I write about telecom and tech policy and have found that lawmakers and regulators are eager to learn about new technologies. That said, I find that good tech policies usually die of neglect as lawmakers and lobbyists get busy patching up or growing “legacy” policy areas, like public pensions, income taxes, Medicare, school financing, and so forth. So it was a pleasant surprise this spring to see Arizona lawmakers prioritize and pass several laws that anticipate and encourage brand-new technologies and industries.

Flying cars, autonomous vehicles, telehealth–legislating in any one of these novel legal areas is noteworthy. New laws in all of these areas, plus other tech areas, as Arizona did in 2021, is a huge achievement and an invitation to entrepreneurs and industry to build in Arizona.

Re: AVs and telehealth, Arizona was already a national leader in autonomous vehicles and Gov. Ducey in 2015 created the first (to my knowledge) statewide AV task force, something that was imitated nationwide. A new law codifies some of those executive orders and establishes safety rules for testing and commercializing AVs. Another law liberalizes and mainstreams telehealth as an alternative to in-person doctor visits. 

A few highlights about new Arizona laws on legal areas I’ve followed more closely:

1. Urban air mobility and passenger drones

Arizona lawmakers passed a law (HB 2485) creating an Urban Air Mobility study committee. 26 members of public and private representatives are charged with evaluating current regulations that affect and impede the urban air mobility industry and making recommendations to lawmakers. “Urban air mobility” refers to the growing aviation industry devoted to new, small aircraft designs, including eVTOL and passenger drones, for the air taxi industry. Despite the name, urban air mobility includes intra-city (say, central business district to airport) aviation as well as regional aviation between small cities.

The law is well timed. The US Air Force is giving eVTOL aircraft companies access to military airspace and facilities this year, in part to jumpstart the US commercial eVTOL industry, and NASA recently released a new study (PDF) about regional aviation and technology. NASA and the FAA last year also endorsed the idea of urban air mobility corridors and it’s part of the national strategy for new aviation.

The federal government partnering with cities and state DOTs in the next few years to study air taxis and to test the corridor concept. This Arizona study committee might be to identify possible UAM aerial corridors in the state and cargo missions for experimental UAM flights. They could also identify the regulatory and zoning obstacles to, say, constructing or retrofitting a 2-story air taxi vertiport in downtown Phoenix or Tucson.

Several states have drone advisory committees but this law makes Arizona a trailblazer nationally when it comes to urban air mobility. Very few states have made this a legislative priority: In May 2020 Oklahoma law created a task force to examine autonomous vehicle and passenger drones. Texas joined Oklahoma and Arizona on this front–this week Gov. Abbot signed a similar law creating an urban air mobility committee.

2. Smart corridor and broadband infrastructure construction

Infrastructure companies nationwide are begging state and local officials to allow them to build along roadways. These “smart road” projects include installing 5G antennas, fiber optics, lidar, GPS nodes, and other technologies for broadband or for connected and autonomous vehicles. To respond to that trend, Arizona passed a law (HB 2596) on May 10 that allows the state DOT–solely or via public-private partnership–to construct and lease out roadside passive infrastructure.

In particular, the new law allows the state DOT to construct, manage, and lease out passive “telecommunication facilities”–not simply conduit, which was allowed under existing law. “Telecommunication facilities” is defined broadly:

Any cable, line, fiber, wire, conduit, innerduct, access manhole, handhole, tower, hut, pedestal, pole, box, transmitting equipment, receiving equipment or power equipment or any other equipment, system or device that is used to transmit, receive, produce or distribute by wireless, wireline, electronic or optical signal for communication purposes.

The new Section 28-7383 also allows the state to enter into an agreement with a public or private entity “for the purpose of using, managing or operating” these state-owned assets. Access to all infrastructure must be non-exclusive, in order to promote competition between telecom and smart city providers. Access to the rights-of-way and infrastructure must also be non-discriminatory, which prevents a public-private partner from favoring its affiliated or favored providers. 

Leasing revenues from private companies using the roadside infrastructure are deposited into a new Smart Corridor Trust Fund, which is used to expand the smart corridor network infrastructure. The project also means it’s easier for multiple providers to access the rights-of-way and roadside infrastructure, making it easier to deploy 5G antennas and extend fiber backhaul and Internet connectivity to rural areas.

It’s the most ambitious smart corridor and telecom infrastructure deployment program I’ve seen. There have been some smaller projects involving the competitive leasing of roadside conduit and poles, like in Lincoln, Nebraska and a proposal in Michigan, but I don’t know of any state encouraging this statewide.

For more about this topic of public-private partnerships and open-access smart corridors, you can read my law review article with Prof. Korok Ray: Smart Cities, Dumb Infrastructure.

3. Legal protections for residents to install broadband infrastructure on their property

Finally, in May, Gov. Ducey signed a law (HB 2711) sponsored by Rep. Nutt that protects that resembles and supplements the FCC’s “over-the-air-reception-device” rules that protect homeowner installations of wireless broadband antennas. Many renters and landowners–especially in rural areas where wireless home Internet makes more sense–want to install wireless broadband antennas on their property, and this Arizona law protects them from local zoning and permitting regulations that would “unreasonably” delay or raise the cost of installation of antennas. (This is sometimes called the “pizza box rule”–the antenna is protected if it’s smaller than 1 meter diameter.) Without this state law and the FCC rules, towns and counties could and would prohibit antennas or fine residents and broadband companies for installing small broadband and TV antennas on the grounds that the antennas are an unpermitted accessory structure or zoning violation.

The FCC’s new 2021 rules are broader and protect certain types of outdoor 5G and WiFi antennas that serve multiple households. The Arizona law doesn’t extend to these “one-to-many” antennas but its protections supplement those FCC rules and clearer than FCC rules, which can directly regulate antennas but not town and city officials. Between the FCC rules and the Arizona law, Arizona households and renters have new, substantial freedom to install 5G and other wireless antennas on their rooftops, balconies, and yard poles. In rural areas especially this will help get infrastructure and small broadband antennas installed quickly on private property.

Too often, policy debates by state lawmakers and agencies are dominated by incremental reforms of longstanding issues and established industries. Very few states plant the seeds–via policy and law–for promotion of new industries. Passenger drones, smart corridors, autonomous vehicles, and drone delivery are maturing as technologies. Preparing for those industries signals to companies and their investors that innovation, legal clarity, and investment is a priority for the state. Hopefully other states will take Arizona’s lead and look to encouraging the industries and services of the future.

The National Academies of Sciences, Engineering, and Medicine has released an amazing new report focused on, “Assessing the Risks of Integrating Unmanned Aircraft Systems (UAS) into the National Airspace System.” In what the Wall Street Journal rightly refers to as an “unusually strongly worded report,” the group of experts assembled by the National Academies call for a sea change in regulatory attitudes and policies toward regulation of Unmanned Aircraft Systems (or “drones”) and the nation’s airspace more generally.

The report uses the term “conservative” or “overly conservative” more than a dozen times to describe the Federal Aviation Administration’s (FAA) problematic current approach toward drones. They point out that the agency has “a culture with a near-zero tolerance for risk,” and that the agency needs to adjust that culture to take into account “the various ways in which this new technology may reduce risk and save lives.” (Ch. S, p.2) The report continues on to say that:

The committee concluded that “fear of making a mistake” drives a risk culture at the FAA that is too often overly conservative, particularly with regard to UAS technologies, which do not pose a direct threat to human life in the same way as technologies used in manned aircraft. An overly conservative attitude can take many forms. For example, FAA risk avoidance behavior is often rewarded, even when it is excessively risk averse, and rewarded behavior is repeated behavior. Balanced risk decisions can be discounted, and FAA staff may conclude that allowing new risk could endanger their careers even when that risk is so minimal that it does not exceed established safety standards.  The committee concluded that a better measure for the FAA to apply is to ask the question, “Can we make UAS as safe as other background risks that people experience daily?” As the committee notes, we do not ground airplanes because birds fly in the airspace, although we know birds can and do bring down aircraft. [. . . ] In many cases, the focus has been on “What might go wrong?” instead of a holistic risk picture: “What is the net risk/benefit?” Closely related to this is what the committee considers to be paralysis wherein ever more data are often requested to address every element of uncertainty in a new technology. Flight experience cannot be gained to generate these data due to overconservatism that limits approvals of these flights. Ultimately, the status quo is seen as safe. There is too little recognition that new technologies brought into the airspace by UAS could improve the safety of manned aircraft operations, or may mitigate, if not eliminate, some nonaviation risks. (p. S-2)

Importantly, the report makes it clear that the problem here is not just that “an overly conservative risk culture that overestimates the severity and the likelihood of UAS risk can be a significant barrier to introduction and development of these technologies,” but, more profoundly, the report highlights how,  “Avoiding risk entirely by setting the safety target too high creates imbalanced risk decisions and can degrade overall safety and quality of life.” (p. 3-6,7) In other words, we should want a more open and common sense-oriented approach to drones, not only to encourage more life-enriching innovation, but also because it could actually make us safer as a result.

