Drone roundtable: Cooling down the UAV hype by David Z. Morris @FortuneMagazine July 31, 2015, 4:57 PM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons In the world of unmanned aerial vehicles—better known as UAVs or drones—it can be hard to tell up from down. The FAA is still developing rules, while everyone from giants like Amazon to startups like Matternet promise the sky. To help clear the air, Fortune gathered insiders from the business, policy, and technical sides of the developing industry to talk about recent progress—and some obstacles that may be larger than they appear. Gretchen West is the former executive vice president of the Association for Unmanned Vehicle Systems International (AUVSI). She is now a consultant based in Silicon Valley. Lisa Ellman is a former policy advisor to the Obama administration, and headed Unmanned Aerial Systems Policy at the Department of Justice. She now chairs the UAV practice at Hogan Lovells. James Grimsley is associate vice president for research at the University of Oklahoma, and CEO of DII LLC, which produces solar-powered long-range drones. Fortune: The last eight months we’ve seen a lot of forward progress, particularly from the FAA. Is that changing the landscape at this point? Lisa: Absolutely. The first positive development was when the proposed [FAA] rule came out, and it was a lot more pro-innovation than folks had feared. From there, the streamlining of the 333 exemption process [allowing limited commercial drone operation], whereas before it used to take at least 120 days, to now, it’s just much more streamlined. The other thing I’d point to is the blanket Certificate of Authorization that’s now issued along with a 333 exemption, which eliminates a lot of the bureaucracy. Gretchen: From the industry standpoint . . . the FAA Pathfinder [regulatory research] program is very, very good. However, it’s more research. The 333 process, while it is a step forward, it’s a bandaid. It’s not a sweeping allowance for commercial operation. And when you look at what other countries are doing, the United States [is] behind. Fortune: Do you think people are getting a little bit ahead of where the technology or regulations are? James: Anytime a new technology or new concept comes along, it’s natural for us to overhype it. If we’re not in a very regulated [environment], we’re able to validate markets very quickly. A lot of the pie in the sky type applications fall away. [But] because of the regulatory hurdles we have right now, we’re not able to get out and validate a lot of the things that we are projecting. There are some areas where I think we’re in desperate need of a reality check. The perfect example to me is agriculture. If you look at how we’ve come up with a lot of the forecasts, we had to look at Japan, which is a little unique—very limited farmland, a lot of it on inclines. It would be more attractive to adopt technology in Japan versus the United States. In the U.S., we have yet to go in and make the strong business case on the [agriculture] side of it. Fortune: What are some of the obstacles that you think people are underplaying? Lisa: A lot of people don’t recognize that the FAA rule isn’t final. In order to fly a drone commercially right now, in the United States, you have to have a 333 exemption. You still need some kind of manned aircraft pilot’s license, [though] they’ve now downgraded the requirement to a sports or recreational pilot’s license. James: I think we’re gonna hit two speed bumps pretty quickly with small UAVs. One would be our communications infrastructure, since we’re talking about flying out in remote areas. And those are areas where we don’t have a lot of communications infrastructure right now. Another is that for small electric powered UAVs, we’re no different than cell phones or laptops—we’re limited by battery technology. The military has already had to deal with this in Iraq and Afghanistan, where they’d have to carry four UAVs mainly because they could only keep one in the air for 45 minutes, and they’d have to bring one back and change the battery. Fortune: The elephant in the room, at least for the last few weeks, has been privacy regulations. Lisa: There’s a lot of fear across the country that drones are going to hover over our backyards and peer into our house. Almost every state has either proposed legislation or passed legislation that would limit unmanned aircraft system (UAS) use, in some way related to privacy. But there are technological solutions to the policy concerns that we have surrounding safety and privacy and security—geofencing technology and collision avoidance technology would be just a few of those. James: I think the safety rules are going to eliminate many of the scenarios. A lot of times when people tell me what their fear is, immediately it sounds either unsafe or something that’s going to be illegal. On the flip side, every time we have the privacy debate, we have to remember that some of the [privacy] rights come from the First Amendment, the right to anonymity and things like that. But there’s also the right to free speech, freedom of the press. We have to look at all of these rights that we have to balance. Fortune: Can you pick a particular application that’s closer to 50 years away than 10 years away? Gretchen: The one that comes to mind the quickest is delivery. What Amazon is trying to do is really wonderful. [But] when you’re thinking about delivering packages in urban areas, because of all the challenges of safety and reliability and visual line of sight and sense and avoid—there’s so many complications it’s going to be very difficult to do. Lisa: That’s exactly what I was going to say. As exciting as it is, if I’m living in New York City or Washington D.C., a package isn’t going to be delivered by drone to my apartment anytime soon.