower cost this this reduces costs from your black hour 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 at least double I believe that all right and here's some reasons why Pin 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 AUV si initial study Chris Malley and I assumed a Lifespan of a drone of 10 years Well 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 line of sight 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 all right To autonomous operations the economic impact increases each time by an order of magnitude Okay, now I'm gonna just explain this one intuitive Uh line of sight drones or are small and inexpensive Right 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 15 to $30,000, 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 line of sight All right now the number of operations for autonomous is excessively high Okay, I'm gonna take you through some things here Let's just use Amazon as an example and I'm gonna first take you through what we know about them Then I'm gonna take you through what 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 85% 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 knock it down by an order of magnitude 30 to 50 All right, because when you forecast you want to be conservative We multiply that by 60 seconds per minute times 60 Minutes per hour by 24 hours per day. Let's 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 interesting Who 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 believe that it 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? 40,000 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 a Ascentope here going up to a limit sober 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 amortizing their software and their Hardware over very large numbers It's going to probably drop down towards about a block 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 in the perspective All right. Oh six 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 you're bright You are bright and 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 No all that being said young man who is bright and who I have a fondness in my heart for All right, how are we gonna do this kid? I don't know. All right. Does anybody in this room know? Yeah, okay, and 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 gonna build this system? Who's gonna operate it? Who's gonna 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 gonna come up with protocols Who's gonna regulate it? Well, I'm pretty sure the only one I know and the answer to is the last one It's probably the FAA but who's gonna do the others? All right. All right big questions Big questions, okay Do we expect the FAA to come up with solutions? Well, they don't have a budget They don't have manpower. All 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's excessively bright and I trust him If the commercial drone industry is to develop and grow It's gonna be because the stakeholder involvement and we all have to be More involved than we have ever been before now somewhere around early September I'm gonna do a webinar Where I'm gonna 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 It's a pleasure also I didn't see him and as he was coming up in the room before to introduce Bradford Foley from Gannett who is Former Air Force pilot and still flies for the US government in the reserve, I believe yes But flies remotely piloted aircraft I have one of the many synonyms for these airplanes we're 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 Daryl will chat for a little bit, and then we'll take some questions from the audience Okay, so I'll Stand there I'll sit here so I Was an Air Force pilot flying emcee 130's 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 US senator, but I'm looking for a reserve job I get this call from a guy by the name of snake Clark is 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 AVs and I said you don't pilots. We don't fly UAVs. We fly airplanes We're not gonna fly you so in 2006 I got I went to my reserve position over at the 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 for the last nine years and that interesting part of my job is and the reserve was having every conceivable Industry come in and say we got this we got that we do this we do this we do this scratch your back with all this information and technology so I Getting out. I said, well, you know what I should probably start a company and I started a company with a bunch of guys out At 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 him here You see test him over in Afghanistan and the technologies are pretty pervading So the point is the technologies that we have used in the military and developed that we have one for one brought into the commercial use of UAVs and and is exploding and the UAVs and the commercial side From the platforms to the data integration capabilities to the sensors you have on board are just unbelievable And if thinking the objective here is just to kind 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'll go 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 a side of 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 mandarin systems can do and so the community And I think the general public have begun to accept the utility of these drones And not only that but see the for businesses. They've seen the cost effectiveness I mean they're really you go out and buy a in our 3d robotics quadcopter for $999 or you can use a helicopter on an annual or a weekly or monthly basis and spend a lot of money doing that to get the Same aerial photography that you may or may not want And so the great other thing about this and why it's exploding so much is the fact that today It's so it's cost-effective, but the technologies it really are very basic in the software the firmware 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's has been a next generation from what we saw in The modeling community So so I think the bottom line of the commercial use is it really is ascending It's getting bigger and bigger now the regulatory piece is really the long pole in the tent That's the part that's 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 FAA not having rules for this and you know There's a reason for getting into this thing It's called safety and efficiency, and he's done a very good job of where we are today Particularly now one thing that they didn't do was keep to any of the timelines dictated by public law 1295, but you know what Congress doesn't do their job either so And I'm not anybody in the room could say Congress did something that they said they were going to do is is hard to find so The bottom line of the regulatory piece if you look at what's happened They put out their proposed the proposed rules back in February, but they they did put out their 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 nodes proposed rulemaking is You know a lot of people thought because I don't have people familiar with the 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 the FAA and you're certified to fly these things that the private pilot's license has gone 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 have you know 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 