No Reward without Some Risk

What the National Academies report is really saying here is that  there can be no reward without some risk.  This is something I have spent a great deal of time writing about in my last book, a recent book chapter, and various other essays and journal articles over the past 25 years.  As I noted in my last book, “living in constant fear of worst-case scenarios—and premising public policy on them—means that best-case scenarios will never come about.”  If we want a wealthier, healthier, and safer society, we must embrace change and risk-taking to get us there.

This is exactly what that National Academies report is getting at when they note that the FAA”s “overly conservative culture prevents safety beneficial operations from entering the airspace. The focus is on what might go wrong. More dialogue on potential benefits is needed to develop a holistic risk picture that addresses the question, What is the net risk/benefit?” (p. 3-10)

In other words, all safety regulation involves trade-offs, and if (to paraphrase a classic Hardin cartoon you’ll see to your right) we consider every potential risk except the risk of avoiding all risks, the result will be not only a decline in short-term innovation, but also a corresponding decline in safety and overall living standards over time.

Countless risk scholars have studied this process and come to the same conclusion. “We could virtually end all risk of failure by simply declaring a moratorium on innovation, change, and progress,” notes engineering historian Henry Petroski. But the costs to society of doing so would be catastrophic, of course. “The history of the human race would be dreary indeed if none of our forebears had ever been willing to accept risk in return for potential achievement,” observed H.L. Lewis, an expert on technological risk trade-offs.

The most important book ever written on this topic was Aaron Wildavsky’s 1988 masterpiece, Searching for Safety. Wildavsky warned of the dangers of “trial without error” reasoning and contrasted it with the trial-and-error method of evaluating risk and seeking wise solutions to it. Wildavsky argued that real wisdom is born of experience and that we can learn how to be wealthier and healthier as individuals and a society only by first being willing to embrace uncertainty and even occasional failure. As he put it:

The direct implication of trial without error is obvious: If you can do nothing without knowing first how it will turn out, you cannot do anything at all. An indirect implication of trial without error is that if trying new things is made more costly, there will be fewer departures from past practice; this very lack of change may itself be dangerous in forgoing chances to reduce existing hazards. . . . Existing hazards will continue to cause harm if we fail to reduce them by taking advantage of the opportunity to benefit from repeated trials.

When this logic takes the form of public policy prescriptions, it is referred to as the “precautionary principle,” which generally holds that, because new ideas or technologies could pose some theoretical danger or risk in the future, public policies should control or limit the development of such innovations until their creators can prove that they won’t cause any harms.

Again, if we adopt that attitude, human safety actually suffers because it holds back beneficial experiments aimed at improving the human condition. As the great economic historian Joel Mokyr argues, “technological progress requires above all tolerance toward the unfamiliar and the eccentric.” But the regulatory status quo all too often rejects “the unfamiliar and the eccentric” out of an abundance of caution. While usually well-intentioned, that sort of status quo thinking holds back new and better was of doing old things better, or doing all new things. The end result is that real health and safety advances are ignored or forgone.

How Status Quo Thinking at the FAA Results in Less Safety

This is equally true for air safety and FAA regulation of drones. “Ultimately, the status quo is seen as safe,” the National Acadamies report notes. “There is too little recognition that new technologies brought into the airspace by UAS could improve the safety of manned aircraft operations, or may mitigate, if not eliminate, some nonaviation risks.” The example of the life-saving potential of drones have already been well-documented.

Drones have already been used to monitor fires, help with search-and-rescue missions for missing people or animals, assist life guards by dropping life vests to drowning people, deliver medicines to remote areas, and help with disaster monitoring and recovery efforts. But that really just scratches the surface in terms of their potential.

Some people scoff at the idea of drones being used to deliver small packages to our offices or homes. But consider how many of those packages are delivered by human-operated vehicles that are far more likely to be involved in dangerous traffic accidents on our over-crowded roadways. If drones were used to make some of those deliveries, we might be able to save a lot of lives. Or how about an elderly person stuck at home during storm, only to realize they are out of some essential good or medicine that is a long drive away. Are we better off having them (or someone else) get behind the wheel to drive and get it, or might a drone be able to deliver it more safely?

The authors of the National Academies report understand this, as they made clear when they concluded that, “operation of UAS has many advantages and may improve the quality of life for people around the world. Avoiding risk entirely by setting the safety target too high creates imbalanced risk decisions and can degrade overall safety and quality of life.” (Ch. 3, p. 5-6)

Reform Ideas: Use the “Innovator’s Presumption” & “Sunsetting Imperative”

Given that reality, the National Academies report makes several sensible reform recommendations aimed at countering the FAA’s hyper-conservatism and bias for the broken regulatory status quo. I won’t go through them all, but I think they are an excellent set of reforms that deserve to be taken seriously.

I do, however, want to highly recommend everyone take a close look at this one outstanding recommendation in Chapter 3, which is aimed at keep things moving and making sure that status quo thinking doesn’t freeze beneficial new forms of airspace innovation. Specifically, the National Academies report recommends that:

The FAA should meet requests for certifications or operations approvals with an initial response of “How can we approve this?” Where the FAA employs internal boards of executives throughout the agency to provide input on decisions, final responsibility and authority and accountability for the decision should rest with the executive overseeing such boards. A time limit should be placed on responses from each member of the board, and any “No” vote should be accompanied with a clearly articulated rationale and suggestion for how that “No” vote could be made a “Yes.” (Ch. 3, p. 8)

I absolutely love this reform idea because it essentially combines elements of two general innovation policy reform ideas that I discussed in my recent essay, “Converting Permissionless Innovation into Public Policy: 3 Reforms.” In that piece, I proposed the idea of instituting an “Innovator’s Presumption” that would read: “Any person or party (including a regulatory authority) who opposes a new technology or service shall have the burden to demonstrate that such proposal is inconsistent with the public interest.” I also proposed a so-called “Sunsetting Imperative” that would read: “Any existing or newly imposed technology regulation should include a provision sunsetting the law or regulation within two years.”

The National Academies report recommendation above basically embodies the spirit of both the Innovator’s Presumption and the Sunsetting Imperative. It puts the burden of proof on opponents of change and then creates a sort of shot clock to keep things moving.

These are the kind of reforms we need to make sure status quo thinking at regulatory agencies doesn’t hold back life-enriching and life-saving innovations. It’s time for a change in the ways business is done at the FAA to make sure that regulations are timely, effective, and in line with common sense. Sadly, as the new National Academies report makes clear, today’s illogical policies governing airspace innovation are having counter-productive results that hurt society.

By Brent Skorup and Melody Calkins

Tech-optimists predict that drones and small aircraft may soon crowd US skies. An FAA administrator predicted that by 2020 tens of thousands of drones would be in US airspace at any one time. Further, over a dozen companies, including Uber, are building vertical takeoff and landing (VTOL) aircraft that could one day shuttle people point-to-point in urban areas. Today, low-altitude airspace use is episodic (helicopters, ultralights, drones) and with such light use, the low-altitude airspace is shared on an ad hoc basis with little air traffic management. Coordinating thousands of aircraft in low-altitude flight, however, demands a new regulatory framework.

Why not auction off low-altitude airspace for exclusive use?

There are two basic paradigms for resource use: open access and exclusive ownership. Most high-altitude airspace is lightly used and the open access regime works tolerably well because there are a small number of players (airline operators and the government) and fixed routes. Similarly, Class G airspace—which varies by geography but is generally the airspace from the surface to 700 feet above ground—is uncontrolled and virtually open access.

Valuable resources vary immensely in their character–taxi medallions, real estate, radio spectrum, intellectual property, water–and a resource use paradigm, once selected requires iteration and modification to ensure productive use. “The trick,” Prof. Richard Epstein notes, “is to pick the right initial point to reduce the stress on making these further adjustments.” If indeed dozens of operators will be vying for variable drone and VTOL routes in hundreds of local markets, exclusive use models could create more social benefits and output than open access and regulatory management. NASA is exploring complex coordination systems in this airspace but, rather than agency permissions, lawmakers should consider using property rights and the price mechanism.

The initial allocation of airspace could be determined by auction. An agency, probably the FAA, would:

1. Identify and define geographic parcels of Class G airspace;
2. Auction off the parcels to any party (private corporations, local governments, non-commercial stakeholders, or individual users) for a term of years with an expectation of renewal; and
3. Permit the sale, combination, and subleasing of those parcels

The likely alternative scenario—regulatory allocation and management of airspace–derives from historical precedent in aviation and spectrum policy:

1. First movers and the politically powerful acquire de facto control of low-altitude airspace,
2. Incumbents and regulators exclude and inhibit newcomers and innovators,
3. The rent-seeking and resource waste becomes unendurable for lawmakers, and
4. Market-based reforms are slowly and haphazardly introduced.

