Matt Riley
Hackers are pretty smart people, and we all know the term porch pirate, but I think I want to coin the term sky raiders.
Narrator
Welcome to the Velocity Podcast, brought to you by management consulting firm Oliver Wyman. In today's episode we are joined by Anthony DiNota and Matt Riley as they have a conversation around how drone operators should focus on delivering packages before people. They will explore safety and privacy and give an industry update. Thank you, and we hope you enjoy the show.
Anthony DiNota
Hello and welcome everyone to the Velocity Podcast. I'm Anthony DiNota, vice president of Oliver Wyman CAVOK and I'm joined by Matt Riley, senior manager also at Oliver Wyman CAVOK. Matt, thanks for joining me. How are you doing today?
Matt
Hi Anthony, good morning, doing well. I'm excited to be back on the show, speaking about a neat topic. I think we both find it near and dear to our hearts. I'm looking forward to today's session.
Anthony
Yeah. That's great to return to the show and continue the discussion from previous podcast episodes that we spoke on. If you haven’t already tuned in, Matt and I hosted the episode Drones: How Close Are We?, where we had conversations around the state of the industry, shared some of the challenges facing the urban air mobility concept. Today we would like to share with you why we think the industry should focus much more around packages and package delivery, certainly, before people. Matt, you want to give us a little update on the industry and see where we’ve been since the last time we got together.
Matt
Sure. That'd be great. Yeah, last time we spoke we had some facts and figures that the FAA had been publishing around how many commercial drones and recreational drones have been registered with the FAA and since the last episode, which we had March 1st, recently, they published there are now 489,000 commercial drones. And that's an increase of 47,000 commercial drones in just a six-month period.
Anthony
Wow! we're coming up on a half, a million commercial drones Matt, huh?
Matt
Yes, yes, that's incredible and 1.2 million recreational drones. That's an increase of 82,000 vehicles. So that's quite an increase in total number of drones and just a six-month period. I think you'll see on some of our daily emails that we put out called now arriving. We have been following the drone data and we're going to watch this increase. And I think the estimates now for the next few years is numbers that you just couldn't imagine several million drones in a few years.
Anthony
We should clarify for our audience today because when people hear half a million commercial drones, you would tend to think of a lot of commerce going on. But there’s a distinction between commercial drones as a service and commercial drone for hire, right. And wonder if you can maybe kind of tease that out a bit.
Matt
Absolutely, a huge difference. As we've mentioned in the past, we've been talking about the integration pilot program or the IPP where the commercial drones are providing the service, but they're going to begin delivering in the test environment service packages and there are only a handful right now, three actually, who have been approved. There are several very close to being approved under Part 135. And there are several out there conducting part 107 deliveries as a test, under a waiver, even just today, Skydio, they received approval to conduct bridge inspections in the state of North Carolina. And we're going to start to see much more commercial type operations like that. But to your other aspect of this, Anthony, is the photography drones and the real estate. The inspections that people do on rooms and even towers. That's a huge business and that's where those half-a-million drones are operating today under Part 107.
Anthony
Yeah, great, Matt. Thanks for clarifying that and as we had in our previous discussions where we talked about a few of the other topics that I'm sure we can get into remote ID and other regulatory concerns. One of the things when people ask us, why do you think like your perspectives are focused more on packages before people? And I think it's important that we clarify, why we think that that’s our view. And I think that's the number of reasons for that. Certainly, on the packages perspective for drones is clear that we could make the case, before COVID, it was not a lot of focus around gosh, I can get a meal delivered to me, more of a novelty than a necessity. But I think that what COVID has taught us is that we need to be able to fulfill the last mile of the supply chain, for critical materials that are necessary for life preservation, if you will, right. So, and if you think that with a drone even the ones that are envisioned today, the ability for them to deliver pharmaceuticals, or personal protective equipment or medications or other healthcare related items from central distribution centers to multiple single-point locations, whether it be residential or industrial is clearly something that can be done. And so we think that that path is much clearer. It seems like people mix the two, right, urban air mobility in drones and sometimes they almost use them as a mixed metaphor in the same sentence. When, in reality, they're completely different things.
Matt
Yeah, that's right, Anthony. I think there's a lot of buzz around the vehicles that are currently being developed that will autonomously carry people, but we're quite a ways away from that point for two reasons. Safety, number one is the FAA’s primary concern but also privacy. There is a lot to be learned about both of those and doing it with packages where there's a significantly less risk, if a drone were to go down with a package versus a vehicle with passengers. What of the recent conferences that the FAA hosted was the US commercial expo and our FAA administrator Steve Dixson. He spoke just prior, and he reiterated that those two were his primary points, safety and privacy, and all of it ties together in the remote ID rule that he announced will be, hopefully, out by the end of this year. And as we mentioned in the previous podcast, they were fifty-three thousand plus comments to that proposed rule and all of that has to be synthesized and then the rule put out onto the docket. So, we have a lot to do in the next few years and that's why we believe that packages before people is the way to go. And I know in a previous podcast that our own Robbie Bourke did, he interviewed a CEO Bobby Healy from Manna, as well as Dan Czerwonka from Zipline. Their whole thing is, let's walk before we run, and I think we're in the walking stage and that's where the packages before people comes in.
