FAA Proposed Drone Rules: Market Opportunity Winners and Losers

This post highlights the business impact and market opportunities the proposed rules brings to drone manufacturers, distributors, service providers, and investors. It also appears in sUAS News 'The Market'.


On February 15, 2015, the commercial drone industry breathed a collective sigh of relief. The Federal Aviation Administration’s proposed new rules for small unmanned aircraft systems seemed, at first blush, somewhat practical.  The FAA regulations will eventually allow commercial operations of drones that weigh under 55 pounds in U.S. airspace, without requiring operators to acquire a pilot’s license. You can read the full 195 pages of proposed rules here(hereafter sUAS notice of proposed rulemaking, or NPRM) and some analysis about them herehere, and here.

In this post, I’ll focus on what I think are the immediate economic winners and losers.  My analysis is concentrated on the business impact and market opportunities that the proposed rules have for drones manufacturers, distributors, service providers, and investors.

What do investors need to know?

According to CB Insights data, 2014 investments in the budding drone industry topped $108M across 29 deals. Year-over-year funding increased 104% as venture firms jumped into the drone space with sizable bets. Still, over the past couple of years, I’ve heard VCs and potential investors discussing the FAA bottleneck and questioning whether this was the right time to invest.  Regulatory uncertainty has kept many on the sidelines. But this new clarity should help investors, including those interested in investing in operational and data / information services.

Read more here: http://droneanalyst.com/2015/02/16/faa-drone-rules-market-winners-a...

Views: 1232

Comment by Gerard Toonstra on February 17, 2015 at 3:14am

Great analysis, Colin.

Comment by Colin Snow on February 17, 2015 at 10:10am

Thanks Gerard.

Comment by Gary McCray on February 17, 2015 at 11:27am

Excellent analysis Colin,

But I have a few thoughts regarding it.

Clearly you have highlighted VLOS as being the most significant (barrier) and No night operation as the second most important.

I completely agree with this assessment.

And in addition not mentioned was the operation essentially below (out of) actual manned aircraft airspace (500 feet).

However, taken in context of this being the "first" truly enabling set of rules, I think it is fair to assume that eventually a reasonable path of exceptions will be made for both these instances.

Clearly these exceptions will require heavier regulation than those that do not.

However, even within the current restrictions, there are circumstances that can make them more feasible for the uses you have described.

Agriculture stands to be a hugely important beneficiary from UAS both in visual oversight and in remedial spraying and dusting.

The reality is that even given the current regulations requiring line of sight, there is no prohibition of FPV, only one against effectively using goggles for the pilot in charge (because ostensibly this would obstruct his line of sight.)

 In fact this restriction has so many holes in it, it is completely circumventable without violating their (in my opinion) silly restriction at all.

Basically, a hand carried (mounted on transmitter) type FPV isn't restricted at all, and with 2 operators, one could be the FPV observer with goggles and the other could be the actual plane operator.

Of course nothing actually prevents them from using a buddy transmitter so long as the master transmitter was controlled by the visual operator.

Further, the reality is, VLOS or not, the vast majority of these flights are going to be fully automated with the (VLOS pilot in charge only taking action if something goes wrong or perhaps to execute a landing or alternate route scenario.

So the bottom line is simply maintaining VLOS in a very broad sense, basically can you see the UAS at all.

This actually favors large UAS flown right at their upper altitude limit (500 feet).

And of course the pilot on the ground could actually be on top of the roof of the farmhouse or water tank perhaps.

At this point with a large brightly painted UAS VLOS can extend quite far.

Even over an extended area, a truck or a van with a platform on top of it could serve as a very superior observation point.

Of course these methods are true for other uses as well and definitely at reasonable cost mitigate the restrictive effect of LOS and of restricted FPV.

Clearly both surveillance and search and rescue and other emergency response applications will suffer from the no night operation, but that simply means that for now the opportunity is simply restricted to daylight hours until the FAA finds a way to accommodate more closely regulated night time operation.

This definitely doesn't nullify their utility, it just narrows it's capability for now.

(I do know that the use of thermal imaging at night is one of the best search and rescue and firespotting methods).

