Regulating drone airspace using ‘smart markets’

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Source:   —  April 19, 2016, at 6:42 PM

D. candidate in policy analysis at the Pardee RAND Graduate School and an helper policy analyst at the nonprofit, nonpartisan RAND Corporation.

Regulating drone airspace using ‘smart markets’

David Manheim is a Ph. D. candidate in policy analysis at the Pardee RAND Graduate School and an helper policy analyst at the nonprofit, nonpartisan RAND Corporation.

How to connect the network

John F. Raffensperger is a senior operations researcher at the RAND Corp and a Prof at the Pardee RAND Graduate School.

How to connect the network

Jia Xu is an associate engineer at the RAND Corp and a Prof at the Pardee RAND Graduate School.

How to connect the network

Commercially operated autonomous drones may be on the horizon, particularly since Google and Amazon have announced plans to start drone-based package delivery in two thousand-seventeenth. A policy problem is likely to follow: allocation of scarce airspace and preferred flight paths — an issue complicated by the necessity to ensure that each drone’s flight is secure and that each flight-path section stays within capacity.

The default solution to regulating drone traffic in the skies would be an open system much love the existing rules that govern roads. Number limits are placed on participation, so flights are controlled by operating regulations and natural congestion, leading to an inefficient system that's oversubscribed, unhurried or even dangerous — or to one that's so heavily regulated few companies bother to fly drones.

An alternative solution follows the mechanisms to distribute electricity — a bright market for drone airspace and flight paths. A bright market is an auction that relies on mathematical optimization to resolve complex rules associated with allocating a resource. Bright markets are already widely used, and comprise such diverse examples as how advertisers tender to space ads through Google’s AdWords and the Australian government’s BushTender, an auction for protecting and improving native vegetation on private land.

In electricity markets, multiple power plants produce electric power, but the demand varies over time. Electric bright markets utilize a computer program to authorize the cheapest power to be delivered from the plants best able to proposal it. They ensure there are number blackouts and that power flow doesn’t overload power lines. Power plants and electricity providers can submit bids simultaneously. The market makes certain the allocation fits the needs and requirements of other market participants and regulators.

These systems can also assistance markets self-regulate. Modern electricity markets incentivize companies to widen their generating capacity, convince users they can purchase power and convince regulators that business practices chase physical constraints and valid mandates. Researchers have made similar smart-market proposals to define airport landing assignments and regulate path-finding for autonomous cars.

A bright market for drone airspace might work love this: Anyone could create a tender for a specific flight path and time slot to fly a specific drone. The computer-based market-clearing mechanism would ensure that each drone had a authorized flight and that each path had enough capacity.

The bright market would be running as a public auction operated by airspace managers and used by those who fly drones. This market would be more inherently flexible than complex regulation, allowing for improvements without the necessity for new laws. It would likely be more transparent to users than mechanisms that distribute permits based on complex regulatory criteria, though it'd require more ongoing management.

The two key components of such a bright market are the initial rights (who controls the existing right to the airspace) and a model for allocation that respects physical and regulatory requirements.

Airspace and permission to fly a drone are currently controlled by a confusing combination of landowners, the Federal Aviation Administration, the public and the county or city over which the drone is flying. Any solution, bright market or not, will first require clarification of these rights.

The allocation model for drone airspace would work much love that in electricity markets — taking into account safety concerns, physical limits and the participants’ needs.

For instance, safety regulations might dictate that drones be kept a certain distance apart. Noise ordinances for certain times of day could restrict schedules. A given flight might pass through a sequence of flight segments with varying degrees of congestion. Multiple time slots might be allocated to the highest sum of bids with non-conflicting flight paths. The bidders might be required to pay the lowest winning tender price for a slot plus some specified cost to allow flight control.

The burden for ensuring that companies chase the established rules would rest on the flight controller, maybe using an established system love NASA’s Unmanned Aerial System Traffic Management or common airspace models being developed privately. Companies that wish to fly drones won’t necessity to worry about the patchwork of local laws, because those laws can be inc in the market-clearing computer model. So the locals themselves can determine whether to have fewer drones overhead or less-expensive drone delivery.

After drones become widespread, capacity will diminish, making prices expand and resulting in income over the cost of providing flight control. This excess income could be allocated to the city or county over which the flights took place, which creates incentives for governments to reduce unnecessary restrictions.

Yes, the bright market is complicated. Fortunately, the companies clamoring to utilize drones, love Amazon and Google, are sophisticated users who already work similar markets for their own businesses. Designing a system and effectively implementing it won't be ordinary or rapid. This means that initial work on designing the system would necessity to start soon, preferably with the support of the drone industry and regulators, and with diligent monitoring and evaluation.

Some people might worry that the bright market for drones could benefit a few users at the expense of others, but this might be worse in heavily regulated systems that create vested interests and lead to regulatory capture, where an industry gains control of an agency meant to regulate it.

Due to vested interests and bureaucratic momentum, bright markets have historically been nearly impossible to implement once a different system is in place. Both consumers and drone operators stand to benefit from a bright market for drone airspace, but if regulators opt to construct a different system, the bright market opportunity will probably be lost.

Waiting for problems to emerge that bright markets would likely solve, love congestion or over-regulation, isn't the best path forward. Unless policymakers make clear airspace rights and act soon, the opportunity to set up a smart market will be lost, love a drone disappearing over the horizon.

Featured Image: Dan Bruins

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