For instance, after demand for commercial flights took off in the 1960s, a command-and-control quota system was created for crowded Northeast airports. Takeoff and landing rights, called “slots,” were assigned to early airlines but regulators did not allow airlines to sell those rights. The anticompetitive concentration and hoarding of airport slots at terminals is still being slowly unraveled by Congress and the FAA to this day. There’s a similar story for government assignment of spectrum over decades, as explained in Thomas Hazlett’s excellent new book, The Political Spectrum.

The benefit of an auction, plus secondary markets, is that the resource is generally put to its highest-valued use. Secondary markets and subleasing also permit latecomers and innovators to gain resource access despite lacking an initial assignment and political power. Further, exclusive use rights would also provide VTOL operators (and passengers) the added assurance that routes would be “clear” of potential collisions. (A more regulatory regime might provide that assurance but likely via complex restrictions on airspace use.) Airspace rights would be a new cost for operators but exclusive use means operators can economize on complex sensors, other safety devices, and lobbying costs. Operators would also possess an asset to sublease and monetize.

Another bonus (from the government’s point of view) is that the sale of Class G airspace can provide government revenue. Revenue would be slight at first but could prove lucrative once there’s substantial commercial interest. The Federal government, for instance, auctions off its usage rights for grazing, oil and gas retrieval, radio spectrum, mineral extraction, and timber harvesting. Spectrum auctions alone have raised over $100 billion for the Treasury since they began in 1994.

My previous column focused on driverless car innovation moving overseas, and earlier installments discussed genetic testing, drones, and the sharing economy. Now another drone-related example has come to my attention, this time from New Zealand. According to the New Zealand Herald:

Aerial pizza delivery may sound futuristic but Domino’s has been given the green light to test New Zealand pizza delivery via drones. The fast food chain has partnered with drone business Flirtey to launch the first commercial drone delivery service in the world, starting later this year.

Importantly, according to the story, “If it is successful the company plans to extend the delivery method to six other markets – Australia, Belgium, France, The Netherlands, Japan and Germany.” That’s right, America is not on the list. In other words, a popular American pizza delivery chain is looking overseas to find the freedom to experiment with new delivery methods. And the reason they are doing so is because of the seemingly endless bureaucratic foot-dragging by federal regulators at the FAA.

Some may scoff and say, ‘Who cares? It’s just pizza!’ Well, even if you don’t care about innovation in the field of food delivery, how do you feel about getting medicines or vital supplies delivered on a more timely and efficient basis in the future? What may start as a seemingly mundane or uninteresting experiment with pizza delivery through the sky could quickly expand to include a wide range of far more important things. But it will never happen unless you give innovators a little breathing room–i.e., “permissionless innovation”–to try new and different ways of doing things.

Incidentally, Flirtey, the drone deliver company that Domino’s partnered with in New Zealand, is also an American-based company. On the company’s website, the firm notes that: “Drones can be operated commercially in a growing number of countries. We’re in discussions with regulators all around the world, and we’re helping to shape the regulations and systems that will make drone delivery the most effective, personal and frictionless delivery method in the market.”

That’s just another indication of the reality that global innovation arbitrage is at work today. If the U.S. puts it head in the sand and lets bureaucrats continue to slow the pace of progress, America’s next generation of great innovators will increasingly look offshore in search of patches of freedom across the planet where they can try out their exciting new products and services.

BTW, I wrote all about this in Chapter 3 of my Permissionless Innovation book. And here’s some additional Mercatus research on the topic.

Additional  Reading

• How to Destroy American Innovation: The FAA & Commercial Drones, Oct. 6, 2014
• Permissionless Innovation & Commercial Drones, February 4, 2015.
• DRM for Drones Will Fail, January 28, 2015.
• Regulatory Capture: FAA and Commercial Drones Edition, January 16, 2015.
• Global Innovation Arbitrage: Commercial Drones & Sharing Economy Edition, December 9, 2014.
• Filing to FAA on Drones & “Model Aircraft”, Sept. 23, 2014
• Private Drones & the First Amendment, Sept. 19, 2014
• [TV interview] The Beneficial Uses of Private Drones, March 28, 2014
• Comments of the Mercatus Center to the FAA on integration of drones into the nation’s airspace, April 23, 2o13
• Eli Dourado, Deregulate the Skies: Why We Can’t Afford to Fear Drones, Wired, April 23, 2013
• Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom (2014)
• [Video] Cap Hill Briefing on Emerging Tech Policy Issues (June 2014)

This article originally appeared at techfreedom.org.

TechFreedom has sued the Federal Aviation Administration (“FAA”) to overturn the agency’s recently adopted “interim” drone regulations, which require that drones that weigh over 250 grams be registered for a $5 fee.

“ Whether or or not requiring drone registration is a wise policy, the rules the FAA rushed out before Christmas are unlawful,” said Berin Szoka, President of TechFreedom. “They exceed the authority Congress has given the FAA. Moreover, the agency illegally bypassed the most basic transparency requirement in administrative law: that it provide an opportunity for the affected public to comment on its regulations. That means the FAA could not fully consider the real-world complexities of regulating drones. Thus, the FAA’s rules could lead to a host of unintended consequences.”

“ The notice-and-comment rulemaking process serves an important role in ensuring that regulation doesn’t do more harm than good,” said Tom Struble, Policy Counsel at TechFreedom. “It ensures that the agency is exposed to viewpoints from all the relevant stakeholders, and it forces the agency to weigh competing considerations before issuing a rule. The holiday rush did not justify the FAA bypassing standard notice-and-comment rulemaking, and the paltry cost-benefit analysis contained in the IFR does not pass muster. The D.C. Circuit should set aside these interim rules and force the FAA to go back to the drawing board.”

See TechFreedom’s petition for review here.

Today, the U.S. Department of Transportation and the Federal Aviation Administration (FAA) announced that it will soon require Unmanned Aircraft Systems (UAS) or private drones, used for both personal and commercial purposes, to be registered in a national database. To facilitate this process, the agencies announced the creation of a new federal task force that will develop recommendations for a UAS registration process. Rules are to be published by November 20th (presumably to cover new devices sold before Christmas).

Here are some quick initial reactions on the proposed registration rules:

• The FAA is a creating a ‘show-us-your-papers’ regulatory regime for average Americans who own drones. Forcing all of us to register our devices with the authorities in a national drone owner’s database raises clear civil liberties concerns.
• Americans are generally opposed to the idea of registering their technologies and a ‘DMV for Drones,’ which isn’t likely to be run any more efficiently than existing government registration systems.
• Moreover, by demanding that all drones be registered, the FAA is opening the door to a potentially far greater regulatory threat since drones are, in essence, flying computers. We don’t have federal registration systems for computers or cameras, and we shouldn’t have such a regulatory regime for private drones.
• It’s not unclear how the agency plans to enforce against existing users, but in response to a question at the press conference announcing the new rules, the head of the DOT said that the task force would determine how to enforce registration retroactively for existing drone owners. So apparently they will be brought under the new rules.
• Mandatory registration of all drones also might raise some First Amendment-related issues for journalists, too, depending on how the FAA enforces its regulations. A government drone database could intimidate reporters (or potentially even private individuals and organizations) and make it harder for them to engage in whistle-blowing activities with the aid of drones.
• Because of these problems, I would not be surprised if the FAA’s new drone registration regime leads to a rise in acts of technological civil disobedience among average Americans, many of whom will actively oppose such heavy-handed tactics and the creation of yet-another federal database of their private information.
• Of course, it could be that the FAA handles objections by creating a long list of carve-outs and exemptions from the new database requirements. In fact, in the press release announcing the formation of the task force, the agency said that the task force “will advise the Department on which aircraft should be exempt from registration due to a low safety risk, including toys and certain other small UAS.” That could take some of the pressure off, but only by creating an even more convoluted regulatory regime.
• Finally, as an administrative matter, the way the FAA to pushing hard to ram this all through before Christmas has led them to believe that they can just skirt the law in the process. As Marc Scribner of the Competitive Enterprise Institute notes, the agency “will likely be in violation of two different federal laws: the FAA Modernization and Reform Act of 2012 and the Administrative Procedure Act.” Read Marc’s full post for the details, but in a nutshell, the FAA cannot simply throw out standard operating procedures in terms of federal rule-making guidelines simply because they wish to suggest that there is some sort of imminent threat to public safety here. The real danger comes not from unregistered drones, but lawmakers and regulators who believe they can suspend the rule of law and ignore administrative accountability when it suits their desires.

The Mercatus Center at George Mason University has published several reports and agency filings discussing the problems associated with the regulation of private and commercial drones. Most recently, Mercatus filed comments with the FAA as part of it proceeding on “Operation and Certification of Small Unmanned Aircraft Systems.”