Anthony
What I think people are missing in their enthusiasm for urban air mobility is the fact that if you have an air vehicle that we're going to put five to six individuals in, and then it will be required that they make the same certification standards for crash worthiness, for air worthiness, for certification, for damage tolerance. As, let's say its closest cousin would be a helicopter. From my own experience, that is, what I have seen in, so let's call them not transport category but let’s just stick with normal category, helicopter certification. It takes the major helicopter OEM to the world and for our audience, probably be able to figure out who they are, but reading a lot of their public disclosures and other documents where they talk about certification timelines of four to six years to bring a new design helicopter in a normal category to market, right. And sometimes investments on the order of two billion dollars plus or minus US and I just wonder if the requirements are the same, how many people are ready to line up for a five-year effort and a two-billion-dollar commitment. And so, I think that kind of stalls the energy at that, right. Because at the initial part of that conversation it’s an awful big pill to swallow it tends to then push the energy back towards where the need, it is. And it's really while we're continuing to build up our own knowledge and insight around urban air mobility, we're much more focused on the package delivery in the last mile solution, Matt.
Matt
Agreed, totally. And that's almost a whole topic for another podcast because the type certification process, even for the small SUAS under fifty-five-pound vehicle, that's still being developed, and we don't have any rules and rule sets that are specifically for these types of vehicles. So the FAA is embarked on a safety risk assessment type model where they're going to apply the vehicles con-ops or concept of operations, to the certification process, which I think if we move into the larger that you were talking about Anthony, they are absolutely going to comply with Part 23 as far as of the aircraft and all of the requirements to operate that. And I think what we're seeing today is a lot of manufacturers. They are in the design phase, the concept phase. They're doing testing but they haven't even entered the type certification process. And as you mentioned, it's three to five years, just in that process alone. Let alone the pre-development stage where they are working out the bugs. So, we have a long way to go, and I think that might be something we talked about in depth in future episodes.
Anthony
It’s interesting, Matt. And I think you’re starting to see that the package last mile delivery solution. And in that sense, the vehicles meeting safety risk assessment and the con-ops profile that can fit. I think there's a much cleaner path to get what I would say is the limited tax certification for that mission profile that you're requesting. And if that's the case, certainly, significantly more opportunity to deploy delivery drones are from hub-and-spoke concept or from a regional or rural hubs were there actually feeding delivery vehicles within neighborhoods and then the delivery vehicles take it the last few feet, but there's some infrastructure requirements there as well. So maybe you touch on that a bit.
Matt
Yeah, exactly. I think that is a concept that I could see being deployed and utilized sooner than later. It makes sense when it talks about the infrastructure and I’ll speak for the state of North Carolina, you have to have permission to take off a vehicle from the landowner. Which means if I go out to fly my photography drone and I'm going to do a roof inspection at home, that home owner must give me written permission before I can launch what we are looking at coming infrastructure point of view is a distribution center, could be the launch location and they have all of the Part 107 rules covered as well as the local DOT rules. For every state is different, but they can certainly launch their own drones from their own property, but the infrastructure, the vertiport, the places that will house the battery chargers, all of the equipment required to have a multi drone operation could be launched from the roof of a distribution center, which I think is a huge benefit to some of these larger drone and the last mile delivery companies. But there is one other piece that I think I'd like to talk about and that is around public acceptance. But the security of the vehicle carrying a package into a neighborhood, no one has really spoken much about any type of security for the vehicle. And what I mean by that is people with jammers that could potentially take over the drone or cause the drone to land or cause the drone to do an emergency parachute deployment. Hackers are pretty smart people, and we all know the term porch pirate, but I think I want to coin the term sky raiders because as drones come in the neighborhoods for package delivery, we have to start thinking about the nefarious entities out there, who might want to steal either the drone or the drone’s package.
Anthony
Yeah, so that brings in a whole new set of challenges around encryption and cybersecurity for these air vehicles and gosh, it's almost a whole other industry of school up. Those that would be the mal-intended sky raiders as you say and then those that are trying to conduct normal business and daily commerce. So how did you protect and how do you ensure that the products that you're putting forth for delivery or able to reach their destination securely and besides the ability to fly safely and now you have to be able to provide cyber and encrypted security along the intended route of flight, which has been obviously a topic at the top of mind that commercial aviation and air transport. And that has been well discussed but not sure we've had a lot of discussions around it, as it relates to this, but, yeah, that is a topic, certainly, that I think we could probably fill a whole other podcast on as well.
