Regulations Matter: 3 Regions Crushing the U.S. in Drone Industry

While the FAA worries about registering drones weighing more than a half-pound, the drone industry has given up waiting and is steadily moving forward with innovation and investment.  They’re just doing it outside of the U.S.

Intel warned FAA regulators last year that harsh regulations might push them out of the U.S. to pursue the drone sector, saying that other countries were actively pursuing their business.  That may happen; but even if Intel doesn’t shift its headquarters overseas, its drone dollars are already flowing across the border.  The company holds investments in Hong Kong based drone manufacturer Yuneec and has just purchased the German company Ascending Technologies.  Other drone investments include the US-based company Airware, creating operating systems for commercial drones – who, the WashingtonMonthly reports, has to actually sell most of its products overseas.

The US has lagged in creating a framework to support the drone industry, and it isn’t clear whether commercial regulations – whenever they are finalized – will help or harm the sector.  But in the meantime, other regions are moving ahead to capture the wave of investment and innovation: Europe, Japan, and Brazil are forming regulations designed to attract and keep the drone business.

Europe has its share of tangled bureaucracies, and has suffered for years from disjointed approaches to financial and other legislation.  But when it comes to the drone industry, they have something invaluable to offer: a united front.  The European Aviation Safety Agency (EASA) addressed the drone industry in it’s Vision 2020 statement (something like the FAA’s infamous integration roadmap.)  The Vision 2020 statement says:

“…when national authorities have a lack of resources or expertise, they should be able to delegate some of their oversight functions to other authorities or to EASA, in order to make sure that no safety risks are overlooked. The Agency also proposes that, on a voluntary basis, Member States can decide that their State aircraft (excluding military) can be covered by EASA. The proposals also include the extension of the Agency’s scope of intervention in new domains, such as airport ground handling, RPAS (drones) and security, in order to cover in a comprehensive way all aviation safety related topics.”

This means that developing European countries without the expertise to deal with the commercial drone industry can rely on the EASA to craft policy – and a universal policy approach effectively means that commercial drones produced in one – or more than one – European country can be sold across Europe.

In addition to the benefits of teamwork, the EASA approach differs significantly from that of the FAA.  Instead of regulating drones with a broad brush (all drones between .55 pounds and 55 pounds, for example) the EASA regulates drones according to risk category.  Lightweight hobby drones that pose the lowest risk are lightly regulated: others are evaluated according to use and capabilities.

Japan has taken a different  – but promising – approach to regulation.  Prime Minister Shinzo Abe promised to slash drone regulations at a development conference in November, saying that drones were part of the 4th Industrial Revolution and critical to Japan’s economic future.  Since then, four different sets of regulations have been passed concerning drones, highlighting one stunning difference between Japan’s drone legislation and that of the US: Japan moves quickly.  While the Japanese have the same concerns over security and personal drones that citizens here have – a drone carrying radioactive material landed on the roof of the prime minister’s office last spring, resulting in a ban on hobby drones in cities – regulation has been targeted, leaving the commercial field open for business.  Only weeks after the ban on drones in heavily populated areas was announced, Japanese legislators followed up by creating special de-regulation zones to allow for the testing and use of drone technology.  U.S. company Amazon is only one business taking advantage of them – Amazon will test its delivery service not here in the U.S., where regulations prohibit it, but in Chiba, Japan, a de-regulation zone perfect for the purpose.  Not a month later, Japan announced yet another proposed adjustment to support the drone industry, this time designating specific radio frequencies for the specific use of drones to enable better transmission of high-res video.  In addition to designating specific frequencies, the proposed legislation – which should go into effect this summer – would raise the current cap on radio signals specifically to assist drone technology.  While the ban on consumer drones in Tokyo persists, Japanese legislators are doing their part to actively create a flexible business environment for the drone industry.

Third on our list is Brazil – or in fact, most of Latin America.  Brazil is a growing consumer of military and defense drones – which they are not purchasing from the U.S.  The Latin American Aerospace and Defense Exposition in Rio de Janeiro last spring illustrated that, as the Expo grew but the U.S. presence was diminished due to U.S. companies’ failure to win South American defense contracts last year.  According to AIN Online,  “Brazil has decided to equip its Gripens with a set of almost entirely non-U.S. weaponry and systems,” instead using equipment sourced from Europe, Asia, and Israel.  Some of the European companies who won Brazil’s business have now put down roots there: most notably, Swedish company SAAB joined Brazilian aircraft manufacturer Embraer to jointly develop drones.

Brazil has two things to offer the drone industry – the first is a robust and hungry military and government market.  Fusion.net reports:

Brazil leads the pack in attracting foreign technology and investment in unmanned aerial vehicles and systems. Its booming defense budget, forecasted to expand by US$10 billion to US$41.1 billion in 2020, has brought leading aeronautics companies to see Brazil as a growth engine for the industry…. In June 2014, Brazil also became the first Latin American country to export home-grown UAVs, when São Paulo-based Flight Tech announced that they won a contract with two undisclosed African countries for a fleet of FT-100 Horus Mini-UAVs.

The second is regulation – or the lack thereof.  While Brazil does have some drone regulations, the government does not take the role of heavy enforcer.  Instead, the government uses drones heavily – by security forces and law enforcement; in a well-publicized push to eliminate the problem of slave labor by using drones to survey industrial areas; and most recently as aerial lifeguards at Brazil’s crowded beaches this season.  Brazil’s huge agriculture sector has embraced drones as tools; the mining and construction sectors also use them.   As the public becomes accustomed to the services and economies that drones provide, focus has shifted away from the dangers and towards the benefits of drone technology.

While we in the U.S. watch drone investment flow overseas to other regions, we can discuss the question of which of the above regulation strategies might work here.  The use-based risk evaluations of Europe make sense; Japan’s fast moving regulation show that they are flexible and demonstrate clearly their commitment to the industry.  While Brazil’s lack of regulation seems an unlikely sell here in the U.S., the fast adoption of the technology by the public sector has contributed to the acceptance and progress of the industry.  It would seem that almost any strategy might be preferable to the lack of one the U.S. offers today.