Additional Reading:

• Jason Koebler, “8 Questions Raised by the FAA’s Decision to Register Every Drone in the US,” Motherboard, October 19, 2015.
• Alex Howard, “Get Ready To Stand In Line At The Department of Drone Vehicles” Huffington Post, October 19, 2015.
• John Goglia, “DOT/FAA Announce Mandatory Registration Of All Drones; Task Force Formed,” Forbes, October 19, 2015.
• Matt McFarland, “The frantic sprint begins to figure out drone registration,” Washington Post, October 20, 2015.
• Jonathan Rupprecht, “The Problems with Mandatory Drone Registration in Drone Law,” Drone Law Blog.
• Marc Scribner, “Is a Drone Registration Mandate Illegal?” CEI Blog, October 19, 2015.
• Kaveh Waddell, “Getting a Drone for Christmas? Better Register with the Government,” National Journal, October 19, 2015.
• Sally French, “All drones to require federal registration,” MarketWatch, October 18, 2015.

Today, Eli Dourado, Ryan Hagemann and I filed comments with the Federal Aviation Administration (FAA) in its proceeding on the “Operation and Certification of Small Unmanned Aircraft Systems” (i.e. small private drones). In this filing, we begin by arguing that just as “permissionless innovation” has been the primary driver of entrepreneurialism and economic growth in many sectors of the economy over the past decade, that same model can and should guide policy decisions in other sectors, including the nation’s airspace. “While safety-related considerations can merit some precautionary policies,” we argue, “it is important that those regulations leave ample space for unpredictable innovation opportunities.”

We continue on in our filing to note that  “while the FAA’s NPRM is accompanied by a regulatory evaluation that includes benefit-cost analysis, the analysis does not meet the standard required by Executive Order 12866. In particular, it fails to consider all costs and benefits of available regulatory alternatives.” After that, we itemize the good and the bad of the FAA propose with an eye toward how the agency can maximize innovation opportunities. We conclude by noting:

 The FAA must carefully consider the potential effect of UASs on the US economy. If it does not, innovation and technological advancement in the commercial UAS space will find a home elsewhere in the world. Many of the most innovative UAS advances are already happening abroad, not in the United States. If the United States is to be a leader in the development of UAS technologies, the FAA must open the American skies to innovation.

You can read our entire 9-page filing here.

___________________________

Additional  Reading

• Permissionless Innovation & Commercial Drones, February 4, 2015.
• DRM for Drones Will Fail, January 28, 2015.
• Regulatory Capture: FAA and Commercial Drones Edition, January 16, 2015.
• Global Innovation Arbitrage: Commercial Drones & Sharing Economy Edition, December 9, 2014.
• How to Destroy American Innovation: The FAA & Commercial Drones, October 6, 2014.
• Filing to FAA on Drones & “Model Aircraft”, Sept. 23, 2014.
• Private Drones & the First Amendment, Sept. 19, 2014.
• [TV interview] The Beneficial Uses of Private Drones, March 28, 2014.
• Comments of the Mercatus Center to the FAA on integration of drones into the nation’s airspace, April 23, 2o13.
• Eli Dourado, Deregulate the Skies: Why We Can’t Afford to Fear Drones, Wired, April 23, 2013.
• Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom (2014).
• [Video] Cap Hill Briefing on Emerging Tech Policy Issues (June 2014).

Yesterday afternoon, the Federal Aviation Administration (FAA) finally released its much-delayed rules for private drone operations. As The Wall Street Journal  points out, the rules “are about four years behind schedule,” but now the agency is asking for expedited public comments over the next 60 days on the whopping 200-page order. (You have to love the irony in that!) I’m still going through all the details in the FAA’s new order — and here’s a summary of what the major provisions — but here are some high-level thoughts about what the agency has proposed.

Opening the Skies…

• The good news is that, after a long delay, the FAA is finally taking some baby steps toward freeing up the market for private drone operations.
• Innovators will no longer have to operate entirely outside the law in a sort of drone black market. There’s now a path to legal operation. Specifically, small unmanned aircraft systems (UAS) operators (for drones under 55 lbs.) will be able to go through a formal certification process and, after passing a test, get to operate their systems.

… but Not Without Some Serious Constraints

• The problem is that the rules only open the skies incrementally for drone innovation.
• You can’t read through these 200 pages of regulations without getting sense that the FAA still wishes that private drones would just go away.
• For example, the FAA still wants to keep a bit of a leash around drones by (1) limiting their use to being daylight-only flights (2) that are in the visual line-of-sight of the operators at all times. And (3) the agency also says that drones cannot be flown over people.
• Those three limitations will hinder some obvious innovations, such as same-day drone delivery for small packages, which Amazon has suggested they are interested in pursuing. (Amazon isn’t happy about these restrictions.)

Impact on Small Innovators?

• But what I worry about more are all the small ‘Mom-and-Pop’ drone entrepreneur, who want to use airspace as a platform for open, creative innovation. These folks are out there but they don’t have the name or the resources to weather these restrictions the way that Amazon can. After all, if Amazon has to abandon same-day drone delivery because of the FAA rules, the company will still have a thriving commercial operation to fall back on. But all those small, nameless drone innovators currently experimenting with new, unforeseeable innovations may not be so lucky.
• As a result, there’s a real threat here of drone entrepreneurs bolting the U.S. and offering their services in more hospitable environments if the FAA doesn’t take a more flexible approach.
• [For more discussion of this problem, see my recent essay on “global innovation arbitrage.”]

Impact on News-Gathering?

• It’s also worth asking how these rules might limit legitimate news-gathering operations by both journalistic enterprises and average citizens. If we can never fly a drone over a crowd of people, as the rules stipulate, that places some rather serious constraints on our ability to capture real-time images and video from events of societal importance (such as political protests or even just major events like sporting events or concerts).
• [For more discussion about this, see this September 2014 Mercatus Center working paper, “News from Above: First Amendment Implications of the Federal Aviation Administration Ban on Commercial Drones.”]

Still Time to Reconsider More Flexible Rules

• Of course, these aren’t final rules and the agency still has time to relax some of these restrictions to free the skies for less fettered private drone operation.
• I suspect that drone innovators will protest the three specific limitations I identified above and ask for a more flexible approach to enforcing those rules.
• But it’s good that the FAA has finally taken the first step toward decriminalizing private drone operations in the United States.

___________________________

Additional  Reading

• Permissionless Innovation & Commercial Drones, February 4, 2015.
• DRM for Drones Will Fail, January 28, 2015.
• Regulatory Capture: FAA and Commercial Drones Edition, January 16, 2015.
• Global Innovation Arbitrage: Commercial Drones & Sharing Economy Edition, December 9, 2014.
• How to Destroy American Innovation: The FAA & Commercial Drones, October 6, 2014.
• Filing to FAA on Drones & “Model Aircraft”, Sept. 23, 2014.
• Private Drones & the First Amendment, Sept. 19, 2014.
• [TV interview] The Beneficial Uses of Private Drones, March 28, 2014.
• Comments of the Mercatus Center to the FAA on integration of drones into the nation’s airspace, April 23, 2o13.
• Eli Dourado, Deregulate the Skies: Why We Can’t Afford to Fear Drones, Wired, April 23, 2013.
• Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom (2014).
• [Video] Cap Hill Briefing on Emerging Tech Policy Issues (June 2014).

Farhad Manjoo’s latest New York Times column, “Giving the Drone Industry the Leeway to Innovate,” discusses how the Federal Aviation Administration’s (FAA) current regulatory morass continues to thwart many potentially beneficial drone innovations. I particularly appreciated this point:

But perhaps the most interesting applications for drones are the ones we can’t predict. Imposing broad limitations on drone use now would be squashing a promising new area of innovation just as it’s getting started, and before we’ve seen many of the potential uses. “In the 1980s, the Internet was good for some specific military applications, but some of the most important things haven’t really come about until the last decade,” said Michael Perry, a spokesman for DJI [maker of Phantom drones]. . . . He added, “Opening the technology to more people allows for the kind of innovation that nobody can predict.”

That is exactly right and it reflects the general notion of “permissionless innovation” that I have written about extensively here in recent years. As I summarized in a recent essay: “Permissionless innovation refers to the notion that experimentation with new technologies and business models should generally be permitted by default. Unless a compelling case can be made that a new invention or business model will bring serious harm to individuals, innovation should be allowed to continue unabated and problems, if they develop at all, can be addressed later.”

The reason that permissionless innovation is so important is that innovation is more likely in political systems that maximize breathing room for ongoing economic and social experimentation, evolution, and adaptation. We don’t know what the future holds. Only incessant experimentation and trial-and-error can help us achieve new heights of greatness. If, however, we adopt the opposite approach of “precautionary principle”-based reasoning and regulation, then these chances for serendipitous discovery evaporate. As I put it in my recent book, “living in constant fear of worst-case scenarios—and premising public policy upon them—means that best-case scenarios will never come about. When public policy is shaped by precautionary principle reasoning, it poses a serious threat to technological progress, economic entrepreneurialism, social adaptation, and long-run prosperity.”

