Amazon: The Future Is Here

Amazon: The Future is here

If you’re waiting for the next game changer in e-commerce, I’m here to tell you that we’re one step closer. In December 2013, Jeff Bezos spoke on CBS News’ 60 Minutes segment about the future of online ordering and delivery: delivery drones. According to Bezos, these tiny little machines could get your Amazon (NASDAQ:AMZN) order to your door in as little as 30 minutes after you order it.

The Problem

As exciting as it might be to picture thousands of mini-drones flying around delivering packages to people, it’s a major headache for regulators—specifically the US Federal Aviation Administration. What if one fails and crashes into a house? Or a car? Or a person? (According to Amazon, these things can fly up to 50 mph (80 kmh.)

And what about commercial airliners? There are simply too many questions and worst-case scenarios. In addition to that, at the time, the FAA hadn’t even written rules on how unmanned aircrafts like drones could be used for commercial use. So the FAA put the kibosh on it pretty quickly.

However, Jeff Bezos would not be deterred. This is a man who somehow convinced the United States Postal Service to deliver Amazon packages on Sunday, so if the FAA were to start considering the idea, he wanted to be there to help guide them.

The Fight

The FAA was understandably afraid of the consequences of allowing drones to be tested before they even knew which direction they wanted to go, so it’s no surprise they weren’t allowing Amazon to do test runs. So late last year, Amazon gave them a sort of an ultimatum—let us test outside or we’ll move our billions of research dollars elsewhere.

In a letter to the FAA, seen by the Wall Street Journal, Amazon’s vice president of global public policy warned them:

"Without the ability to test outdoors in the United States soon, we will have no choice but to divert even more of our [drone] research and development resources abroad. I fear the FAA may be questioning the fundamental benefits of keeping [drone] technology innovation in the United States.”

While there is an ever-intensifying struggle in Washington to keep investment and jobs from being sent overseas, the FAA’s original response wasn’t positive. In a draft of regulations posted last month, drone operators would need to stay within a line of sight of their drones and drones could not be flown over people.

The Approval

Despite the initial draft, the FAA was open to discussion from “all interested parties.” You have to wonder what exactly Amazon did to lobby them on this, because just a month later, Amazon got the go-ahead to begin testing its drones over private, rural land in Washington state. While the draft is still open for discussion and will likely take the better part of a year to finalize, this initial approval is huge for the industry.

The Catch

But, of course, the FAA isn’t making things easy for Amazon to comply with its approval. Among some of the things it requires are:

  • Amazon must obtain a new certification to test any modified version of the drones. This will make it extremely difficult to adapt and improve the drones.
  • Flights must be kept at or below 400 feet (the company asked for permission to fly as high as 500 feet).
  • The drones must be in sight at all times.
  • Drone operators must have a private pilot license and current medical certification.
  • Amazon must supply regulators with data on a monthly basis.
  • Flights must only occur during the day and with clear skies.

So while this is a huge step in the right direction for Amazon, it’s also just a baby step. These requirements show that, while the FAA likely understands the evolution of drones for commercial use is inevitable, the regulator is extremely cautious about opening up the floodgates to let Amazon do anything contrary to the FAA’s specifications or its timeline.

The Conclusion

Jeff Bezos is nothing less than a visionary. His company is unlike any other company in the world, let alone the industry it’s in. It spends just about all its bottom line on new investments, yet investors are rabid to own it. After last year’s third quarter results, where Amazon had another major loss, one Seeking Alpha contributor called it “the end of the rainbow, the start of the storm.” But even though Amazon hasn’t given shareholders much in regards to its bottom line, the future is brighter for the e-commerce giant than it ever has been.

The company’s stock shows it too, making its way back up toward its all-time high. In the end, I expect the whole drone process to remain tedious and slow-moving, but the win here is that it’s finally begun, and like a pit bull, now that Amazon has its jaws clamped down on it, it’ll never let it go.

Disclosure: None

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Comments

Brian CunninghamBass 9 years ago Member's comment

Go offshore then after having acquired experience in failure, return to the US. Spend your money twice and have a good day.