SPECIAL EDITION of Dronin' On - 7 Forces Transforming the FAA and the UAV Industry

Hi all –

I founded the DroneBusiness.center (db.c) to advise clients about the ideas and issues that are impacting the development of the commercial drone business.

Coming into the drone business from the tech side, I had little idea of what it meant to be in a regulated industry. Like many of you, I assumed that technology would disintermediate traditional business models and quickly change existing rules.

We were wrong – or at the very least impatient. Because despite the unending, literally priceless media coverage, commercial drones have yet to have the impact that the optimists at AUVSI, PwC and others so exuberantly (and
irrationally) forecast.

Instead, other forces have emerged that are quickly changing the rules. Which is why I have put together this Special Edition of Dronin’ On.

The combination of a new political agenda, unending opportunities to use drones, increasing technical complexity evolving along multiple paths, and the emergence of sUAS as a threat have manifested themselves in a series of seven events that have taken place in rapid succession – most in the past 30 days – something I find to be quite extraordinary.

They are:

  1. Department of Transportation OIG Audit (12/2016)
  2. Recent decision on registration (Taylor) (5/2017)
  3. The proposed Drone Federalism Act (5/2017)
  4. Proposal to standup the ATC as a separate organization (6/2017)
  5. The 2017 FAA Reauthorization Bill (6/2017)
  6. The proposed Drone Security Bill (5/2017)
  7. The trend towards bundling of autonomous vehicle regulations (4/2016)

Together they beg the question, Quo Vadis, where does the FAA go from here?  

And what does it mean for the commercial drone business?

It is too early to draw many conclusions, but it is certainly an interesting time to begin connecting the dots. Because what emerges is likely to shape our industry for years to come.

While this is in no way intended as an apologia (a formal written defense) I think a strong argument can be made that under President Obama, Secretary Foxx and Administrator Huerta’s leadership, the FAA has done a great deal to nurture
our industry.

What has happened in the past few months is that many of the underlying assumptions have changed. The ground is literally shifting beneath us and now extends far beyond the FAA’s mission of civil aviation safety.

1 – Department of Transportation OIG Audit

In a report published December 1 2016, the Inspector General of the Department of Transportation published FAA Lacks a Risk-Based Oversight Process for Civil Unmanned Aircraft Systems. The conclusion, which I have abridged, is telling and in retrospect a harbinger of more recent developments:

“While FAA has taken many steps to advance use of UAS, the Agency has not yet established a risk based approach to UAS oversight to most effectively identify and mitigate UAS safety risks…Unless FAA can adopt a more proactive approach to civil UAS oversight, the Agency cannot ensure that approved UAS are operating safely in our airspace.”

I can’t tell you what impact this had on day-to-day operations because it is not the sort of thing that is routinely reported. I do know that the FAA is all about a data-driven Safety Management System (SMS), so I was surprised to read this.

The real problem is that you can’t mitigate risks until you have enough data to identify them. The Unmanned Aircraft Safety Team (UAST), which was announced at the White House Drone Day in August 2016 was created to help gather that data.

Looking ahead, one implication is that new regulations will be required to facilitate the capture of more data – a new approach to registration, electronic identification and ultimately UTM are all likely future data sources.

2 – Recent decision on registration (Taylor)

The Taylor decision is the focal point, but the larger issue here is credibility  – a repeating theme throughout this analysis. I believe that in part this is the result of a very practical decision to focus on education instead of enforcement.

While I cannot say with certainty what caused the FAA to act in October of 2015, I have always assumed that it was a reaction to the gaudy forecasts for Christmas 2015 drone sales.

Despite what the Court has since ruled was a clear admonishment by Congress not to do it – “Statutory interpretation does not get much simpler” – the FAA decided to register recreational (model/hobby) drone owners with the stated goal of being able to educate new aviators.

That they did this hastily is a matter of record. And as I wrote at the time in 10 Things I Think About The Registration Initiative, in my opinion, it was poorly thought through.

Despite that, as of May 23rd, 764,830 recreational owners have registered – but as a single registration can cover any number of aircraft, we have no idea how many drones (as opposed to drone owners) are registered. Or what kind they are. Or how they are used. Or even how old the registrants are.

The question is, will there be a new registration system? We’ll get to that.

But first, let’s consider the question of credibility.

Today if one peruses the pages of social media, you will find a very real division in the drone world – the casual versus the committed.

All of them, except for the few still flying under a 333 – regardless of skill or knowledge – are operating under the same rules – RPIC, no observer, 400’AGL, 55 pounds, 100mph, VLOS, daylight. Yes there are waivers but this is the universal going in position.