Matt
I agree. I think we've touched on a couple of the future episodes here.
Anthony
Well, thinking about a bit of the infrastructure and certainly there is as you mentioned earlier, where you have people that potentially would hijack or skyraid the drone. There is also obviously situations where if a drone is lost along its route of flight, it crashes into an area. How do we then ensure that the local fire departments understand how to come and deal with, it's not going to be a big crash scene, but none unless there's a battery and then there's chemicals and so on. And you never know what you're hauling in the cargo area of the drone. So, there's some ground and certification elements, the infrastructure in some place. If you're having dozens of these, it would have to be some number of batteries, battery charging stations and some level of security as well. What have you seen the industry focus on in that area?
Matt
Right now, I think the industry is focused on short-haul delivery focused on the PPE and the medical fields around a couple of big cities here in North Carolina, but they're all short distances. And as you mentioned, we need batteries, we need to be able to dispatch or launch a vehicle, make a delivery return that vehicle to its landing area and get a new battery, get a new flight plan loaded. And get that vehicle back in the air to really be efficient and the current battery technology, it's only good for a quadcopter to fly approximately five miles, deliver, return, and then be recharged or a new battery placed in it. If you start flying a winged vehicle, which you see some of these vehicles are vertical lift. However, they transition to forward flight. That's a more efficient operation because now you're using less energy on just two motors to create the lift, and I can fly a lot further. However, there are only a few of those type vehicles out there and the infrastructure around that type of operation is better suited because if you're going to come into a neighborhood and drop something in someone's driveway, there's only one way to accurately place that package in the driveway or front yard and that is with vertical lift.
Anthony
I think the one part that is still a little bit uncertain for me is public acceptance as it relates to noise. So, while the convenience factor, we can certainly articulate that and then this necessity, especially I think what COVID’s taught us, right. As you said earlier, the ability to deliver, critical things to individuals in a time of need is there, beyond that though and just a kind of steady-state commerce. I wonder, how do easy it's going to be to get people accustomed to the constant drone buzzing noise in the and around the neighborhood and then do community enact noise ordinances that perhaps could preclude drones that don't meet quietness standards, if you will, from operating in those areas. You know, the FAA, other regulatory agencies have certain, I wouldn't call them measurable noise ordinances. It’s more based around subjective measures, but certainly, if you have one that's on a decibel scale with that recordable metric. It may be difficult for me to meet that, right. It’s going to be the next big hurdle between local communities and those that wish to expand this commerce last mile delivery like.
Matt
Right. yeah, I think you've touched on the last of the four major topics, you know, we've said, safety and privacy. We talked a bit about infrastructure, but that public acceptance piece is one of the ones I think is going to give drone delivery companies the most trouble.
Anthony
You're right. I think the neighborhood guidelines, the noise ordinances will come into play when these vehicles start buzzing around and people are in their backyard, and they don't want to be spied on. They want to maybe get their package, but the neighbor doesn't want to see that drone flying over their house. There are going to be those issues and that is going to be a challenge that delivery companies must deal with. As far as what do I see, that's going to be a tough one. I've recently become a member of the FAA fast team, and that is where members of the community, get out and talk to the community about drones and it's a community outreach. It's going to be a long process to get people to accept drones, delivering packages. However, people are pretty used to having that truck pull up in their yard and have whatever they're ordering delivered in a couple of days. Now, when they get the taste delivery in a couple of hours, I think you'll see some of that public acceptance start to abate and it will become more mainstream, but it will take some time. I have to admit.
Matt
No, I think you’re right. I think that time tends to create that acceptance. One thing that history of aviation has taught us is there are no shortcuts. We see problems. We work together as a community, to develop alternate procedures or real technical solutions that address those problems head on.
Anthony
So, yeah. I think we’ve covered all of those main challenges, and I hope, we’ve been able to shed a light on why we believe that there's certainly a big case to be made for focus on packages before people.
Matt
I totally agree. We have touched on a lot of things and probably a few things that will talk more in-depth on, but I think, for now Anthony, that's all we have time for. Thank you for a great discussion around these topics. And I totally agree that it's packages before people.
Anthony
Yeah, absolutely. I would agree, and thank you, Matt. It would be great for us to come back on the show again continue the discussion around how drones could be utilized and serve different purposes and even in other business functions.
Matt
Well, thanks. Anthony. If any of our listeners would like to gain any more insight around this topic or any of our other topics. Please don't hesitate to contact us via our Oliver Wyman catalog UAS website, our emails are there, and I would love to hear from you.
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This transcript has been edited for clarity.
