On today’s What’s Working in Washington EXTRA, the subject is drones. Drones have the potential not not only be a great boon to entrepreneurs in the region, but also to change the way that people live their daily lives. To talk about that, we’re joined by Anne Swanson, an attorney with Wilkinson Barker Knauer; Matt Scassero, director of the University of Maryland Unmanned Aircraft System test site; and Mark Ryan, CEO of the Ryan Media Lab.

ABERMAN: Let’s begin with the fact that is an emerging industry. Drones are a lot more than just people playing with model airplanes. These days, it’s important stuff. I suspect that many of our listeners have an idea that drones are important, but maybe don’t have a clear understanding of the real large industrial opportunities. Mark, this is something you clearly have lot of passion about, why don’t you start out this conversation? What is it about this industry that makes it so exciting?

RYAN: Well, it’s the opportunity to take an autonomous technology, robotics, and apply it to virtually every industry that exists in current society. So, there’s this huge displacement opportunity to displace the old way of doing things with the new technology. For example, drone delivery. Drone delivery is going to become a reality. The majors are looking at it, FedEx, UPS, U. S. Postal Service, but where will the opportunities be? Well, we’re driving things around in cars, we have them on trucks, here we have an opportunity to take a big slice of that activity and make it more efficient, more productive, and at a lot lower cost, and actually improve the customer service on the other end.

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ABERMAN: I’ve got this mental image, and Anne, I’m going to turn to you in a moment, I’m almost imagining Star Wars and Tatooine. You know, all of the air-cars. Anne, is that the kind of world we’re heading towards, where people are off the roads, and things are all happening above us?

SWANSON: No, we’ll still always be on the roads, but I think we will get to a situation where there are a number of vehicles up in space, probably in low altitude, uncontrolled airspace. Matt can speak to that later, but I think we will be there. The trick is going to be getting regulations to catch up with the innovation, and secondly, coming up with a traffic management system that will help us control that conglomeration that you see up in the sky.

ABERMAN: You know, when I think about this industry, it really does feel to me like—remember when we were all younger, we thought that, when we watched the Jetsons, which was much better than the Flintstones, because, well, it had air-cars—this is one of these industries that just feels to me like really twenty-first century stuff. Matt, am I just losing my mind here?

SCASSERO: Not at all. The way I tell folks is literally, if you can imagine it, we will be doing it. We will be flying cars. We will be doing unmanned things where we’re just the passenger in the vehicle. We’ll be moving things autonomously, where we just say we want to end up here and the vehicle system, the traffic management system figures out how to get it there safely and efficiently. All of that stuff is going to happen. So, what we have to figure out is, how do we get from here to there efficiently, safely, taking into account where we are now with economic systems, and the money that’s invested in next-gen air traffic control systems, and not have to just totally get a white sheet of paper. So, really, how do we get from here to all those “there” points, and as your imagination is limited, how many “there” points there are.

ABERMAN: Mark, before we came on the air we talked a little bit about drones. I think when a lot of people think about drones, they’re thinking about these hobbyist drones that are now flooding the market from China, but there are a whole other host of them. When we talk about drones what are we talking about?

RYAN: That’s a great question. So, drones have been around for a number of years in concept. But what really accelerated the potential to the industry is the cell phone industry. It was many many millions of dollars invested in microelectronic systems that make a cell phone absolutely amazing, those microprocessors are actually the brains and the arms and legs, so to speak, of a drone. So, all of this remote telemetry, the precision of GPS systems, and use of the radio spectrum with remote controls, that enables a modern-day drone to do the amazing things that it can do. It can fly long distances, it can fly at various altitudes at various speeds. It can be controlled by computer. So, that opens up your imagination to well, okay, what are we going to do with these things?

In some cases, someone just wants to take videography, or put a sensor on it to survey agricultural fields, or to go up above a rooftop and inspect the integrity of the roof for maintenance, or post-disaster, when you need to look at thousands of roofs at one time. So, the insurance industry has adopted drones. All the way up to large scale drones. One of the more interesting news updates that came out last week is that China has given official approval to the largest logistics company in China to fly what looks like, basically, a full-on air freight company. So, they’re able to fly small drones to deliver last-mile delivery stuff to the homes in rural areas. All the way up to one-ton payloads, at high altitudes, where they’re flying a large number of packages.

So, the spectrum of the kinds of drones is enormous, from something that can fit your hand to something that will it take up several spots in a parking lot, or even larger. So, the size and shape depends on the use society wants from it. If you need to carry large payloads, or large things, or just have high value sensors collecting data for all kinds of things—construction, maintenance, cell tower inspections, railroad line inspections. All those things that are done now, but can be done a lot more efficiently using a drone.