Based on the lack of enforcement and prosecution, people routinely express a high degree of certainty that there will be absolutely no penalty for doing whatever they want to do.

There are those who since the Taylor ruling (40%+ according to a recent survey on Facebook) say that there should be no registration requirement for what is portrayed as a lifestyle hobby akin to photography. We might call them the “fly free or die” crowd. They are for the most part recreational users.

There are also many commercial users who have invested the time and money to pass Part 107 and become certified. And having drunk the Kool-Aid, are buying drones and trying to build businesses around this emerging opportunity.

A lot of these folks are irate with the FAA.

  • Because the FAA has done nothing to create or protect the value of their Part 107 certificates by cracking down on unlicensed competitors.
  • Because the FAA has not showed up in court for things like DroneSlayer case where drones are being shot out of the sky – a clear violation of the FAA’s own rules.
  • Because the FAA cannot respond quickly enough to their requests for authorizations and waivers.

At the other end of the spectrum are those who say that we absolutely need registration as a precursor to additional regulation such as electronic identification. This includes most of the associations that represent themselves as the “voice” of our industry. Since many of these folks have offices on K Street and in Arlington, one suspects that they recognize that in this political climate, registration is inevitable.

But unless the FAA appeals and wins the Taylor ruling, it is going to take an act of Congress to change Section 336 of the FAA Modernization and Reform Act of 2012. Until then the great majority of new drones sold will not be registered.

3 – The proposed Drone Federalism Bill

Since the beginning, the FAA has steadfastly maintained that it alone has the authority to regulate the air from the dirt to the heavens. In December 2015, it issued a State and Local Regulation of Unmanned Aircraft Systems (UAS) Fact Sheet to support its position and to provide guidance to local governments.

As I report almost every week, this has done nothing to stop irate or panicked or simply meddlesome constituents from putting the arm on their elected representatives to “do something about those awful drones.” It is politics in its purest form.

As a result, dozens of states and hundreds of county and municipal governments have ignored the FAA’s “Facts” and proposed, considered and often enacted their own laws creating what the FAA has coined “the patchwork quilt.” (Later we will see that similar problems surfaced regarding the state regulation of
autonomous vehicles.)

This has caused a lot of handwringing among a wide range of industry visionaries like Amazon who know that such laws will greatly increase the cost of compliance, and DJI who for a time saw everything as a threat to sales.

Now, as I reported last week, on May 25th Senators Dianne Feinstein (D-Calif.), Mike Lee (R-Utah), Richard Blumenthal (D-Conn.) and Tom Cotton (R-Ark.) introduced the bipartisan Drone Federalism Act which basically seeks to take control from the FAA and give it to the local governments

S.1272 – A bill to preserve State, local, and tribal authorities and private property rights with respect to unmanned aircraft systems, and for other purposes.

The bill is now sitting in the Senate’sCommittee on Commerce, Science, and Transportation.

The bill modifies Section 336 of the FAA Modernization and Reform Act of 2012 to require that drone operators secure permission from landowners to overfly their property below 200’ AGL. This applies to both recreational and commercial pilots.

Jonathan Rupprecht breaks it down here.

As I tweeted earlier this week “Politics makes strange bedfellows.” Heritage Foundation favorites Jason Snead and John-Michael Seibler have come out in support of the bill in their editorial  Drones Are About to Revolutionize Our World. This Bill Will Let America Lead the Drone Economy.

The bill takes a novel approach, recognizing and balancing the interests of federal officials in maintaining airspace safety with the responsibility of local and state governments in policing conduct within and among their communities, and with private property owners who may not be keen on drones routinely buzzing
their backyards.
 

There are a growing number of articles in the pro-drone press that are
strongly opposed.

But the bill enjoys the support of the very powerful and well organized National Governors Association and other national associations. Given the Republican penchant for offloading to the states, together with the strong desire for local regulation, it will require a sophisticated and coordinated effort from our industry to effectively lobby against it. Something we haven’t seen yet. With a nod to Patrick Egan, perhaps this will mark the end of “squandered” opportunities.

And now on to the runways.

4 – Proposal to standup the ATC as a separate organization

Ms. Chao’s artfully timed announcement at the Drone FocusConference last week made it clear that the Trump administration intended to separate ATC operations from the FAA’s business of policy and regulation.

A few days after Ms. Chao’s address, President Trump announced his plans to make overhauling the FAA the cornerstone of his infrastructure plan.

