Keeping politicians' hands off the Net & everything else related to technology

The urban air mobility stories keep stacking up in 2019. A few highlights and a few thoughts.

Commercial developments

There have been tons of urban air mobility announcements, partnerships, and demos in 2019. EHang, the Chinese drone maker, seems to be farthest along in eVTOL development, though many companies are working with regulators to bring about eVTOL services in the next five years. 

In April, representatives said EHang will start selling its two-passenger, autonomous eVTOL next year for about $350,000 to commercial operators. Ehang’s co-founder says its 2-passenger autonomous eVTOL is already completing routine flights in China for tourists between a hotel and local attractions.

Uber recently announced they’ll offer shared-ride helicopter service between Manhattan and JFK airport, starting in July. This week, Voom (Airbus) announced they will expand their helicopter ridesharing service to San Francisco. They’ve been operating in Sao Paulo and Mexico City already.

These helicopter rides are targeting popular urban routes (airport-to-airport, CBD-to-airport, etc.) for customers who are willing to pay to shorten a one-hour car ride to a ten-minute helicopter ride. Fees are typically $150 to $250 one-way. Both companies want to get a sense of demand, price, and frequency for eVTOL services.

[BS – July 9 update: Last week Xin Gou, a pilot, reported on Twitter that EHang had sold 18 of its 2-passenger eVTOL aircraft, 10 in China, 8 overseas. To my knowledge, these are the first sales of passenger eVTOL aircraft in the world.]

What’s the Plan?

This makes the development of airspace markets and unmanned traffic management (UTM) systems all the more urgent. What regulators must guard against is first-movers squatting on high-revenue aerial routes.

Airspace is nominally a common-pool resource, rationed via regulation and custom. That worked tolerably well for the Wright brother era and the jet age. Still, there are massive distortions and competitive problems because an oligopoly of first movers attained popular routes and airport terminals. The common-pool resource model for airspace also leaves regulators with few tools to ration access sensibly.

From my airspace policy paper:

For example, in 1968, nearly one-third of peak-time New York City air traffic—the busiest region in the United States—was general aviation (that is, small, personal) aircraft. To combat severe congestion, local authorities raised minimum landing fees by a mere $20 (1968 dollars) on sub 25-seat aircraft. General aviation traffic at peak times immediately fell by more than 30 percent, suggesting that a massive amount of pre-July 1968 air traffic in the region was low value. The share of aircraft delayed by 30 or more minutes fell from 17 percent to about 8 percent. Similarly, Logan Airport raised fees on small aircraft in the 1980s in order to lessen congestion. The scheme worked, and general aviation traffic fell by about one-third, though the fee hike was later overturned.

There’s a revolution in aviation policy occurring. The arrival of drones, eVTOL, and urban air mobility requires a totally different framework. It seems inevitable that a layer-cake or corridor approach to airspace management will develop, even though the FAA currently resists that. As with American frontier or radio spectrum: a demand shock to Ostromian common pool resource leads to enclosure and property rights.

Already, first movers and the government are collaborating on UTM and airspace policy. But regulators must resist letting collaboration today degrade into oligopoly tomorrow. This early collaboration on technology and norms is necessary but the regulators will be under immense pressure, inside and outside the agency, to have a single UTM provider, or a few hand-picked vendors. 

A single UTM system or a tightly-integrated system with a few private system operators would reproduce many of the problems with today’s air traffic management. It is very hard to update information-rich systems, especially air traffic control systems, the delayed, over-budget NextGen modernization shows. Today there are 16,000 FAA workers working on the NextGen project, which has been ongoing since 1983. UTM will be an even more information-rich system. An system-wide upgrade to UTM would make NextGen modernization look simple by comparison.

Further, once the urban air mobility market develops, the first movers (UTM and eVTOL operators) will resist newcomers and new UTM technologies in the future. Exclusive aerial corridors, as opposed to shared corridors planned for today by regulators, would allow competitive UTM systems with only basic interoperability requirements.

Quick Hits

NETT Council: In March, USDOT Secretary Chao announced the formation of the Non-Traditional and Emerging Transportation Technology Council. It sounds great, and one of the likely topics the Council will take up is urban air mobility.

ASI Aviation Report, “Taking Off”: The Adam Smith Institute (UK) this week published an excellent report from Matthew Lesh about improving competition and service in aviation. The UK often leads the world in deregulation and market-based management of government property (like AIP in spectrum policy), and ASI has been influential in aviation policy in particular. Report highlights:

1. Analysis of terminal competition policies for Heathrow (which is in the midst of a major expansion project)
2. Proposes additional slot auctions for takeoff and landing slots at UK airports
3. Endorses aerial corridor auctions for air taxis and eVTOL

Government study of airspace auctions: My proposal that the FAA auction aerial corridors for eVTOL caught the attention of the FAA’s Drone Advisory Committee and was included in a working group’s 2018 report about ways to finance drone and eVTOL regulation. Section 360 of the FAA Reauthorization Act, passed a few months after the working group report came out, then instructed the GAO to study ways of financing drone and eVTOL regulation. The law specifies that the GAO must study the six proposals in that working group report, including the auction of aerial corridors.

Lincoln Network Conference: I recently had the privilege of speaking at the Lincoln Network’s Reboot American Innovation conference. Jamie Boone (CTA) and I gave a fireside chat about the fast-moving urban air mobility sector. Matt Parlmer, founder of Ohlogen, was a great moderator. Video here.

eVTOL in North Carolina: The North Carolina state appropriations bill, which is nearing passage, allocates some funds to the Lt. Governor’s office to study eVTOLs, consult with experts, and convene an eVTOL summit in the next year. The Lt. Governor might also form a state advisory committee on eVTOL, a good, forward-looking policy for states given the rapid pace of progress in urban air mobility. To my knowledge, North Carolina is the first state to dedicate funding for study of this industry.

