Regulating drone airspace using ‘smart markets’

Regulating drone airspace using ‘smart markets’

Commercially operated autonomous drones may be on the horizon, especially since Google and Amazon have announced plans to start drone-based parcel delivery in 2017. A policy problem is likely to follow: allocation of scarce airspace and preferred flight paths — an issue complicated by the need to ensure that each drone’s flight is safe and that each flight-path segment stays within capacity.

The default solution to regulating drone traffic in the skies would be an open system much like the existing rules that govern roads. No limits are placed on participation, so flights are controlled by operating regulations and natural congestion, leading to an inefficient system that is oversubscribed, slow or even dangerous — or to one that is so heavily regulated few companies bother to fly drones.

An alternative solution follows the mechanisms to allocate electricity — a smart market for drone airspace and flight paths. A smart market is an auction that relies on mathematical optimization to resolve complex rules associated with allocating a resource. Smart markets are already widely used, and include such diverse examples as how advertisers bid to place 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 smart markets use a computer program to allow the cheapest power to be delivered from the plants best able to offer it. They ensure there are no 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.

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