The fight that’s roiling the drone industry: small businesses see an “ol’ boys club’ forming
The fight that’s roiling the drone industry: small businesses see an “ol’ boys club’ forming

This is an excerpt of a piece originally written for MarketWatch.com. Read the entire piece here.

The U.S. government is farming out the difficult task of establishing drone regulations to private companies, but the choice of one of the world’s largest telecom companies to lead a recent effort is not sitting well with smaller companies in the tightknit drone industry.

Verizon Communications Inc.’s airspace-management company, Skyward, is the first to offer drone companies instant access to fly in controlled airspaces. The ability to fly instantly in controlled airspace is a huge advantage for pilots who subscribe to Skyward’s service.

It is currently illegal for commercial drone pilots to fly within 5 miles of an airport without permission, and getting approval has been a lengthy, paperwork-ridden process that could take months. That made situations like police monitoring crowds during a protest, electric companies inspecting a problem with a power line or first responders trying to find lost hikers impossible, should those drone flights occur near an airport.

Skyward Co-President Mariah Scott said the Federal Aviation Administration has a backlog of about 28,000 requests asking for approval to fly in controlled airspaces.

The yellow circles indicate controlled airspace, meaning commercial drone operators cannot fly there without approval. Before Skyward, the approval process could take months, making impromptu drone flights like search and rescue missions illegal. Most of the area within 5 miles of all airports would be considered controlled airspace.

That could soon change, now that Skyward has rolled out software that makes it possible to fly in controlled airspace in a matter of minutes.

“Automating it is good for the industry,” drone industry analyst Colin Snow said.

But here’s the problem: The ability to offer a service like Skyward’s is currently limited to only about a dozen companies handpicked by the FAA to participate in a beta program to test how those instant approvals would work. That approach is becoming common for the FAA, which has a history of creating public-private partnerships when it comes to solving drone-related problems.

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The issue is that FAA’s instant-approval beta program is becoming more than that. Skyward has rolled out a full working model of its instant-approval software, and competitors who weren’t chosen to be a part of that beta program—as well as others in the broader drone community—are not taking the news well.

“Getting exclusive access to what is essentially a national resource doesn’t seem like a fair gig at all,” said Joshua Ziering, founder of Kittyhawk, a drone-operations platform similar to Skyward. “With this, the FAA is essentially picking winners in the private industry.”

“Collaboration with a wide variety of stakeholders is how we’ll meet our goal to streamline airspace authorizations,” a spokeswoman for the FAA said in a statement.

Rather than build software and develop guidelines themselves, the FAA has relied on private companies through a series of committees to help shape the future of the drone industry.

A committee for establishing performance standards for drones includes stakeholders like Chinese drone giant SZ DJI Technology Co. Ltd., AT&T Inc. Intel Corp. and Alphabet Inc.’s  X division. Those companies, as well as others (including Verizon), sit on a separate committee centered around drone identification and tracking. DJI, GoPro Inc. and Amazon.com Inc. are among the companies in a committee for drone registration. Last week, President Donald Trump announced a drone integration pilot program, which seeks proposals for better integrating drones into the airspace; those participants will be handpicked by the U.S. Department of Transportation.

See also: How DJI has crushed the consumer drone industry

That type of approach has led to anger among the companies—typically small businesses—that don’t have a seat at the table. And given the current dust-up surrounding regulation of flights in controlled airspace, there’s a fear that the ultimate rules will primarily benefit the companies who are a part of those committees.

The FAA created the Low Altitude Airspace Notification Capability, or LAANC, to test and design standards that could make it more efficient for drone pilots to fly in controlled airspace. The FAA asked drone companies to submit their LAANC proposals in September 2016 via a public request for information, and the FAA selected about a dozen companies to join its test group, according to Skyward’s Director of Strategy Matt Fanelli.

“We think it’s a game-changer for the industry,” Scott said. “We should be thrilled that this public-private partnership is advancing the industry.”

Competitors and pilots are not thrilled, though, expressing fear that Skyward‘s ability to offer instant airspace approvals gives Verizon an unfair advantage in controlling the skies. Even if the program comes out of beta mode in the near future, they say Verizon will have had lead time to build its customer base and build upon its product before other companies have had a chance.

“At the end of the day, there is a very big advantage to being the first mover,” said Jonathan Rupprecht, an attorney focused on drone law. “You have the [search-engine optimization] and PR benefits. Now the competitors have to reverse-engineer and catch up to you.”

Skyward retorts that any company could have participated in the FAA’s LAANC test program, as the startup did before being acquired by Verizon in February.

“When we applied to this RFI, we were a small company as well,” Fanelli said. “We had to demonstrate technical capability and that we were willing to put in the time to work with the FAA. Some of the other companies who are upset about this didn’t go through the same procedures we did.”

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On the whole, the drone community accepts that the FAA is increasingly constrained by its resources, and appreciates the concept of public-private partnerships that allow experts the opportunity to share valuable insights.

“The FAA knows that it doesn’t have the technical expertise these companies do,” Mike Blades, Frost & Sullivan’s North American research director, said. “If these companies can prove they have the capabilities the FAA doesn’t, then the FAA can and should rely on that.”

But some are skeptical of the companies that are selected to participate in the FAA’s public-private partnerships. Companies that ultimately don’t join any of the FAA’s drone-related committees fear that the agency is playing kingmaker in allowing certain companies advance control of the airspace.

“The FAA has a longstanding history of selecting certain companies that have venture capital and deep pockets,” Rupprecht said. “They’re never picking the ‘Jim Bob’ who does real estate photography. It’s not a fair representation of the industry.”

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Rupprecht described getting selected to an FAA committee as being in the “good ol’ boys club.”

“Being on those committees lets you know what the FAA is thinking way before everyone else,” he said. “That’s appealing to investors. Those companies have a huge competitive advantage.”

Verizon’s Skyward currently has an extremely small market share among all drone flight logging and operations software, according to a report by Skylogic Research. Skyward comes in at No. 9 in a ranking of most-used drone operations software, with a 2% market share. Chinese drone behemoth DJI has a huge plurality with 38% market share for its “DJI Go” software, while Kittyhawk comes in at No. 2 with a 15% market share.

Courtesy Skylogic Research

That 2% market share could grow if Verizon maintains its hold as one of the few companies that can issue instant approvals. Solar energy equipment supplier SunPower Corp. SPWR, +1.74% is among the companies already adopting Verizon’s Skyward. It was the first to use Skyward to get instant approval for a drone flight near San Jose International Airport in California.

“Even three months of access to a feature because you were in the working group could be life and death for certain companies,” Kittyhawk’s Ziering said.

The FAA says that it plans to bring in even more companies to participate in programs so that it isn’t just companies like Verizon that have an advantage.

“We plan to issue additional announcements to get even more partners on board,” the FAA said in a statement. “In addition to traditional stakeholder outreach, we will use social media, FAA.gov and email to make sure everyone is aware of the opportunity.”

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About the Author: Nana Gastaldi