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Cato Unbound is taking on the issue of tech expertise this month and the lead essay came from Kevin Kosar, who argues for the revival of the Office of Technology Assessment. As he explains,

[N]o one wants Congress enacting policies that make us worse off, or that delay or stifle technologies that improve our lives. And yet this kind of bad policy happens with lamentable frequency. Pluralistic politics inevitably features some self-serving interests that are more powerful and politically persuasive than others. This is why government often undertakes bailouts and other actions that are odious to the public writ large.  

He continues, “Congress’s ineptitude in [science and technology policy] has been richly displayed.” To help embed expertise in science and technology policy, Kosar argues for the revival of the Office of Technology Assessment, which was established in 1972 and defunded in 1995.

I have been on the OTA beat for a little while now, and so I offered some criticism of Kosar’s proposal, which you can find here. I’ll lay out my cards: I’ve been skeptical of reving the OTA in the past and I remain so. Here is my key graf on that:

Elsewhere, I have argued that the OTA should be seen as a last resort; there are other ways of embedding expertise in Congress, like boosting staff and reforming hiring practices. The following essay makes a slightly different argument, namely, that the history of the OTA shows the razor wire on which a revived version of agency will have to balance. In its early years, the OTA was dogged by accusations of partiality. Having established itself as a neutral party throughout the 1980s, the OTA was abolished because it failed to distinguish itself among competing agencies. There is an underlying political economy to expertise that makes the revival of the OTA difficult, undercutting it as an option for expanding tech expertise. In a modern political environment where scientific knowledge is politicized and budgets are tight, the OTA would likely face the hatchet once again. Continue reading →

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Two weeks ago, Gov. Polis signed a bill that generally cuts off Colorado state funds from ISPs that commit “net neutrality violations” in the state. Oddly, I’ve seen no coverage from national outlets and barely a mention from local outlets. Perhaps journalists and readers have tired from what Larry Downes has dubbed the net neutrality farce, a debate about Internet regulation that has distracted the FCC and lawmakers for over a decade.

There’s not much new in the net neutrality debate, but Colorado did tread new ground: a House amendment to allow ISPs to filter adult content barely failed, on a tied vote 32-32. Net neutrality in the US runs into First Amendment and Section 230 problems, and that amendment is the first time I’ve seen the issue raised by a state legislature.

A few thoughts on the law because in March I was invited to testify before a Colorado House committee about net neutrality, broadband, and the policy implications of the then-pending bill. I commended the bill drafters for scrupulously attempting to narrow their bill to intra-state consumer protection issues. Nevertheless, it was my view that the Colorado law, as written, wouldn’t survive judicial review if litigated.

States can have agreements with vendors and contractors and can require them to abide by certain contractual terms. However, courts have held that states cannot, as Seth Cooper has pointed out, use their contractual relationships with firms to extract concessions that are “tantamount to regulation.” State agencies cannot attempt an end-around federal laws that prevent state regulation of Internet services generally, and net neutrality regulation in particular.

My testimony:

Good afternoon. My name is Brent Skorup and I am a senior research fellow at the Mercatus Center at George Mason University. I also serve on the Broadband Deployment Advisory Committee of the Federal Communications Commission (FCC).

It is commendable that state legislatures, governors, and cities around the country, including in Colorado, are prioritizing broadband deployment. The focus should remain on the pressing broadband issues of competition and deployment. The political battles in Washington, DC, about net neutrality, which I have observed over the past decade, have alarmingly spread to statehouses in recent months, and they will distract from far more important issues.

Lawmakers should enter the debate with their eyes wide open about the stakes and the unintended effects of internet regulation. By imposing network management rules on certain providers, SB 19-078 conflicts with federal policy, codified in the Telecommunications Act, that internet access should be “unfettered by Federal or State regulation.”

First, net neutrality laws and regulations do not accomplish what they purportedly accomplish. As the FCC revealed when it defended its net neutrality regulations in federal court in 2016, any no-blocking rule is mostly unenforceable. As a tech journalist put it, internet service providers (ISPs) can “exempt [themselves] from the net neutrality rules”—the rules are “essentially voluntary.” The same problem arises with state net neutrality laws.

Second, state internet regulations are unlikely to survive judicial review. Internet access is inherently interstate: simply streaming a YouTube video or sending an email often transmits data across state lines. State attempts to regulate treatment of internet access therefore likely violate federal law, which vests authority to regulate interstate communications with the FCC.

Third, the bill penalizes small, rural carriers. There’s a saying in politics: “If you’re not at the table, you’re on the menu.” It appears that Colorado’s rural broadband providers are “on the menu.” The bill applies internet regulations only to companies receiving state support (13 companies, each one serving rural areas). With the exception of CenturyLink, these are very small telecommunications companies, and the smallest had 64 customers. It is a puzzle why the state would add regulations and compliance costs to rural ISPs at a time when the FCC and most states are doing everything possible to help deploy broadband in rural areas.

This is not a plea to “do nothing” in Colorado regarding broadband. The FCC’s Broadband Deployment Advisory Committee has several recommendations for states and localities to improve broadband deployment.

Further, the FCC and some states are considering making it easier for private property owners to install wireless antennas without local regulation and fees, much like how satellite dishes are installed.

Finally, the legislature could also urge flexibility from the FCC regarding the federal high-cost fund, which disburses about $60 million annually to carriers in Colorado. My preliminary estimates using FCC data suggest that, under a new voucher program, every rural household in Colorado could receive $15 to $20 per month to reduce their monthly broadband bill.

Testimony on the Mercatus website here.

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