Kendall Carpenter, CPA, CGMA

Learning to fly

Unmanned aerial vehicles — also known as drones — may provide opportunities for innovation for some businesses, but regulatory, safety, and privacy concerns persist.

By Ken Tysiac

For much of their history, unmanned aerial systems have largely been the domain of the military. But in recent years, drone technology has crept into the commercial arena.

Manufacturers and business interests are pushing forward into unmanned aerial technology, exploring potential new applications and efficiencies that drones could provide. And retailers, including online behemoth Amazon, are testing the technology as a way of delivering products to customers.

Equipped with sensors that can include cameras, infrared technology, and spectrum analysis equipment, drones have the potential to provide valuable information from a new vantage point for many businesses.

Concerns about regulation, safety, and privacy may make them seem like a far-off science-fiction dream. But some companies are beginning to live that dream.

A Business Insider Intelligence report projects $98 billion in global spending on drones over the next decade. Although military applications represent the overwhelming majority of the drone market, 12% of that total is projected to be spent on commercial applications.

“There are many commercial applications for drones,” said Kendall Carpenter, CPA, CGMA, the CFO of publicly listed US company Drone Aviation Holding Corp., which operates a subsidiary that produces helium-filled units that are tethered to a mobile winch on the ground to reduce privacy and safety concerns. “Some we know, and some we can only look into a crystal ball and envision in the future.”

The commercial uses she envisions for drones include:

  • Surveillance and security. Drone cameras could monitor factories and pipelines that are vulnerable to sabotage, as well as sporting arenas and other places where large crowds gather.
  • Search and rescue. At disaster scenes, drones could provide rescuers with vantage points they can’t see from the ground.
  • Photography. Television broadcast crews, for instance, could use drones to provide an aerial view for news.

Safety, privacy concerns

For drone technology to expand in industry, it must clear many safety and privacy hurdles. Safety is a main reason drones are highly regulated in much of Europe, said Jim Edmondson, president of the Association for Unmanned Vehicle Systems International’s (AUVSI’s) UK board.

The concerns aren’t unfounded: In 2011, a police drone reportedly lost battery power and crashed into River Mersey in the UK. And an Australian triathlon competitor reportedly was injured by a drone during a race in April.

“Something 20 kilos falling out of the sky at 500 feet is going to be very painful for somebody,” Edmondson said. “Something that weighs the same as a Predator [a US military drone] is going to be catastrophic.”

The key to future safety and expansion of commercial drones is the development of a lightweight transponder that will help small drones communicate with other aircraft about their speed, altitude, and intended route, Edmondson said.

Drones also create concerns about privacy, with technology that could inexpensively provide commercial interests or the government with lots of information about unsuspecting people on the ground. The not-for-profit Electronic Privacy Information Center (EPIC) in the United States has called for the US Federal Aviation Administration (FAA) to consider privacy concerns as it creates regulations for drone use.

“Low-cost drones, coupled with leaps in camera technology and cheap data storage, basically create the capacity for pervasive and indiscriminate surveillance,” said Jeramie Scott, national security counsel for EPIC.

Airborne for economic growth

In the mid-western US state of Ohio, government officials are teaming with university researchers to create opportunities for state agencies to use unmanned aerial vehicles.

The objective is to harness unmanned aerial devices for economic growth and development and help make state agencies more effective and efficient. State agencies have applied or are preparing applications to the FAA for permission to use drones for precision agriculture, firefighting, monitoring water and vegetation quality in parks, bridge assessment, and prison fence monitoring.

“The more time you spend looking at opportunities across a set of requirements, you really start finding new, innovative, creative ways to apply this as a tool across our business practices,” said Dick Honneywell, executive director of the Ohio/Indiana Unmanned Aerial Systems Center, a testing and development complex in Springfield, Ohio, that is operated as a two-state joint venture.

Worldwide uses of drones, as reported by the AUVSI, have included:

  • Public safety. Drones have been used to rescue migrants in rough waters in the Mediterranean Sea, for security purposes around soccer matches in Brazil, and for law enforcement efforts in Germany.
  • Scientific research. A micro-copter camera is helping National Geographic magazine document wildlife on the African Serengeti Plain, and the Royal Society for the Protection of Birds in the UK is using unmanned aerial systems to monitor the nests of rare birds.
  • Agriculture. Unmanned helicopters are spraying crops for pest control in Japan, and an Australian farmer has used drones to monitor crop nutrients, weeds, insects, and moisture on a trial basis.
  • Disaster response. Drones have been used to monitor radiation at the Fukushima nuclear plant in Japan, to scan flood-hit areas that rescue workers could not reach in India, and to study wildfires in Australia.

The possibility for drone delivery in retail, however, seems more tenuous. Amazon’s aspirations for a drone delivery fleet, for instance, have been met with scepticism.

And despite the hype surrounding a video showing a successful test delivery by Domino’s Pizza UK’s “Domicopter”, the company won’t pursue the technology in the near future. “Too many potential issues related to such a thing,” Domino’s spokesman Tim McIntyre said in an email. “… So many that we don’t think the idea will ever really (ahem) fly.”


Regulation, costs, training are key factors in drone design

Executives may soon find themselves evaluating the business case for drones. Here are some things to consider:

  • Is it legal? To protect safety and privacy, many governments regulate the use of unmanned aircraft. A review of existing or proposed regulations in your jurisdiction will allow you to determine whether drone use is even an option for your company — and what you need to do to obtain permission to operate drones.
  • How much will it cost? “There are costs related to purchasing, training, operating, and insuring,” said Kendall Carpenter, CPA, CGMA, the CFO of Drone Aviation Holding Corp. These need to be weighed against the benefits and cost savings drones can provide.
  • Who will launch and operate the machinery? Companies must decide whether their own personnel will run their drones, or whether they will outsource the work. “Most companies would have their own employees that are trained and do this,” Carpenter said. “But there are other service providers who know how to do this and could be hired on an as-needed basis.”
  • What type of customer support will you get? If you plan to have your own employees operate drones, you should know before making a purchase what kind of maintenance, repair, and technical assistance will be available.

The future is now

If you’d been asleep for 20 years and woke up to survey today’s global business environment, you’d be convinced that you had been cast in a science-fiction movie:

  • Digital scanning and 3D printing devices are helping everybody from manufacturers to confectioners create almost anything using material that can range from plastic to chocolate.
  • Employees at companies worldwide are wearing sensors that track how far they walk in a day, and sports teams are fitting athletes with monitors that track their movement and performance. Meanwhile, companies are researching uses for Google Glass eyewear, which gives users the ability to use voice commands to record video and surf the internet.

These developments can have profound implications for companies and innovators around the world. The only limit to their ability to transform business — aside from safety and privacy regulations — is your imagination.