In this regard, the unprecedented growth of the Internet is a good example of how permissionless innovation can significantly improve consumer welfare and our nation’s competitive status relative to the rest of the world. And this also holds lessons for how we treat commercial drone technologies, as Jerry Brito, Eli Dourado, and I noted when filing comments with the FAA back in April 2013. We argued:

Like the Internet, airspace is a platform for commercial and social innovation. We cannot accurately predict to what uses it will be put when restrictions on commercial use of UASs are lifted. Nevertheless, experience shows that it is vital that innovation and entrepreneurship be allowed to proceed without ex ante barriers imposed by regulators. We therefore urge the FAA not to impose  any prospective restrictions on the use of commercial UASs without clear evidence of actual, not merely hypothesized, harm.

Manjoo builds on that same point in his new Times essay when he notes:

[drone] enthusiasts see almost limitless potential for flying robots. When they fantasize about our drone-addled future, they picture not a single gadget, but a platform — a new class of general-purpose computer, as important as the PC or the smartphone, that may be put to use in a wide variety of ways. They talk about applications in construction, firefighting, monitoring and repairing infrastructure, agriculture, search and response, Internet and communications services, logistics and delivery, filmmaking and wildlife preservation, among other uses.

If only the folks at the FAA and in Congress saw things this way. We need to open up the skies to the amazing innovative potential of commercial drone technology, especially before the rest of the world seizes the opportunity to jump into the lead on this front.

___________________________

Additional  Reading

• DRM for Drones Will Fail, January 28, 2015.
• Regulatory Capture: FAA and Commercial Drones Edition, January 16, 2015.
• Global Innovation Arbitrage: Commercial Drones & Sharing Economy Edition, December 9, 2014.
• How to Destroy American Innovation: The FAA & Commercial Drones, October 6, 2014.
• Filing to FAA on Drones & “Model Aircraft”, Sept. 23, 2014.
• Private Drones & the First Amendment, Sept. 19, 2014.
• [TV interview] The Beneficial Uses of Private Drones, March 28, 2014.
• Comments of the Mercatus Center to the FAA on integration of drones into the nation’s airspace, April 23, 2o13.
• Eli Dourado, Deregulate the Skies: Why We Can’t Afford to Fear Drones, Wired, April 23, 2013.
• Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom (2014).
• [Video] Cap Hill Briefing on Emerging Tech Policy Issues (June 2014).

I suppose it was inevitable that the DRM wars would come to the world of drones. Reporting for the Wall Street Journal today, Jack Nicas notes that:

In response to the drone crash at the White House this week, the Chinese maker of the device that crashed said it is updating its drones to disable them from flying over much of Washington, D.C.SZ DJI Technology Co. of Shenzhen, China, plans to send a firmware update in the next week that, if downloaded, would prevent DJI drones from taking off within the restricted flight zone that covers much of the U.S. capital, company spokesman Michael Perry said.

Washington Post reporter Brian Fung explains what this means technologically:

The [DJI firmware] update will add a list of GPS coordinates to the drone’s computer telling it where it can and can’t go. Here’s how that system works generally: When a drone comes within five miles of an airport, Perry explained, an altitude restriction gets applied to the drone so that it doesn’t interfere with manned aircraft. Within 1.5 miles, the drone will be automatically grounded and won’t be able to fly at all, requiring the user to either pull away from the no-fly zone or personally retrieve the device from where it landed. The concept of triggering certain actions when reaching a specific geographic area is called “geofencing,” and it’s a common technology in smartphones. Since 2011, iPhone owners have been able to create reminders that alert them when they arrive at specific locations, such as the office.

This is complete overkill and it almost certainly will not work in practice. First, this is just DRM for drones, and just as DRM has failed in most other cases, it will fail here as well. If you sell somebody a drone that doesn’t work within a 15-mile radius of a major metropolitan area, they’ll be online minutes later looking for a hack to get it working properly. And you better believe they will find one.

Second, other companies or even non-commercial innovators will just use such an opportunity to promote their DRM-free drones, making the restrictions on other drones futile.

Perhaps, then, the government will push for all drone manufacturers to include DRM on their drones, but that’s even worse. The idea that the Washington, DC metro area should be a completely drone-free zone is hugely troubling. We might as well put up a big sign at the edge of town that says, “Innovators Not Welcome!”

And this isn’t just about commercial operators either. What would such a city-wide restriction mean for students interested in engineering or robotics in local schools? Or how about journalists who might want to use drones to help them report the news?

For these reasons, a flat ban on drones throughout this or any other city just shouldn’t fly.

Moreover, the logic behind this particular technopanic is particularly silly. It’s like saying that we should install some sort of kill switch in all automobile ignitions so that they will not start anywhere in the DC area on the off chance that one idiot might use their car to drive into the White House fence. We need clear and simple rules for drone use; not technically-unworkable and unenforceable bans on all private drone use in major metro areas.

[ Update 1/30: Washington Post reporter Matt McFarland was kind enough to call me and ask for comment on this matter. Here’s his excellent story on “The case for not banning drone flights in the Washington area,” which included my thoughts.]

Regular readers know that I can get a little feisty when it comes to the topic of “regulatory capture,” which occurs when special interests co-opt policymakers or political bodies (regulatory agencies, in particular) to further their own ends. As I noted in my big compendium, “Regulatory Capture: What the Experts Have Found“:

While capture theory cannot explain all regulatory policies or developments, it does provide an explanation for the actions of political actors with dismaying regularity.  Because regulatory capture theory conflicts mightily with romanticized notions of “independent” regulatory agencies or “scientific” bureaucracy, it often evokes a visceral reaction and a fair bit of denialism.

Indeed, the more I highlight the problem of regulatory capture and offer concrete examples of it in practice, the more push-back I get from true believers in the idea of “independent” agencies. Even if I can get them to admit that history offers countless examples of capture in action, and that a huge number of scholars of all persuasions have documented this problem, they will continue to persist that, WE CAN DO BETTER! and that it is just a matter of having THE RIGHT PEOPLE! who will TRY HARDER!

Well, maybe. But I am a realist and a believer in historical evidence. And the evidence shows, again and again, that when Congress (a) delegates broad, ambiguous authority to regulatory agencies, (b) exercises very limited oversight over that agency, and then, worse yet, (c) allows that agency’s budget to grow without any meaningful constraint, then the situation is ripe for abuse. Specifically, where unchecked power exists, interests will look to exploit it for their own ends.

In any event, all I can do is to continue to document the problem of regulatory capture in action and try to bring it to the attention of pundits and policymakers in the hope that we can start the push for real agency oversight and reform. Today’s case in point comes from a field I have been covering here a lot over the past year: commercial drone innovation.

Yesterday, via his Twitter account, Wall Street Journal reporter Christopher Mims brought this doozy of an example of regulatory capture to my attention, which involves Federal Aviation Administration officials going to bat for the pilots who frequently lobby the agency and want commercial drone innovations constrained. Here’s how Jack Nicas begins the WSJ piece that Mims brought to my attention:

In an unfolding battle over U.S. skies, it’s man versus drone. Aerial surveyors, photographers and moviemaking pilots are increasingly losing business to robots that often can do their jobs faster, cheaper and better. That competition, paired with concerns about midair collisions with drones, has made commercial pilots some of the fiercest opponents to unmanned aircraft. And now these aviators are fighting back, lobbying regulators for strict rules for the devices and reporting unauthorized drone users to authorities. Jim Williams, head of the Federal Aviation Administration’s unmanned-aircraft office, said many FAA investigations into commercial-drone flights begin with tips from manned-aircraft pilots who compete with those drones. “They’ll let us know that, ’Hey, I’m losing all my business to these guys. They’re not approved. Go investigate,’” Mr. Williams said at a drone conference last year. “We will investigate those.”

Well, that pretty much says it all. If you’re losing business because an innovative new technology or pesky new entrant has the audacity to come onto your turf and compete, well then, just come on down to your friendly neighborhood regulator and get yourself a double serving of tasty industry protectionism!

And so the myth of “agency independence” continues, and perhaps it will never die. It reminds me of a line from those rock-and-roll sages in Guns N’ Roses: ” I’ve worked too hard for my illusions just to throw them all away!”

Capital moves like quicksilver around the globe today as investors and entrepreneurs look for more hospitable tax and regulatory environments. The same is increasingly true for innovation. Innovators can, and increasingly will, move to those countries and continents that provide a legal and regulatory environment more hospitable to entrepreneurial activity. I was reminded of that fact today while reading two different reports about commercial drones and the sharing economy and the global competition to attract investment on both fronts. First, on commercial drone policy, a new Wall Street Journal article notes that:

Amazon.com Inc., which recently began testing delivery drones in the U.K., is warning American officials it plans to move even more of its drone research abroad if it doesn’t get permission to test-fly in the U.S. soon. The statement is the latest sign that the burgeoning drone industry is shifting overseas in response to the Federal Aviation Administration’s cautious approach to regulating unmanned aircraft.

