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By: IBISWorld Analyst, Sean Windle
LOS ANGELES – June 24, 2016 – After years of patchwork regulation, missed deadlines and ambiguity, the Federal Aviation Administration (FAA) announced guidelines for the use of commercial drones on Tuesday. The new rules allow a broad range of businesses to operate drones without explicit permission. Previously, companies had to apply for individual FAA permits, and delays and backlogs left many would-be drone operators on the sidelines. With clear guidelines and open skies, IBISWorld expects a boost in commercial drone sales this year and in the coming years. In fact, according to the FAA, sales of commercial drones are expected to grow from 600,000 in 2016 to 2.7 million by 2020.
Stronger sales growth typically means higher prices for buyers; however, prices have dropped in recent years as the cost of drone technology has continued to fall. Substantial research and development investments by manufacturers have made drone production cheaper and more efficient. Technological advancements in high-definition cameras and other drone peripherals have also contributed to falling prices. Moreover, IBISWorld expects price competition to heat up as more suppliers enter the expanding commercial drone market. These market characteristics benefit buyers by allowing them to pit multiple suppliers against one another to get the best price.
While the FAA’s new regulations open the door for wider use of commercial drones in applications like aerial photography, emergency response, education and real estate, they will hinder the development of drone delivery services. Drones must weigh less than 55 pounds and fly no higher than 400 feet. Additionally, drones cannot fly at night or cross state lines, and they must always stay within line of sight of the operator. These restrictions preclude the rollout of autonomous drone delivery systems currently being developed by Amazon, Alphabet Inc., Walmart and other large corporations. For now, buyers in package delivery industries will have to wait until the FAA releases additional guidelines to expand the range of uses for commercial drones.