It’s Not Economics Diminishing Drone Delivery

Business

Two days ago, New York Times tech newsletter writer Shira Ovide published an article with the title, Where are the delivery drones. Ovide asserts that for the foreseeable future, the opportunity and scale of drone deliveries will continue to be a disappointment. Although I agree that the industry overpromised early in its development, the piece’s overall opinion—that the reason is because the economics don’t make sense or that the value to society isn’t real—was way off base. Below is a breakdown of where I believe the UAS industry, and certainly I, have a different opinion.

Ovide writes:

The bottom line: For the foreseeable future, drone deliveries will be handy in a limited number of places for a small number of products under certain conditions. But because of technical and financial limitations, drones are unlikely to be the future of package delivery on a mass scale.

She misses one key point that really undermines her argument. Regulatory limitations in most countries have largely scared away investment and made the type of innovation necessary for rapid, but safe, rollout take much longer than it could have. In those countries where regulators have been able to approve scaled drone operations, as the article does warrant, drone delivery has been extremely successful in enabling disconnected populations to receive life-improving services. The difference there was not that people or institutions are willing to pay more (in fact the alternative modes of transportation are generally motorcycle delivery or similar truck-load deliveries with far lower labor costs) but that regulators have largely been more open to new approaches and have seen the societal value of on-demand, just in-time, delivery.

Ovide asserts: “Drone deliveries are a significant improvement for some tasks, like bringing medicine to people in remote areas. But that’s less ambitious than the big drone dream Bezos and others pitched to the public.”

Rural communities across the globe, including in the United States, suffer tremendously from an imbalance in investment for logistics. For example, In Alaska, 82% of the state’s communities aren’t connected to a highway or road system. Where logistics networks are connected but low functioning, costs and wait times aredouble or triple to get the same goods to where they need to go; the prices are higher to the consumer, or the services don’t exist. Drone delivery has already proven its value in ensuring that “where you live, doesn’t determine if you live.” Drone deliveries in Ghana and Rwanda have reduced blood shortages, vaccine stockouts, and system-wide wastage by numbers that donor groups and NGOs have sought for decades and at a fraction of the institutional cost associated with systematic rewiring.

In a recent third-party study funded by the Bill and Melinda Gates Foundation, one drone company was found to have the following impacts:

1. Services increased the number of products stocked by facilities by 9.4% (10.24 products in control to ~11.2 products in treatment, out of a total of 18).

2. On average, across all 18 products, regardless of which products facilities chose to stock, … services reduced the percentage of days without a medical product by 5.7 percentage points compared to 50% in control group.

3. [services] reduced instances of sending patients seeking vaccinations away due to stockout. The service reduced instances of patients not getting vaccinated because of stockout by 10 pp compared to the control group (25%), representing a 41% reduction compared to the control mean.

To say serving remote communities is less ambitious demonstrates an urban bias that ignores the real challenges facing underserved communities across the U.S. and abroad, who simply can’t access on-demand delivery in less than 3–4 days.

Ovide writes:

Mini aircraft that operate without human control face two significant obstacles: The technology is complex, and governments have required lots of red tape — often for good reason. (In the U.S., regulatory issues have largely been worked out.)

Dan Patt, an experienced drone engineer and a senior fellow at the Hudson Institute research group, said he and I could make our own delivery drone in a garage in about a week for less than $5,000. The basics aren’t that hard.

To say that regulatory issues have largely been “worked out” is probably the greatest misunderstanding in the entire piece. Regulatory issues in the United States have to-date enabled only close range, non-commercial deliveries under 14 CFR Part 107 (low risk operations), and commercial operations with unique exemptions limiting scalability. A recent rulemaking effort, the Beyond Visual Line of Sight Aviation Rulemaking Committee — founded with the understanding that, “the FAA’s existing regulatory framework must change to better support the long term viability and sustainability of this evolving aviation sector” — sought to create recommendations for a future regulatory framework more appropriate for scalable, safe drone delivery. Bottom line: Neither government nor industry view the regulatory issues as solved.

Ovide writes: “We keep making the same mistakes with automated technology. For decades, technologists kept saying that driverless cars, computers that reason like humans and robotic factory workers would soon be ubiquitous and better than what came before.”

Finally, I’d perhaps agree that driverless vehicles are taking time to change the road, but just because what was promised isn’t the first stage of technological evolution doesn’t mean that those in industry should be dismayed. Driverless vehicle technology has led to driver assist technology that exists today and parking assist innovation that reduces traffic in major cities, affects carbon reduction efforts, and reduces avoidable accidents. Rather than having computers that reason like humans, AI has enabled computers that spot cancer well before doctors could, and co-robotic factory workers are commonplace throughout a vast majority of all manufacturing industries driving production, reducing costs to consumers, and bringing previously unattainable goods to new markets.

It’s clear by the organizations still investing in, and betting on, drone delivery that the need for safe, efficient, sustainable, last-mile delivery is growing and that the technology continues to evolve rapidly, other issues beyond economics are to blame. The fact that Amazon, Google, Walmart, Jumia, and UPS all see drone delivery as important to their future operations is a significant proxy for belief in the economic viability of drone delivery. So, before you write a piece arguing that drone delivery, or other similar technologies, doesn’t make sense, please do just a little bit of research on ANY of the claims you’re making and perhaps speak to experts first.

Frankly, anyone in their garage CAN build a $5,000 drone and conduct a flight — to not deliver something, to a non-paying customer, not very far away, one time under the current regulatory and economic setting. However, to successfully meet customer expectations, to realize a highly complex vision of on-demand teleportation for anyone, anywhere, the reality is a bit more … complex.

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