ABERMAN: Matt, you’re working with these things all the time. What’s the state of the art right now?

SCASSERO: As far as technology wise, there really isn’t a limit. It’s literally imagination. We have kids I just came from meeting on campus. We had students putting LIDAR on their vehicles inside of the lab. But we’re ready to take that outside. So, with sensors, your limits really are your abilities to integrate all the pieces of several things that Mark brought up there—microprocessors, the sensors, the external data, the communications links that are either required for the application, or required for regulations. It’s your ability to integrate all of those things. So, that’s the technological limit right now, the bigger limit right now is regulatory. To do things in the national airspace, it is very controlled, rightfully so, by the FAA, and the ability to do what you want to do is limited by what you’re able to do with flight regulations.

ABERMAN: I think that is a great place for us to take our first break, because this conversation—what’s fascinating to me is watching an industry emerge, and how many times in your life do you get a chance to see an industry emerge? When we come back, I’m going, to first of all, I’m going to ask Anne Swanson how we’re doing regulating and bringing this industry into fruition.

ABERMAN: Anne Swanson, what do you think of the current regulatory environment? Is the government going to screw this up, or are they going to make it happen?

SWANSON: Now, I give the FAA a lot of credit. I mean, this is clearly an area where innovation is out in front of regulation, but these regulators are trying to catch up. Initially, I think things move very slowly, but starting in 2012, when we got some statutory language that kind of gave the FAA a boost and prodded it along. That created, for instance, the test sites, one of which Matt works at. That really began to spur things, and we really did begin to see commercial development. Initially, it was slow, because you had to get a permit from the FAA to go fly, you had to go get an exemption, and that slowed things down.

There were thousands of applicants, and the FAA had administrative issues with that. But starting in the summer of 2016, when we got some new rules, the FAA made it possible to fly without first getting permission from them, as long as you stuck with some operational rules that they set down. Now those are pretty restrictive still, at this point, because the FAA is a very safety-conscious agency, but we’re starting to see waivers of those, we’re seeing people pushing around the edges, and just today the House passed re-authorization for the FAA that includes even some more provisions that’ll let things go forward.

ABERMAN: Matt Scassero, when you’re testing these drones all the time, and you shared with me that you used to be an aviator, you had an awesome callsign, “Gucci,” but what I love about this is I have this image of you being this mad scientist, hobbyist, playing with a lot of drones. In my experience, a lot of entrepreneurs in new industries, the last thing they want is to be regulated. I’ve seen this for years, saying the government’s terrible. How is it that this industry is growing up where there seems to be more of a willingness to work with the government than some of the other industries that are emerging?

SCASSERO: I would say there are two audiences in this drone world. It’s the Radio Shack crowd, that’s used to just the technology. They don’t know anything about aviation, but they found this new tool, microprocessors and all the technology that’s enabling them to do things with sensors, and unmanned, and autonomy, and AI, and all that kind of stuff, and they don’t care about the aviation. Just the fact that it flies is even better. It’s more efficient, we can do more cool stuff. Then you have the aviation world, that comes from manned aviation, and the discipline, and the safety approach that Anne mentioned. The two are colliding, and that’s really what’s been driving some of the tension.

It’s becoming a healthy tension, in my opinion, because of the FAA’s leadership, over the last two, three, four years. The FAA’s leadership has really taken that tension and now focused it into the areas it needs to be focused on to actually create regulations. The amazing thing that came out, with the regulations of 2016, the part when they sent them to us, was they put in waiver possibilities, the ability to do waivers. It wasn’t just, hey, here’s rule to live by, it was, hey, here’s the rules, but here’s all of things you could waive, because that’s going to be the next rule set. So, they put in place things that allowed the next set of rules, and allowed to people to push out. So, there’s two communities that came from opposite ends, and I think they’re driving a healthy tension now.

SWANSON: And then the FAA has actually, in at least one case I can think of, pushed things farther than other parties wanted to go, and that’s in the area beyond visual line-of-sight. We know that about a year ago, we had rules drafted, potentially, that would let drones go beyond visual line-of-sight. But the law enforcement agencies came in, and said to the FAA, no, you can’t ID, and you can’t remotely ID these, or authenticate them, and until you do that, you can’t let them go beyond visual line-of-sight. So, the FAA actually was in front of some other parts of the government, and we’re now working on resolving that tension.

RYAN: So, a new thing that’s happened on the regulatory front, is something called the Unmanned Aircraft Systems Integration Pilot Program. The short version of that is Fast Track. So, the Trump administration said, okay, we love the progress, but we need to accelerate the development, we have to accelerate the integration, the acceptance of drones in society, because there are so many social benefits. And, by the way, other countries are competing against us, and we risk the opportunity that we have to be successful, to be the leader in the world. So, what does that mean? It includes the things that Anne and Matt described, but it puts them on a fast track. So, they set up kind of a reality TV show competition between states across the U.S. to actually solicit private companies to come to their state and do things, to explore the technology, and push the envelope, and the FAA, for their part, has committed to focus on that, and fast track waivers if they get if they earn the right to fly.

