By the Blouin News Business staff

The commercial drone finds its proven visionary

by in U.S..

prime-air-drone

Photo Credit: Amazon.com

Did buying a newspaper heighten Amazon.com’s chief executive Jeff Bezos’ sense of the value of a well-timed headline? His eve-of-Cyber-Monday revelation that the online retailer was testing drone delivery was timed to perfection for the outburst of buzz that followed on the U.S.’s busiest online shopping day of the year. It also returned the feel-good factor to a company that has been getting some negative ink for its labor practices and a wage dispute with its workers in Germany.

Amazon’s video of a demonstration of the futuristic concept hit 4 million views within 20 hours of being posted on YouTube. News outlets, including this one, it must be said, found it an irresistible story — Bezos, drones and a Jetsons-like vision of the future, plus a video of it seemingly working. What more could a news editor want? The reality check is that there is a host of privacy, safety, technical and regulatory issues to be addressed before Amazon Prime Air, as the service has been dubbed, can be a working reality.

The privacy issues have been heightened by outbreak of concern worldwide over national intelligence agencies’ surveillance operations — though now anyone with a hobbyist drone and a GoPro sports camera (available for less than a combined $1,500) can pretty much spy as he pleases. Privacy is, however, a serious issue that commercial drone operators already say is holding back development of the industry. In the U.S., the state of Virginia, for example, has imposed a two-year moratorium on drones in its airspace because of privacy concerns.

The safety issues are twofold. The first is ensuring the self-driven, GPS-guided devices don’t fall out of the air or drop their payload regardless of the day’s weather. The second is ensuring they don’t hit anything untoward either en route or in landing: power cables, birds, buildings, other drones, customers, customers’ pets or swimming pools being some notable examples. Cost-effective, reliable “sense-and-avoid” technology will need to be developed further.

That, though, will be easier to achieve than solving the regulatory issues. Bezos mentioned a date, 2015, which would be the earliest his octo-copters — so named for their eight electric engines — would be able to operate commercially. That is the year in which the U.S. Congress has asked the U.S. Federal Aviation Administration to produce rules for the use of unmanned aircraft in U.S. airspace. Given the fact that drones have proven to be an explosive domestic issue even in their foreign-wars incarnation, a sky full of non-lethal Amazon delivery bots could well bring with it the potential for a similar backlash. And another massive regulatory fight is the last thing the Obama administration needs now, in any case, as it will be coping for the foreseeable future with fallout over the Affordable Care Act’s disastrous rollout.

Commercial drones have the potential to transform dozens of industries, not just the retailing one Amazon has spawned, in ways that could reshape conventional ideas about shipping and logistics, and even distance.

Indeed, these rules were requested with the burgeoning U.S. commercial drone industry in mind, but it is unlikely that lawmakers had imagined a giant fleet of Bezosbirds delivering books and everything else weighing less than five pounds (the prototype’s maximum payload, though that, the company says, would be sufficient for 86% of Amazon’s deliveries). Amazon closely guards information about how many packages a day it delivers, but a back-of-the-envelope guesstimate based on its reported 2012 shipping costs and percentage of sales in the U.S., and an arbitrary assumption about the average cost of each one, gives a conservative estimate of 1.2 million dronable deliveries a day in the U.S. on average.

The skies would be thick with drones, all the more so if rivals like Wal-Mart and eBay adopt the technology, too.  At the very least, there would likely have to be designated clear corridors along which commercial drones could fly, much as there are flight paths for civil aircraft over cities. This runs counter to Bezos’s big talk about delivery drones becoming as ubiquitous as mail trucks on the streets (by way of comparison the U.S. Postal Service has nearly 213,000 vehicles).

Another critical dimension of their commercial adoption is the economics. Although Amazon has ducked making any cost comparisons, it is far from impossible that unmanned to manned delivery could be a cents to dollars comparison, though there are a lot of elements that go into that equation. It would certainly be prudent for Amazon to lessen its dependence on a consolidating parcel-shipping industry, which could potentially hold it hostage over price or logistics.

Meanwhile, it is easy to see the marketing advantage Amazon could get over rivals in the battle to shorten delivery times. Bezos seems to be driving his relentless pursuit of customer satisfaction to as close to the point of instant gratification as a shopper would get buying goods over the counter at a store.

Bezos talked of a customer within 10 miles getting a drone delivery within 30 minutes of placing an order online. Unless or until Amazon develops delivery drones with longer ranges, that would point to a hub-and-spoke delivery system with the drones covering the last 10 miles from an Amazon fulfillment center — and the safety concerns related to crossing those populated areas would give an aviation regulator nightmares.

Longer-range commercial drones are certainly in the future. Both FedEx and UPS have been monitoring the use of a remote-controlled helicopter being used by the U.S. Marines in Afghanistan to carry payloads of up to 6,000 pounds. It is not impossible to imagine a future automated logistics system in which Amazon would drone deliver in bulk to a local fulfillment center where the load would be broken down by robotic stevedores for local delivery by small drones.

That could be transformative for its costs. Amazon is crystal clear about the importance of shipping costs to its profitability. “We believe that offering low prices to our customers is fundamental to our future success, and one way we offer lower prices is through shipping offers,” it said in its most recent annual report to shareholders. “We seek to mitigate costs of shipping over time in part through achieving higher sales volumes, optimizing placement of fulfillment centers, negotiating better terms with our suppliers, and achieving better operating efficiencies.” Send in the drones.

Commercial drones have the potential to transform dozens of industries, not just the retailing one Amazon has spawned, in ways that could reshape conventional ideas about shipping and logistics, and even distance. They are being looked at for applications as diverse as law enforcement and agriculture as well as cargo delivery. According to the Teal Group, an aerospace consultancy, the global market for commercial drones is likely to double over the next decade from $5.2 billion to $11.6 billion by 2023.

Their manufacturers see drones as being at the equivalent stage to where computers were in the 1980s. In the scale of outlandish ideas, delivery drones don’t seem nearly as unlikely as Bezos’ original idea for an online retailer. Waterstone’s, the U.K. bookseller that is typical of the business that Amazon has disrupted so devastatingly, put up this parody version proposing delivery by owl. An amusing bit of gallows humor, certainly — but Bezos is dead serious. Commercial drones have found their popular champion.