According to the  Journal reporters, Amazon has sent a letter to the FAA warning that, “Without the ability to test outdoors in the United States soon, we will have no choice but to divert even more of our [drone] research and development resources abroad.” And another report in the U.K. Telegraph  notes that other countries are ready and willing to open their skies to the same innovation that the FAA is thwarting in America. Both the UK and Australia have been more welcoming to drone innovators recently. Here’s a report from an Australian newspaper about Google drone services testing there. (For more details, see this excellent piece by Alan McQuinn, a research assistant with the Information Technology and Innovation Foundation: “Commercial Drone Companies Fly Away from FAA Regulations, Go Abroad.”) None of this should be a surprise, as I’ve noted in recent essays and filings. With the FAA adopting such a highly precautionary regulatory approach, innovation has been actively disincentivized. America runs the risk of driving still more private drone innovation offshore in coming months since all signs are that the FAA intends to drag its feet on this front as long as it can, even though Congress has told to agency to take steps to integrate these technologies into national airspace. 

Meanwhile, innovation in the sharing economy is at risk because of incessant bureaucratic meddling at the state and especially the local level across the United States.  My colleagues Matt Mitchell, Christopher Koopman, and I released a new Mercatus Center white paper on these issues yesterday (“The Sharing Economy and Consumer Protection Regulation: The Case for Policy Change“) and argued that most of the rules and regulations holding back the sharing economy are counter-productive and desperately in need of immediate reform. If policymakers don’t take steps to liberalize the layers of red tape that encumber new sharing economy start-ups, it’s possible that some of these companies will also start to look for opportunities offshore. Plenty of countries will be eager to embrace them, which I realized as I was reading through another report recently. The UK’s Department for Business, Innovation & Skills recently published a white paper called, “Unlocking the Sharing Economy,” which discussed how the British government intended to embrace the many innovations that could flow from this space. The preface to the report opened with this telling passage from Rt. Hon. Matthew Hancock, MP and Minister of State for Business, Enterprise, and Energy:

The UK is embracing new, disruptive business models and challenger businesses that increase competition and offer new products and experiences for consumers. Where other countries and cities are closing down consumer choice, and limiting people’s freedom to make better use of their possessions, we are embracing it.

That really says it all, doesn’t it!  If other countries, including the US, don’t clean up their act and create an more welcoming environment for sharing economy innovation, then the UK will be all too happy to invite them to come set up operations there.The offshoring option is just as real in countless other sectors of the modern tech economy. As Marc Andreessen, co-founder of the venture capital firm Andreessen Horowitz, noted in a Politico oped this summer:

Think of it as a sort of “global arbitrage” around permissionless innovation — the freedom to create new technologies without having to ask the powers that be for their blessing. Entrepreneurs can take advantage of the difference between opportunities in different regions, where innovation in a particular domain of interest may be restricted in one region, allowed and encouraged in another, or completely legal in still another.

Similar opportunities for such “global arbitrage” exist for the Internet of Things and wearable tech, intelligent vehicle technology, advanced medical device tech, robotics, Bitcoin, and so on. The links I have embedded here point back to other essays I have written recently about the choice we face in each of these fields, namely, will we embrace “permissionless innovation” or “precautionary principle” thinking. This matters because — as I noted in recent essays (1,2) as well as a book on these issues — economic growth depends upon policymakers promoting the right values when it comes to entrepreneurial activity. “For innovation and growth to blossom, entrepreneurs need a clear green light from policymakers that signals a general acceptance of risk-taking—especially risk-taking that challenges existing business models and traditional ways of doing things,” I noted in a recent essay on the importance of “Embracing a Culture of Permissionless Innovation.” Or, as the great historian of technological progress Joel Mokyr has concluded: “technological progress requires above all tolerance toward the unfamiliar and the eccentric.” To sum up in two words, incentives matter.  “[E]conomic and social institutions have to encourage potential innovators by presenting them with the right incentive structure,” Mokyr notes. Thus, when the economic and social incentive structure discourages risk-taking and experimentation in a given country or even entire continent, we can expect that global innovation arbitrage will accelerate as entrepreneurs look to find more hospitable investment climates.

Additional Reading:

• “Embracing a Culture of Permissionless Innovation“
• “Europe’s Choice on Innovation“
• “Thinking about Innovation Policy Debates: 4 Related Paradigms“
• Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom
• “Problems with Precautionary Principle-Minded Tech Regulation & a Federal Robotics Commission“
• “How to Destroy American Innovation: The FAA & Commercial Drones“
• “New Paper on The Sharing Economy and Consumer Protection Regulation”

If you want a devastating portrait of how well-intentioned regulation sometimes has profoundly deleterious unintended consequences, look no further than the Federal Aviation Administration’s (FAA) current ban on commercial drones in domestic airspace. As Jack Nicas reports in a story in today’s Wall Street Journal (“Regulation Clips Wings of U.S. Drone Makers“), the FAA’s heavy-handed regulatory regime is stifling America’s ability to innovate in this space and remain competitive internationally. As Nicas notes:

as unmanned aircraft enter private industry—for purposes as varied as filming movies, inspecting wind farms and herding cattle—many U.S. drone entrepreneurs are finding it hard to get off the ground, even as rivals in Europe, Canada, Australia and China are taking off. The reason, according to interviews with two-dozen drone makers, sellers and users across the world: regulation. The FAA has banned all but a handful of private-sector drones in the U.S. while it completes rules for them, expected in the next several years. That policy has stifled the U.S. drone market and driven operators underground, where it is difficult to find funding, insurance and customers. Outside the U.S., relatively accommodating policies have fueled a commercial-drone boom. Foreign drone makers have fed those markets, while U.S. export rules have generally kept many American manufacturers from serving them.

Of course, the FAA simply responds that they are looking out for the safety of the skies and that we shouldn’t blame them. Again, there’s no doubt that the agency’s hyper-cautious approach to commercial drone integration is based on the best of intentions. But as we’ve noted here again and again, all the best of intentions don’t count for much–or at least shouldn’t count for much–when stacked against real-world evidence and results. And the results in this case are quite troubling.

An article last week from Alan McQuinn of the Information Technology and Innovation Foundation (“Commercial Drone Companies Fly Away from FAA Regulations, Go Abroad“) documented how problematic this situation has become:

With no certainty surrounding a timeline, limited access to exemptions, and a dithering pace for setting its rules, the FAA is slowing innovation. . . .  These overbearing rules have pushed U.S. companies to move their drone research and development projects to more permissive nations, such as Australia, where Google chose to test its drones. Australia’s Civil Aviation Safety Authority, the agency in charge of commercial drones, offers a great example of unrestrictive regulations. While it has not yet finalized its drone laws, it still allows companies and citizens to test and use these technologies under certain rules. Instead of forcing companies to reveal their technologies at government test sites, it allows them to test outdoors if they receive an operator’s certificate and submit their test area for approval. Australia’s more permissive nature shows how a country can allow innovation to thrive while simultaneously examining it for potential safety concerns.

The Wall Street Journal’s Nicas similarly observes that foreign innovators are already taking advantage of America’s regulatory mistakes to leapfrog us in drone innovation. He reports that Germany, Canada, Australia and China are starting to move ahead of us. Nicas quotes Steve Klindworth, head of a DJI drone retailer in Liberty Hill, Texas, who says that if the United States doesn’t move soon to adopt a more sensible policy position for drones that, “It’ll reach a point of no return where American companies won’t ever be able to catch up.”

In essence, the United States is adopting the exact opposite  approach we did a generation ago for the Internet and digital technology.  I’ve written recently about how “permissionless innovation” powered the Information Revolution and helped American companies become the envy of the globe. (See my essay, “Why Permissionless Innovation Matters,” for more details and data.) That happened because America got policy right, whereas other countries either tried to micromanage the Information Revolution into existence or they adopted policies that instead actively stifled it. (See my recent book on this subject for more discussion.)

In essence, we see this story playing out in reverse with commercial drones. The FAA is adopting a hyper-precautionary principle position that is holding back innovation based on worse-case scenarios. Certainly the safety of the national airspace is a vital matter. But to shut down all other aerial innovation in the meantime is completely unreasonable. As I wrote in a filing to the FAA with my Mercatus Center colleagues Eli Dourado and Jerry Brito last year:

Like the Internet, airspace is a platform for commercial and social innovation. We cannot accurately predict to what uses it will be put when restrictions on commercial use of UASs are lifted. Nevertheless, experience shows that it is vital that innovation and entrepreneurship be allowed to proceed without ex ante barriers imposed by regulators. We therefore urge the FAA not to impose  any  prospective restrictions on the use of commercial UASs without clear evidence of actual, not merely hypothesized, harm.

Countless life-enriching innovations are being sacrificed because of the FAA’s draconian policy. (Below I have embedded a video of me discussing those innovations with John Stossel, which was taped earlier this year.) New industry sectors and many jobs are also being forgone. It’s time for the FAA to get moving to open up the skies to drone innovation. Congress should be pushing the agency harder on this front since the agency seems determined to ignore the law, which requires the agency to integrate commercial drones into the nation’s airspace.