Miriam McNabb writing for DroneLife.com neatly summarized the
President’s position:

Trump has been sharply critical of the FAA and chief administrator Michael Huerta, earlier this year saying that the FAA’s NextGen program was “out of whack,” and commenting that he’d like to see a pilot in the Administrator position. In this morning’s speech, Trump said that the air traffic control system was “ancient, broken, antiquated, horrible.”  Calling previous efforts to update systems a “waste of money,” Trump said, “Honestly, they didn’t know what the hell they were doing.”

WaPo reports that “The president’s proposal transfers responsibility for providing air traffic services from the FAA to a private, nonprofit organization.Trump’s plan is based largely on legislation crafted by Rep. Bill Shuster. [But has significant differences.] The Pennsylvania Republican, who heads the House Transportation and Infrastructure Committee, pushed for privatization last year but his efforts stalled. Presidential backing gives those efforts new life.”

Students of the game will remember that last year Shuster couldn’t get his AIRR bill out of the House, leaving the Senate to draft what ultimately became FESSA, the FAA Extension, Safety and Security Act of 2016.

This week Ms. Chao was up on the Hill trying to sell the idea of “liberating” the Air Traffic Control system from safety which she positioned as “an oversight issue.” She met a skeptical reception. Her punt was that “they” were prepared to work with the Congress which portends a long road to hoe.

You can watch her testimony to the House Committee on YouTube. On the chat stream, someone commented that “She is not convincing at all. She has very few answers, and it seems like she has zero plans to put forward.

Aviation Today has summarized the industry response here.

Aviation Week has a podcast with their editors exploring the issue in some detail.

Frankly, I wonder why the decision was made to invest the political capital that it is going to take to try and make this old dog hunt.

Because it is impossible to see how this will be perceived as a win to those who voted for a trillion-dollar infrastructure program expecting blue collar jobs and a pothole free commute. And it is even more difficult to conjure why this will be remembered as a good thing when you are stuck in the cabin on a gate hold, or your flight is delayed.

In addition, new voices are emerging seeking to broaden the privatization concept.  A UAS consulting group called Safe Access UAS has recently published Dysfunction in UAS Regulatory Safety Decision Making: Analysis and a New Paradigm in which they argue that

“Regardless what form corporatization of FAA takes; the authors recommend that safety risk analysis and assurance functions be eliminated or transferred from government to the privatized entity—not retained in government.” 

The irony is that the members of this group all spent their careers in aviation.
Et tu Brutus.

5 – The 2017 FAA Reauthorization Bill

Leaving the speculation, obfuscation and search for red herrings aside, if the doors at 800 Independence Avenue are to stay open, a FAA Reauthorization Bill needs to be passed this September.

Politico spotted the fly in the ointment in their coverage of Ms. Chao’s appearance before the Senate Wednesday.

With the administration’s support of this concept, the chances of getting a long-term FAA reauthorization in my view have now been diminished,” Sen. Jerry Moran (R-Kan.) said Wednesday, “so at some point in time the decision needs to be made by you and others in the administration — is our priority a long-term FAA reauthorization, or is it privatization of air traffic control? Because those two things may be mutually exclusive.”

If you haven’t guessed, funding is a perennial problem. The FAA has long maintained that inconsistent funding has negatively impacted the timely completion of key initiatives like the NextGen program – which they have been repeatedly taken to task for.

Now let’s bring it closer to home.

In 2016, of the 13 UAS Safety Provisions in FESSA, only one was funded
by Congress.

SEC. 2206, which deals with Pilot Projects for Airport Safety and Airspace Hazard Mitigation, was allocated $6M. One “assumes” that the rest of the initiatives were to be funded from the FAA’s operating budget, even though these were new requirements created by Congress.

If you wonder why the FAA isn’t doing more faster or better, now you know.

I also worry that if the crown jewel, the ATC is cut away, along with 2/3rds of the budget, it will be even easier to starve what is then a bureaucracy – leaving our own special interest projects like BVLOS and UTM fluttering in the funding breeze. Let us also remember that the FAA’s extremely decentralized structure exists in no small part to support ATC operations.

Since it is difficult to tell the players without a scorecard, Mark McKinnon of Dentons has just posted an invitation to attend a webinar June 29th,  The FAA Reauthorization Act of 2017: Everything You Want to Know. Timing subject to change depending on how long it takes for the bill to get out of committee.

6 – The proposed Drone Security Bill

A couple of weeks ago I shared a proposed piece of legislation from the White House,Official Actions To Address Threats Posed By Unmanned Aircraft Systems To Public Safety Or Homeland Security. This little slice of heaven has sunk from view as quickly as it surfaced, but the underlying concerns that inform the bill are not going away.

As you remember, the proposal takes a Gordian knot approach to the problem of interdicting a drone over federal facilities by eliminating both the FAA aircraft protections and the FCC strictures against jamming.

