Maintaining healthy skepticism of new drone ideas

As experts on the drone industry, we often receive requests to weigh in on new ideas in the industry. While a healthy climate of innovation still exists in the drone industry, not all new ideas are good ones. As our clients prove every day, drones have become essential basic tools for many businesses, but that does not mean that all drone-related concepts are so valuable.

We were recently asked by the blockchain technology experts at Smith + Crown to review a unique new proposition they had come across: an Initial Coin Offering for a blockchain enabled currency that would allow private property owners to get paid to grant permission to their supposedly private airspace.

This is an excellent example of hype overshadowing real-world value.

While an interesting thought experiment, this proposed new coin, Aero, solves a problem that does not exist today and very well may never exist. Though the combination of drones and blockchain is exciting, the application of blockchain technology to airspace regulation is a fundamental mismatch. Blockchains offer an excellent method for decentralizing authority over decentralized goods, but airspace is a common good that is already (and best) regulated by a centralized authority in the Federal Aviation Administration.

Conveniently, the request from Smith + Crown happened to come shortly after our recent post diving into the regulation of private airspace.

Read an excerpt from Smith + Crown’s analysis below or the full article on their site, and contact us to learn how your business can benefit from the real-world value of drones today.

Aero Token ICO: Dubious Prospects for the Drone Superhighway

By Brant Downes on October 10, 2017 7:52pm

While the project is immediately appealing upon casual consideration, a closer examination leads to a number of very troubling questions. Specifically, the company’s case is built around a particular reading of a handful of relatively obscure legal cases that raised red flags once we considered them more carefully. Subsequent conversations with a number of sources confirmed to us that AERO’s interpretation of these cases is considerably outside the mainstream. Moreover, AERO presents its solution as the missing link allowing commercial drone flights to begin, as noted above, without any mention of the fact that commercial drone delivery is ridiculously uneconomic, and that there is in fact no meaningful market for such deliveries. Moreover, the AERO team has no background in the drone, blockchain, aerospace or in fact any remotely related industry, has virtually no project code, and is proposing a project that simply from the standpoint of network enrollment is likely unworkable.

Concerns with AERO’s Arguments

Interestingly, our own research yielded evidence suggesting a range of industry interpretations of the same legal precedents AERO cites to present its argument for individual ownership of airspace below the 500 foot level. While AERO implies the questions of airspace rights are clear cut, the drone industry is much less certain. A recent blog post from Aerotas, consultants and providers of drones for land surveyors, conveniently titled “Who owns the air above your home? argues that there is no common understanding of the status of air rights between 85 and 500 feet. They go on to suggest that whatever solution that does emerge will come about only after a series of court battles, likely even before the Supreme Court. Slate makes a roughly similar argument concerning the many questions about who actually owns overhead airspace in this 2011 piece. In both cases, 85 feet, and not 500, is described as the general understanding of the upper limit of property owner rights. All references to the 85 foot level trace their claim back to the same 1940’s court case that AERO implied justified a 500 foot ownership claim. This is an absolutely essential distinction, for if a landowner’s claim is commonly understood to stop at 85 feet above ground there remains a significant space between 85 and 400 or 500 feet where a drone corridor could be designated. Regulations establishing such a corridor would instantaneously render AERO Token’s proposed solution completely superfluous.

Even if the problems of regulation and authorization were to simply disappear, somehow magically resolved entirely in AERO’s favor, there is another angle from which AERO’s ostensible solution to the legal status of commercial drone flights may be ignoring or overlooking larger issues. In this case the question is one of economics. AERO’s whitepaper makes no mention of any questions of finances. There are no micro discussions of any amounts property owners might expect as compensation, nor macro consideration of whether there are indeed sufficient volumes of goods that might be transported by drones willing or able to pay fees associated with the network. These are critical issues in any whitepaper, for a project must ultimately prove commercially viable. Readers of whitepapers and potential ICO investors have a right to at least a minimum explanation of a project’s economic context and strategy.