Additional  Reading

• Filing to FAA on Drones & “Model Aircraft”, Sept. 23, 2014
• Private Drones & the First Amendment, Sept. 19, 2014
• [TV interview] The Beneficial Uses of Private Drones, March 28, 2014
• Comments of the Mercatus Center to the FAA on integration of drones into the nation’s airspace, April 23, 2o13
• Eli Dourado, Deregulate the Skies: Why We Can’t Afford to Fear Drones, Wired, April 23, 2013
• Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom (2014)
• [Video] Cap Hill Briefing on Emerging Tech Policy Issues (June 2014)

Today, Ryan Hagemann and I filed comments with the Federal Aviation Administration (FAA) in its proceeding on the “Interpretation of the Special Rule for Model Aircraft.” This may sound like a somewhat arcane topic but it is related to the ongoing policy debate over the integration of unmanned aircraft systems (UASs)—more commonly referred to as drones—into the National Airspace System. As part of the FAA Modernization and Reform Act of 2012, Congress required the FAA to come up with a plan by September 2015 to accomplish that goal. As part of that effort, the FAA is currently accepting comments on its enforcement authority over model aircraft. Because the distinction between “drones” and “model aircraft” is blurring rapidly, the outcome of this proceeding could influence the outcome of the broader debate about drone policy in the United States.

In our comment to the agency, Hagemann and I discuss the need for the agency to conduct a thorough review of the benefits and costs associated with this rule. We argue this is essential because airspace is poised to become a major platform for innovation if the agency strikes the right balance between safety and innovation. To achieve that goal, we stress the need for flexibility and humility in interpreting older standards, such as “line of sight” restrictions, as well as increasingly archaic “noncommercial” vs. “commercial” distinctions or “hobbyists” vs. “professional” designations.

We also highlight the growing tension between the agency’s current regulatory approach and the First Amendment rights of the public to engage in peaceful, information-gathering activities using these technologies. (Importantly, on that point, we attached to our comments a new Mercatus Center working paper by Cynthia Love, Sean T. Lawson, and Avery Holton entitled, “News from Above: First Amendment Implications of the Federal Aviation Administration Ban on Commercial Drones.” See my coverage of the paper here.)

Finally, Hagemann and I close by noting the important role that voluntary self-regulation and codes of conduct already play in governing proper use of these technologies. We also argue that other “bottom-up” remedies are available and should be used before the agency imposes additional restrictions on this dynamic, rapidly evolving space.

You can download the complete comment on the Mercatus Center website here. (Note: The Mercatus Center filed comments with the FAA earlier about the prompt integration of drones into the nation’s airspace. You can read those comments here.)

Additional Reading

• Private Drones & the First Amendment, Sept. 19, 2014
• [TV interview] The Beneficial Uses of Private Drones, March 28, 2014
• Comments of the Mercatus Center to the FAA on integration of drones into the nation’s airspace, April 23, 2o13
• Eli Dourado, Deregulate the Skies: Why We Can’t Afford to Fear Drones, Wired, April 23, 2013
• Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom (2014)
• [Video] Cap Hill Briefing on Emerging Tech Policy Issues (June 2014)
• New Paper: “Removing Roadblocks to Intelligent Vehicles and Driverless Cars,” September 17, 2014

The use of unmanned aircraft systems, or “drones,” for private and commercial uses remains the subject of much debate. The issue has been heating up lately after Congress ordered the Federal Aviation Administration (FAA) to integrate UASs into the nation’s airspace system by 2015 as part of the FAA Modernization and Reform Act of 2012.

The debate has thus far centered mostly around the safety and privacy-related concerns associated with private use of drones. The FAA continues to move slowly on this front based on a fear that private drones could jeopardize air safety or the safety of others on the ground. Meanwhile, some privacy advocates are worried that private drones might be used in ways that invade private spaces or even public areas where citizens have a reasonable expectation of privacy. For these and other reasons, the FAA’s current ban on private operation of drones in the nation’s airspace remains in place.

But what about the speech-related implications of this debate? After all, private and commercial UASs can have many peaceful, speech-related uses. Indeed, to borrow Ithiel de Sola Pool’s term, private drones can be thought of as “technologies or freedom” that expand and enhance the ability of humans to gather and share information, thus in turn expanding the range of human knowledge and freedom.

A new Mercatus Center at George Mason University working paper, “News from Above: First Amendment Implications of the Federal Aviation Administration Ban on Commercial Drones,” deals with these questions.  This 59-page working paper was authored by Cynthia Love, Sean T. Lawson, and Avery Holton. (Love is currently a Law Clerk for Judge Carolyn B. McHugh in 10th Circuit U.S. Court of Appeals. Lawson and Holton are affliated with the Department of Communication at the University of Utah.)

“To date, little attention has been paid to the First Amendment implications of the [FAA] ban,” note Love, Lawson, and Holton. Their article argues that “aerial photography with UASs, whether commercial or not, is protected First Amendment activity, particularly for news-gathering purposes. The FAA must take First Amendment-protected uses of this technology into account as it proceeds with meeting its congressional mandate to promulgate rules for domestic UASs.” They conclude by noting that “The dangers of [the FAA’s] regulatory approach are no mere matter of esoteric administrative law. Rather, as we have demonstrated, use of threats to enforce illegally promulgated rules, in particular a ban on journalistic use of UASs, infringes upon perhaps our most cherished constitutional right, that of free speech and a free press.”

The authors note that we already have a well-established set of principles that guide how government may set content-neutral regulations related to the time, place, or manner for how certain technologies can be used. Unfortunately, the FAA doesn’t seem to be paying any attention to this time-tested jurisprudence. As the authors note:

Because the airspace within a public forum should itself be considered a public forum, the government may only restrict the journalistic use of UAS technology with content-neutral regulations of the time, place, or manner of such use. Such regulations must be “justified without reference to the content of the regulated speech,” be “narrowly tailored to serve a significant government interest,” and “leave open ample alternative channels of communication.” The FAA’s blanket ban on commercial use fails to meet this test. The FAA’s ban is not a reasonable time, place, or manner restriction.

This new paper by Love, Lawson, and Holton will hopefully inform future policymaking and judicial activity on this front and, if nothing else, make the FAA to realize that it is not above the law–and in this case the First Amendment–when it comes to drone policy. Please read the entire paper for more details. It is exceptionally well done and could be a real game-changer in these debates.

P.S. I plan on attaching Love, Lawson, and Holton’s paper to my filing to the FAA next week in its proceeding on model aircraft regulation. The filing date for that proceeding was extended this summer and comments are now due next week. I will post my filing here shortly. The Mercatus Center filed comments with the FAA earlier about the prompt integration of drones into the nation’s airspace. You can read those comments here. You can also read Eli Dourado’s excellent Wired editorial on the matter here and here’s a video of me talking about these issues on the Stossel show a few months ago.

Give us our drone-delivered beer!

That’s how the conversation got started between John Stossel and me on his show this week. I appeared on Stossel’s Fox Business TV show to discuss the many beneficial uses of private drones. The problem is that drones — which are more appropriately called unmanned aircraft systems — have an image problem. When we think about drones today, they often conjure up images of nefarious military machines dealing death and destruction from above in a far-off land. And certainly plenty of that happens today (far, far too much in my personal opinion, but that’s a rant best left for another day!).

But any technology can be put to both good and bad uses, and drones are merely the latest in a long list of “dual-use technologies,” which have both military uses and peaceful private uses. Other examples of dual-use technologies include: automobiles, airplanes, ships, rockets and propulsion systems, chemicals, computers and electronic systems, lasers, sensors, and so on. Put simply, almost any technology that can be used to wage war can also be used to wage peace and commerce. And that’s equally true for drones, which come in many sizes and have many peaceful, non-military uses. Thus, it would be wrong to judge them based upon their early military history or how they are currently perceived. (After all, let’s not forget that the Internet’s early origins were militaristic in character, too!)

Some of the other beneficial uses and applications of unmanned aircraft systems include: agricultural (crop inspection & management, surveying); environmental (geological, forest management, tornado & hurricane research); industrial (site & service inspection, surveying); infrastructure management (traffic and accident monitoring); public safety (search & rescue, post-natural disaster services, other law enforcement); and delivery services (goods & parcels, food & beverages, flowers, medicines, etc.), just to name a few.

This is why it is troubling that the Federal Aviation Administration (FAA) continues to threaten private drone operators with cease-and-desist letters and discourage the many beneficial uses of these technologies, even as other countries rush ahead and green-light private drone services. As I noted on the Stossel show, while the FAA is well-intentioned in its efforts to keep the nation’s skies safe, the agency is allowing hypothetical worst-case scenarios get in the way of beneficial innovation. A lot of this fear is driven by privacy concerns, too. But as Brookings Institution senior fellow John Villasenor has explained, we need to be careful about rushing to preemptively control new technologies based on hypothetical privacy fears:

If, in 1995, comprehensive legislation to protect Internet privacy had been enacted, it would have utterly failed to anticipate the complexities that arose after the turn of the century with the growth of social networking and location-based wireless services. The Internet has proven useful and valuable in ways that were difficult to imagine over a decade and a half ago, and it has created privacy challenges that were equally difficult to imagine. Legislative initiatives in the mid-1990s to heavily regulate the Internet in the name of privacy would likely have impeded its growth while also failing to address the more complex privacy issues that arose years later.