what they call the certificate of authorization is 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 section 333 exemption You I think you had to deal with a law firm today. There's 822 as of Monday Exceptions that the FAA has put out there There's 822 examples if you're 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 aren't in a positive trajectory now I will say one last thing the challenges still do remain everybody in this room has probably heard of detect and avoid the detect and avoid the type of avoid capabilities and how that Applies to be on my side 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 In terms of reference just give you to where the military is on the detecting void capabilities The Pred Reaper isn't even the global Hawks have this capability. There's a 99% effective capability. It's basically a dual guard radar It's a T-Cas a DS being a transponder the problem is it's as big as a stage right it fits on a predator fits on a Reaper or a 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's makes the FA very comfortable It's gonna it's gonna be a while where the miniaturization the technology is actually fit now There's companies out there working on radar and acoustic Capabilities and they're good, but they're not really I think we're the true detect and avoid 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 that for NASA on kind of how we're gonna deal with we don't have the detective away capability But how are we gonna deal with the gap fill and so this UTM or this UAS a traffic management system and how we can actually Operate at below 500 feet with the drones and do so effectively will be presented and adjudicated You know, there's industry who are getting involved to it. Google is doing 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 FA has worked on is gonna I think Produce some good information just not just for line of sight, but extended line of sight behind my sight 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 limb and say that the SUAS or the small UAS is really beginning to come on its own the babies 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 altitude and high altitude operations This is where a whole new dynamic of industry comes into play who really were shut out of the the small UAS community who were basically developing these things in their garages and so you have these massive manufacturers and Integrators because it's gonna be a lot of integration issues that come in. So where are we going? It's it's the regular story 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 it's really on a very positive trajectory That's all I'm gonna say about that I Guess questions There's questions for Darrell on your slides and through media We hear a lot about how amazons, you know talk about the drone delivery Where are the other delivery companies in this space? Oh 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 We'll 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 considered That in infrastructure the two biggest dawning 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 be on 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 that. 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 the sense and avoid with GA and sense and avoid with Birds The those are my my concerns have almost no concerns whatsoever about Running in for a commercial guy running into a commercial airliner 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 a UBS I and nothing else other than insurance issues It was real 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 haul insurance The reason they're not willing to do haul 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 Okay, so you want some standards and you want licensing now if we have licensing a lot of the other issues that we talk 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 life blood 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 in 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 tackled these issues earlier Did I answer your question? Well, I'm not sure the answer There's you know Google Amazon there's a company called Kwee-Kwee that does that wants to do pharmaceutical delivery There's a company Flirty that just proved here recently in Virginia to deliver Mac I think matter net and Swiss post 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 were to make 200,000 drones? How much would it cost if they were to have 500,000? How much would it cost? Okay, so you can set bounds here and so I'm working on the assumption here am I working assumptions Somewhere they're going to be paying between 10 and $20,000 per drone So if you amortize that over the number of deliveries, that's where I come up with the the probably it's going to start somewhere around Two bucks and over time it's going to drift down and trend towards the dollar Okay So I Didn't pull it entirely out of my butt There is some data behind it 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's going to be worth they're going to have a market cap of a trillion dollars. How do you maintain that? This is how you maintain market caps of a 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 this system going and I'm not even I think they could probably go 10 miles All right, so if you're talking a 50-pound drone With a 4.5 pound package, which is your max How far given current batteries can you travel? All right, well 10 to 15 miles more or less Not not beyond that. So what I think we have in this number is 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 to scale by going from a hundred thousand to five hundred thousand Then that that cost curve goes down drastically again. Did that answer your question? I think you alluded to the fact that if Amazon is going for a one trillion market cap Then they essentially have to cash to do this development Whereas a lot of whereas in comparison other delivery delivery companies may not have to cash Okay, and you're correct on that they have the cash. I mean Amazon read their annual report They have the ability they get 30 days credit from all their 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 bokeh cash And so the reason I use 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 of the trillion dollar market cap, which they're approaching right now And so there they're the ones or a Google or something like that Who's also cash flush right now who have the ability to go out and change markets and make things like this happen? We're getting am I approaching an answer to your question asymptomically yet All right perfectly good question. Thank you. Yes. I am willing to adopt you Since the economies of the 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 Okay, here's here's what I They would most likely are 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 assembling 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 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 a 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 airspace that high up you're talking about pretty significant winds So you have to have pretty robust engines so The CO2 emissions itself Yeah, I don't know the answer to that. Well, I certainly enjoyed being here and I hope to go to Peru someday