However, I can also see that the FAA has taken very bold steps at trying to allow the first phase of real UAS operation in the US to proceed in a reasonable fashion while minimizing dangers from interactions between UAS and manned aircraft and while not allowing them to get so far afield that immediate control cannot be maintained.

I have been one of the biggest detractors of the FAA and the thing I find most confusing and unsettling is why, if this is the direction they were headed in in the first place did they not keep us - the public and the concerned interests - more in the loop.

They have been till now acting like Draconian nay sayers, now they are basically presenting a very reasonable and understandable plan.

I guess I really don't understand the political process, but all that negative energy seems incredibly non-productive to me.

And in light of this - pointless.

Best Regards,


Comment by Colin Snow on February 17, 2015 at 11:37am

Hi Gary - Great comments and analysis.  I agree about extended flights. I'm pretty sure the operators will be able see long distances ;-)

Comment by Justin Stiltner on February 17, 2015 at 1:36pm

I believe the visual line of sight stipulations are primarily to be able to sense other aircraft / people in the area, not so much as to be able to maintain control of the aircraft.  If you look at it from a safety perspective this makes sense, along with the no night time operations, because you may not be able to see other aircraft (which should have strobes/ nav lights anyway).  I think for a first set of rules these will enable the vast majority of use cases and will relieve a lot of pressure from industry.  Search and rescue could potentially get exceptions on an emergency basis as they are currently allowed to do. 

Comment by David on February 17, 2015 at 1:58pm

I think the VLOS requirement is actually much more restrictive than its being made out to be in some of the above posts: 

"the proposed rule would require that the operator’s or visual observer’s vision of the small unmanned aircraft must be sufficient to allow him or her to: (1) know the small unmanned aircraft’s location; (2) determine the small unmanned aircraft’s attitude, altitude, and direction; (3) observe the airspace for other air traffic or hazards; and (4) determine that the small unmanned aircraft does not endanger the life or property of another."

Comment by Gary McCray on February 17, 2015 at 3:22pm

Hi David,

I don't think that is more restrictive, I think that is exactly what you would expect.

Ultimately with VLOS it is incumbent on the operator to keep those circumstances fully under his control.

Basically it puts it back on the operator to determine that those conditions are being satisfactorily met.

I can't imagine it being otherwise.

If / when accidents happen, UAS as with manned aircraft presents exactly the same conditions (determination of operator error and resultant operator liability).

I am sure this will be clearly spelled out in the final rules and well covered in the "test".

Of course the FAA will have the right to make or legally assist in determinations of negligence or willful violation, but that is what you would expect (and what they do now).

What it will also do however, is to in practice give a more open license to more intrinsically safe operations such as flying a UAS over ones own private crop land where safety is directly under the immediate control of the operator.

Basically you are still left with if anything goes wrong it is your responsibility and you will be held accountable and even more so if it can be shown that you were in violation of any of the rules.

I think it is fair to say that this is what the FAA does now with normal aircraft and that they are quite comfortable taking that role for UAS as well.

I wasn't actually advocating "cheating" in any way, just pointing out that the rules as presented so far definitely allow for individual judgement to determine a lot of the safe operating parameters.

Comment by hal on February 18, 2015 at 6:40am

I might be wrong, but I do remember reading somewhere in the FAA definitions that line of sight has an actual distance limit.  Standing on a tower or above ground isn't going to change ones ability to see farther on flat ground.  Either way there will be a practical or "legal" limit based on vehicle size and 20/20 vision.

Comment by Dwgsparky on February 18, 2015 at 7:32am

Well, I fly a standard 3 mtr RC sailplane at over 3000 feet and I can still see it clear enough to fly and control it and keep it away from others.Just for the record my eyes have been with me for 60+ yrs Whats your idea of LOS.

Comment by Mecha on February 18, 2015 at 12:13pm

The proposed rule limits to 1,500ft away and 400ft ceiling


You need to be a member of DIY Drones to add comments!

Join DIY Drones

© 2017   Created by Chris Anderson.   Powered by

Badges  |  Report an Issue  |  Terms of Service