This is a key theme discussed throughout my new book, “Permissionless Innovation: The Continuing Case for Comprehensive Technological Freedom.” The central lesson of the booklet is that living in constant fear of hypothetical worst-case scenarios — and premising public policy upon them — means that best-case scenarios will never come about. We shouldn’t let our initial (and often irrational) fears of new technologies dictate the future course of innovation.We can and will find constructive solutions to the hard problems posed by new technologies because we creative and resilient creatures. And, yes, some regulation will be necessary. But how and when we regulate matters profoundly. Preemptive, precautionary-based proposals are almost never the best way to start.

Finally, as I also noted during the interview with Stossel, it’s always important to consider trade-offs and opportunity costs when discussing the disruptive impact of new technologies. For example, while some fear the safety implications of private drones, we should not forget that over 30,000 people die in automobile-related accidents every year in the United States. While the number of vehicle-related deaths has been declining in recent years, that remains an astonishing number of deaths. What if a new technology existed that could help prevent a significant number of these fatalities? Certainly, “smart car” technology and fully autonomous “driverless cars” should help bring down that number significantly. But how might drones help?

Consider some of the mundane tasks that automobiles are used for today. Cars are used to go grab dinner or have someone else deliver it, to pick up medicine at a local pharmacy, to have newspapers or flowers delivered, and so on. Every time a human gets behind the wheel of an automobile to do these things the chance for injury or even death exists, even close to home. In fact, a large percentage of all accidents happen with just a few miles of the car owner’s home. A significant number of those accidents could be avoided if we were able to rely on drone-delivery of things we today use cars and trucks for.

These are just some of the things to consider as the debate over unmanned aircraft systems continues. Drones have gotten a very bad name thus far, but we should remain open-minded about their many beneficial, peaceful, and pro-consumer uses.

(For more on this issue, read this April 2013 filing to the FAA I wrote along with my Mercatus colleagues Eli Dourado and Jerry Brito.)

Yesterday, an administrative judge ruled in Huerta v. Pirker that the FAA’s “rules” banning commercial drones don’t have the force of law because the agency never followed the procedures required to enact them as an official regulation. The ruling means that any aircraft that qualifies as a “model aircraft” plausibly operates under laissez-faire. Entrepreneurs are free for now to develop real-life TacoCopters, and Amazon can launch its Prime Air same-day delivery service.

Laissez-faire might not last. The FAA could appeal the ruling, try to issue an emergency regulation, or simply wait 18 months or so until its current regulatory proceedings culminate in regulations for commercial drones. If they opt for the last of these, then the drone community has an interesting opportunity to show that regulations for small commercial drones do not pass a cost-benefit test. So start new drone businesses, but as Matt Waite says, “Don’t do anything stupid. Bad actors make bad policy.”

Kudos to Brendan Schulman, the attorney for Pirker, who has been a tireless advocate for the freedom to innovate using drone technology. He is on Twitter at @dronelaws, and if you’re at all interested in this issue, he is a great person to follow.

James Barrat, author of Our Final Invention: Artificial Intelligence and the End of the Human Era, discusses the future of Artificial Intelligence (AI). Barrat takes a look at how to create friendly AI with human characteristics, which other countries are developing AI, and what we could expect with the arrival of the Singularity. He also touches on the evolution of AI and how companies like Google and IBM and government entities like DARPA and the NSA are developing artificial general intelligence devices right now.

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Related Links

• Our Final Invention: Artificial Intelligence and the End of the Human Era, Amazon
• About the Author, Barrat
• The Definitive Tech Books of 2013, Huffington Post

In an op-ed at CNN, Ryan Calo argues that the real drone revolution will arrive when ordinary people can own and operate app-enabled drones. Rather than being dominated by a few large tech companies, drones should develop along the lines of the PC model: they should be purchasable by consumers and they should run third-party software or apps.

The real explosion of innovation in computing occurred when devices got into the hands of regular people. Suddenly consumers did not have to wait for IBM or Apple to write every software program they might want to use. Other companies and individuals could also write a “killer app.” Much of the software that makes personal computers, tablets and smartphones such an essential part of daily life now have been written by third-party developers. […] Once companies such as Google, Amazon or Apple create a personal drone that is app-enabled, we will begin to see the true promise of this technology. This is still a ways off. There are certainly many technical, regulatory and social hurdles to overcome. But I would think that within 10 to 15 years, we will see robust, multipurpose robots in the hands of consumers.

I agree with Ryan that a world where only big companies can operate drones is undesirable. His vision of personal drones meshes well with my argument in Wired that we should see airspace as a platform for innovation.

This is why I am concerned about the overregulation of drones. Big companies like Amazon, Apple, and Google will always have legal departments that will enable them to comply with drone regulations. But will all of us? There are economies of scale in regulatory compliance. If we’re not careful, we could regulate the little guy out of drones entirely—and then only big companies will be able to own and operate them. This is something I’m looking at closely in advance of the FAA proceedings on drones in 2014.

Yesterday at Forbes, William Pentland had an interesting piece on possible disintermediation in the electricity market.

In New York and New England, the price of electricity is a function of the cost of natural gas plus the cost of the poles and wires that carry electrons from remotely-sited power plants to end users. It is not unusual for customers to spend two dollars on poles and wires for every dollar they spend on electrons. The poles and wires that once reduced the price of electricity for end users are now doing the opposite. To make matters worse, electricity supplied through the power grid is frequently less reliable than electricity generated onsite. In other words, rather than adding value in the form of enhanced reliability, the poles and wires diminish the reliability of electricity.

If two thirds of the cost of electricity is the distribution mechanism, then, as Pentland notes, there is a palpable opportunity to switch to at-home electricity generation. Some combination of solar power, batteries, and natural gas-fired backup generators could displace the grid entirely for some customers. And if I understand my electricity economics correctly, if a significant fraction of customers go off-grid, the fixed cost of maintaining the grid will be split over fewer remaining customers, making centrally-generated electricity even more expensive. The market for such electricity could quickly unravel.

While it remains to be seen whether electricity generation will indeed become decentralized, such disintermediation would be the continuation of a decades-long social trend. It all began (plausibly) in 1984. The Macintosh was released, and desktop computing became a thing. Desktop printers disintermediated printing departments, Kinkos, and the steno pool. The Internet has disintermediated telephone companies, music labels, television networks, newspapers, and much more. Online education is unbundling university courses.

What’s even more exciting is the next generation of disintermediating technologies. Bitcoin could displace some financial institutions—to varying degrees, banks, the Federal Reserve, Western Union, and credit card companies. Mesh networks could solve the last-mile problem of Internet service delivery, which tends to be monopolized or at least concentrated. 3D printers could disintermediate supply chains. 3D chemical printers could disintermediate drug companies and the FDA.

Delivery drones like Amazon Prime Air‘s arguably disrupt package delivery services, though not entirely because FedEx and UPS will still run drone-utilizing distribution networks. More importantly, delivery drones disintermediate the real estate market for small businesses. It will no longer be important, if you run a local business, to have a storefront in a prime location. Your customers can order online and items can be delivered to them in half an hour straight from the factory or artisanal workshop. It could be the Etsyfication of the economy.

If information, electricity, money, and production all get disintermediated, what is left? If these trends continue, the future will be one in which human interaction is unmediated, and to a surprising degree, unregulable. It will be difficult to stop a willing buyer and seller from transacting. Information about the proposed transaction might not be censorable. Payment via Bitcoin or other cryptocurrencies can’t be stopped. Production and delivery of the item may be difficult or impossible to detect and intercept.

Intermediaries are often used by governments as points of control. As we shed intermediaries, it may become possible to live one’s entire life without any particular authority even knowing that one exists. I doubt that we’ll ever get that far in the process, because using non-abusive intermediaries often makes economic sense. But for the next few decades, at least, I expect the trend to continue and the world to get a lot more interesting.

Originally posted at elidourado.com

Timothy Ravich, a board certified aviation lawyer in private practice and an adjunct professor of law at the Florida International University School of Law and the University of Miami School of Law, discusses the future of unmanned aerial system (UAS), also known as drones.

Ravich defines what UAVs are, what they do, and what their potential non-military uses are. He explains that UAV operations have outpaced the law in that they are not sufficiently supported by a dedicated and enforceable regime of rules, regulations, and standards respecting their integration into the national airspace.

Ravich goes on to explain that Congress has mandated the FAA to integrate UAS into the national airspace by 2015, and explains the challenges the agency faces. Among the novel issues domestic drone use raises are questions about trespass, liability, and privacy.

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Related Links

• The Integration of Unmanned Aerial Vehicles into the National Airspace, Ravich
• Domestic Drones are Coming your Way, Brito
• Making airspace available for ‘permissionless innovation,’ Technology Liberation Front