Keeping the threat top of mind is an unrelenting barrage of papers from various branches of the armed services. This week’s pick to hit is a very well thought through USAF paper, Defeating Small Civilian Unmanned Aerial Systems to Maintain Air Superiority. Here’s a taste.

“Modern small UASs are versatile and can offset many current USAF capabilities. They are free to offensively maneuver and damage the Air Force’s advanced stealth fighters and bombers, aerial refueling tankers, and cargo aircraft. Small UASs can also hold critical support facilities at risk. This “wicked” UAS problem will only
get worse.”

Despite the presence of decorated war fighters like Senior UAS Integration Advisor Marke “Hoot” Gibson, the FAA’s charter is the safety of civil aviation and the US commercial space transportation industry.

To the extent that security issues are now top of mind (trumping safety and privacy), it is not hard to imagine that the DHS could play a much more active role in drone regulation.

7 – The trend towards bundling of autonomous vehicle regulation

There is one last area that I want to touch on where the FAA’s role appears to be evolving and that is in the regulation of autonomous vehicles which is of course regulated by the Department of Transportation (DOT).

This is important because the way that autonomous vehicles are developed, tested and certified is critically important to the drone industry. As is the pace it happens at. And how and by who the initiatives are led.

In April 2016, Administrator Huerta hosted the National Highway Traffic Safety (NHTSA)-FAA Safety Forum, which was billed as a chance for the NHTSA to learn from (and adapt) the FAA’s partnership model with the aviation industry.

In September 2016, the NHTSA published the Federal Automated Vehicles Policy, “A voluntary framework for the safe and rapid deployment of these advanced technologies.

According to Morning Consult the policy “Would scrap the DOT’s “self-certification” system for driverless car manufacturers. Manufacturers would instead be required to receive “pre-market approval authority,” in which the government inspects and affirmatively approves new autonomous technologies before they can be deployed.”

In this model “States will retain control over enacting and enforcing traffic laws, as well as regulating motor vehicle insurance and liability,” which sounds a great deal like S.1272, the Drone Federalism Act.

In February, Fortune reported that Trump Administration Reevaluating Self-Driving Car Guidance. At the National Governors Association meeting, Ms. Chao said that the administration wanted to make sure that the guidelines were “A catalyst for safe, efficient technologies, not an impediment. In particular, I want to challenge Silicon Valley, Detroit, and all other auto industry hubs to step up and help educate a skeptical public.”

In May, Ms. Chao sat down with a reporter from Bloomberg for a video interview. At 05:14 she tackled the question of how to regulate drones. Giving her by now familiar nod to American creativity and innovation, she noted (and this is a paraphrase) Drones can know where they are. They can know when they cross state lines and automatically adjust to comply with the appropriate state laws.

Not much to add to that.

Meanwhile NASA has begun three studies as part of the Convergent Aeronautics Solutions initiative. “One idea is to develop autonomy-enabling algorithms that lay a foundation for establishing justifiable confidence in machine decisions and, ultimately, lead to certification of autonomous systems.”

Conclusion: Quo Vadis

So where does this leave the FAA? Let’s summarize the 7 forces in our headline.

  • The FAA is being criticized for their approach to UAV regulation.
  • The recreational drone industry is now completely unregulated.
  • If passed, the Drone Federalism Act will create a patchwork quilt.
  • Separating the ATC will cut budgets and take years to rebuild the culture.
  • Funding remains a political football with a chicken and egg situation this year.
  • The Security act is likely to force the FAA to share control with other agencies.
  • And it seems probable that the NHTSA will set the policies for autonomous regulation going forward.

So what as a UAS business person can you take away from this?

  • First, you could ask how many issues the Congress has the bandwidth to take on.
  • Because corporations require standards and certainty to invest, corporate adoption is likely to continue to be slow in industries where ROI and safety benefits are not already clear.
  • For security reasons, flights over people are still a long way off.
  • Beyond the ASSURE and Pathfinder programs it seems unlikely that the FAA will be able to do much to advance BVLOS. I would really like to be wrong about this.
  • There will be increased focus on security and CUAS across multiple agencies.
  • UTM is a NASA program that is scheduled to continue until 2019 after which the FAA will have to develop the rules and regulations. Hopefully, the test program will not be affected.
  • The million dollar question is how much time and energy the FAA’s managers will have to devote to “our” issues.

That’s my take. I will continue to cover this for you as it evolves.

Thanks for reading and for sharing this Special Edition. All of the back issues of Dronin’ On can be found here.

best,
ck

Christopher Korody
DroneBusiness.center
chris@dronebusiness.center
follow me @dronewriter

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