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The Path Becomes More Clear for Commercial Drones

By Motley Fool Staff – Jul 1, 2016 at 8:04AM

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What the FAA regulations change, and how the new rules will affect consumer-facing companies such as Amazon.com and Wal-Mart.

The Federal Aviation Administration (FAA) recently released new and less strict regulations for commercial drones.

That starts to clear the skies for a number of companies hoping to use unmanned vehicles in a variety of ways. Of course, this is only the beginning and a lot of decisions are yet to be made, but it's progress in an emerging space where things have progressed very slowly from a legislative point of view. 

In this clip from the MarketFoolery podcast, Chris Hill, Aaron Bush, and Simon Erickson go over what the regulations will mean for companies using commercial drones, how much impact a commercial drone industry could have on the economy in the next decade, and why the new rules aren't terribly exciting for companies such as Amazon.com (AMZN -1.84%), Google, and Wal-Mart (WMT -0.46%).

A full transcript follows the video.

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This podcast was recorded on June 22, 2016. 

Chris Hill: We have some movement on the commercial-drone front. The FAA has released new regulations that will go into effect in late August. Aaron, I was struck by the fact that beyond dictating what these rules are going to be in terms of who gets to fly drones, what's involved in terms of licenses and that sort of thing -- you don't need a pilot's license, you need a drone license, which is apparently a lot easier and a lot cheaper to come by -- the FAA went out of its way to talk about what this will do to the U.S. economy, saying, "We think the commercial drone industry is going to add 100,000 jobs in the next 10 years; it's going to add $82 billion to the U.S. economy." And yet I get the sense that they're not popping the champagne over at Google and Amazon and Wal-Mart and places that are looking at it.

Aaron Bush: Not quite.

Hill: Where are we now, when it comes to commercial drones?

Bush: Previously, there was pretty much a rule on every single thing you could do with a drone. This allows you to operate it with fewer restrictions. Still manually controlling it within line of sight, but it doesn't quite extend to autonomous drones, which is what the Googles and Amazons are most interested in. They deliver packages and go around doing their own thing, and we as humans don't even have to deal with it that much. We're not quite there. But this is a good step in the right direction, because there are plenty of use cases that don't have to be autonomous.

I was looking at the numbers a little bit. As you mentioned -- 100,000 potential jobs. They anticipate up to $80 billion or more in value created in the next decade. But currently, how it's done with getting permission from the government to use drones, there's just a giant backlog of companies requesting permission.

The government has to go one by one and look at each one. But now, that's going to go away. There will be thousands of companies across all industries that will have the ability without having to wait anymore to start using this. I think that is the big news here.

Simon Erickson: Especially for investors, because now things get interesting. It's kind of neat having a drone following you around as your surfing on Hawaii's North Shore or whatever you're doing action sports-related. But the real bang for your buck as an investor is going to be, how is a commercial company going to monetize drones into their business? And what does that mean for shareholders? It gets interesting now.

Bush: Yeah, it's a productivity boost.

Erickson: And Chris, I know you are a surfer on the North Shore of Hawaii, right?

Hill: Not even remotely. That was the look you saw on my face: "What are you talking about?" First of all, I'm not surfing on the North Shore. Secondly, I don't want a robot flying behind me when that's happening. 

 Chris Hill owns shares of Amazon.com. Aaron Bush owns shares of Amazon.com. Simon Erickson owns shares of Amazon.com. The Motley Fool owns shares of and recommends Amazon.com. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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