ABERMAN: Anne Swanson, from your perspective, what you think about what he just said?

SWANSON: Well, I think the pilot program brought together, really smartly, a couple of different political tensions. The states and localities wanted to be running the show, and then you had industry banging on the door of the White House saying, the FAA’s not letting us do enough. So the White House said, okay, we’re throwing you together. This is going to be a pilot program where the lead applicants, the people running each set of each team that’s picked, is going to be a state or local government, and they’re going to run it.

And they’re going to see how they can run it, and how they can help integrate drones into the national airspace. And at the same time, they’re going to bring on private partners, and those private partners will get to push the limits. They’ll get to go beyond visual line-of-sight. They’ll get to deliver packages. Some of the things we can’t do now. They threw everybody together and said, you guys go figure it out, and we’re just about at the stage where I think we’re going to get the first teams, they’ll be announced.

ABERMAN: It seems to me, as I hear you talk about this, that this industry, say, compared to autonomous vehicles, or artificial intelligence, or some other things that people perceive are going to drive the 21st century, sounds to me like this industry’s gotten its act together more. Is that fair to say, or do I just have Stockholm Syndrome?

SWANSON: I think it’s done it pretty quickly actually. Four or five years ago, we really did have the commercial folks, I think, in more disarray, and they’ve begun to realize that certain changes are needed. They’re acting more cohesively. In that 2012 statute I mentioned, the Congress kind of said, FAA, hands off on regulating the hobbyists, you can’t regulate the recreational drone folks. And in the last twelve or so months, the commercial industry has said that really needs to be done, and together they went to Congress, and I think that’s getting changed.

RYAN: To add to what Anne just said, one of the new things that is a true accelerant in the progress, is that the major corporations, the major players, have stepped into the arena. So, you get General Electric, Intel, Lockheed Martin, Northrop Grumman. They all have their commercial side tech, whether it’s software or hardware, that they’re bringing into the operating to the civilian life. So, aerospace management, radar, unmanned traffic management system architecture that basically create will create an air traffic control system for drones, which is basically from zero feet to 400 feet of altitude.

SWANSON: It’s called UTM, which is actually an acronym within an acronym, it’s UAS Traffic Management, shortened to UTM.

ABERMAN: Let’s face it. There are few things that we do as well in Washington as acronyms. That actually bring up a good point to break. When we come back after the break, I want to talk about why is this is a particularly strong opportunity for our region.

ABERMAN: I think I’ll turn to you first, Mark, why are drones such a big deal for the economy?

RYAN: The answer today is different than what it would have been five years ago, because the surprising rise of the drone industry has taken a lot of people by storm. So, if you look at the numbers, the GDP impact. Back just five years ago, the GDP impact was forty million dollars with an M. Just five years later, last year, the impact was one billion dollars, with a b, and folks are estimating that, within a handful of years, it’ll be upwards of thirty to forty, or more, billion dollars of GDP impact. Secretary Elaine Chao, US DOT, cites fifty thousand new jobs in the drone industry have already been created. And if you look at the venture capital market, some 300 companies have come on in the past three years, and have garnered three billion dollars in venture capital investment. So, there’s a huge uptick on the macro economic scale, but also on the industry participation. It’s almost startling.

ABERMAN: You know, I think about fifty thousand new jobs, that sounds like a lot of jobs. And that’s a lot of jobs in an industry that will have a huge multiplier effect. So, I’m very excited about this. I think this is terrific. Let’s take it more locally for a moment. Matt, I know you’re in the test site, you’re in the middle of University, Federal R&D. That would seem, to me, to be something this region would do really well, if we got our acts together. Are you seeing us focus on this the way we should be?

SCASSERO: It is something we have a demonstrated expertise in, turning research into jobs, and turning government R&D into civil R&D, but now, we’re starting to see the government interest in bringing civil R&D into the government. So, you see the technology transfer going both ways with this industry. So, this is something we are good at. We’ve done it with biohealth, biomed, and other areas. We’re going to be able to do the same thing with unmanned aircraft systems, unmanned ground vehicles, and surface-subsurface vehicles, all those things. And we have the experience, we have the ability, and we have the technologies.

The DoD has been working on drones for literally forty years. In the last twenty years, because of the microprocessor revolution, they’ve really expanded their capabilities. Now, we’re starting to look at AI, and the abilities of autonomous vehicles, and machine learning, and applying those things to the unmanned world. So, we’re going to see a rippling effect of technology going out, and out, and out, creating more and more opportunities. That’s what I really see. It’s just an incredible opportunity, in the local area, as a region, and as a technology area. The two of those things married together, there’s a lot of opportunity for our area.

SWANSON: We have a lot of smart folks here in Washington, who can figure out how to move the regulations along more quickly, and how to move the statues along more quickly, and I think this industry is benefiting from that. It’s moving a lot more quickly, I think, in regulatory triumphs, and successes, than, say, the internet folks did. It took a decade or two there, and this is moving very, very quickly. We’ve got a lot of expertise in this area. And, I don’t use the term beltway bandit it as a pejorative. I mean, we’ve got a lot of folks who’ve taken that military expertise that Matt mentioned over the years, and turned it into civilian applications. And those companies are all, I think, engaging in this industry.

ABERMAN: So do you think it’s fair to say that, as we look at possibilities for growth in the greater Washington region, drones are something our policymakers in the state level surely would be focusing on, right?

SWANSON: I think the government around the area have. I mean, Virginia has been very active in that, Maryland has, our governors, Virginia and Maryland, I think are awake to that. Created commissions, created bodies. I mean, they’re also starting to put funding in. I mean, I think we’re still a little behind, New York has made a big push into this, North Dakota, Ohio. There are some areas that are ahead of us, but I think we’re waking up.

SCASSERO: I agree. The states are passing pro-UAS legislation, where, in the first two or three years I was working this particular effort, about five years ago, we were beating down anti-drone legislation in the state legislatures. Now, you see pro-UAS. In Maryland, we passed Senate bill 370 back in 2015. It was the second pro-UAS legislation in the United States. Now, nine other states have copied it, because it levels the playing field within the state, it recognizes federal preemption, but it encourages UAS activity. Do studies, economic funding from of these states, economic development organizations. So, the states are already really getting involved, and they’ve come to understand what the limits are, of federal preemption, of the airspace, things like that. So, we’re doing very well.

RYAN: One thing to add: a number of industries over the past thirty, forty years have really been born out of Washington, unleashed through legislation that’s been passed, whether it’s the cable television industry, the wireless industry. A huge brain trust of really talented people, as Anne said, are here, working really the hard on the hill, in law, and various ancillary supporting industries, where it’s a team effort, everybody is trying to craft the best possible regulatory framework. A tremendous amount of learning is built up there. That’s what we have right now with the unmanned industry. So, we have an opportunity to capture that, and leverage that for the local economy.

ABERMAN: You know what’s funny to me? If we were sitting around in the 1800s, we wouldn’t necessarily be having the having conversation about how steam power’s changing the world. Sitting around, talking about the railroads. But you guys are in the middle of a brand new, 21st century industry. How exciting must it be to be giving birth to an industry?

SCASSERO: We actually do talk about exactly what you mentioned. We talk about the pivot points of industry, the reciprocating engine, the gas engine, back further than that, the steam engine. In aviation, manned flight is only one hundred years old. And now, we’re talking about unmanned flight. So, you see these pivot points. We are at a pivot point, and it’s happening so fast that we’re seeing the opportunities at the same time we’re creating the industry. They’re really happening. People are really starting to make money and finding their commercial opportunities.

SWANSON: And I hope you encourage your students to jump right into this, what a great career.

SCASSERO: I can’t hold them back!

RYAN: Well, consider this. So, the first approved package delivery by drone in the United States was conducted less than three years ago, July 2015, by an independent company in the hills of Virginia. And that was momentous, it was beyond visual line-of-sight, it was autonomous. Consider the vertical vertical arc of development since even less than three years ago. This industry is growing exponentially fast, in its sophistication and its ability to socialize its technology. People are becoming very warm to the idea. If you look at the recent public survey, about a year and a half ago, by the Postal Service. Most Americans in the survey were open to drone delivery.

SWANSON: I think Mark mentioned that this is a disruptive, initially viewed as a displacing industry, but I think the public’s coming around to seeing that it saves lives. It saves time. It saves money. It really does.

ABERMAN: I’m really glad you took the time to come into the studio today. This has been a really fun conversation to have, I love it when you get a ringside seat into something truly new, particularly something that has a potential to put a lot of people to work, and really take advantage of our regional resources. So with that, I want to thank Anne Swanson, attorney with Wilkinson Barker Knauer; Matt Scassero, who runs the University of Maryland test site, and has a lot of passion about making things fly and not crash, I like that about you; and Mark Ryan, CEO of Ryan Media Lab. Thanks again for joining us today.

SWANSON: Thank you.

RYAN: Thank you.

SCASSERO: Thank you.

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