This report explores the development of Unmanned Traffic Management (UTM) systems, various stakeholders in its development, and the expected market growth. Over the past few years, around 35 UTM companies have received over USD371mn in funding and the industry is now entering a period of accelerating growth. The major stakeholders in the development of the UTM infrastructure are aviation authorities, law enforcement agencies, Unmanned Aviation Vehicles (UAV) service suppliers, drone manufacturers, commercial drone operators, and flight operation management companies. The report also lists leading companies in the field.
One of the key challenges facing air traffic management today is the integration of unmanned aircraft systems (UAS) into the existing airspace system. As a response to this challenge, the UTM architecture is being developed, which will enable the operation of UAS in a safe and structured manner. This report provides an overview and in-depth analysis of the UTM system and its impact on the drones, visual and beyond visual line-of-sight (BVLOS) UAS flights in low-altitude airspace, self-driving cars, mobile robots, and other evolving technologies such as flying cars. An overview of the market drivers, opportunities, key players, and the technology is also provided.
Introduction to UTM
UTM is a "traffic management" ecosystem, being jointly developed by the Federal Aviation Administration (FAA), NASA, industry players, and other agencies around the world. The objective of the collaboration is to develop a framework which will enable multiple BVLOS UAS operations at low altitudes (under 400 feet above ground level (AGL)). The UTM development will ultimately identify services, roles/responsibilities, information architecture, data exchange protocols, software functions, infrastructure, and performance requirements for enabling the management of low-altitude uncontrolled UAS operations.
The current view of most stakeholders developing the UTM system is that it will manage drones in the lower airspace. It will be a system with several subsystems, which will be interconnected and work together to provide a comprehensive service. It is envisioned that the UTM system will be connected to different data providers to collect real-time information about weather, airspace traffic, drone registration, and credentials of drone operations among other crucial data.
The core functionalities of the UTM system will likely share many characteristics with the current Air Traffic Management (ATM) system.
Regulatory market dynamics
Need for a regulatory framework
The surge in the number of UASs in the recent years, the development of flying cars, and proliferation of other autonomous systems has necessitated the development of regulatory framework. In the following sections, we explore what is driving companies to create UAS, the stakeholders working towards the UTM architecture, privacy issues, safety concerns, and overall vulnerability of the UAS ecosystem in the absence of stringent laws to govern them.
Growing number of drones in airspace
Initially used exclusively for military programs, UAVs now have numerous capabilities. They are now used for a rapidly expanding list of tasks including photography, infrastructure monitoring, package delivery services, precision agriculture, search and rescue operations and much more. This has myriad challenges for lawmakers and regulatory agencies. When the civilian UAV was introduced, there were no laws or regulations to govern their production, sale, or use. This led to safety and privacy concerns.
At the latest count, for the US alone, there are more than one million recreational drones registered with the FAA. That number is the sum of about 878,000 hobbyists, who each receive one identification number for all the drones they own, plus 122,000 commercial, public, and other drones, which are individually registered by aircraft. Around 1,500 professional drone pilots and companies have together registered more than 70,000 commercial drones. These numbers are set to multiply exponentially over the next few years.
The FAA's drone registration program requires hobby drone owners to register through an FAA website for a USD5 fee. According to the FAA, drone sales reached 2.5 million units as of December 2016 and will grow to seven million units by 2020 in the US alone.
Security and safety issues
Most UASs use GPS technology. This technology enables the operator to fly the drone on a specified route. However, GPS poses many security issues. When operating the drone, GPS allows the operator to fly them beyond the regulated 400 feet height as well as out of their line of sight. This poses a safety risk as the operator cannot gauge the hazards that are beyond their line of sight nor can they make corrections to their flight path.
Rogue operators are another cause of concern. Until a UTM architecture is in place that can identify unregistered aircraft, rogue operators will pose a public danger. Their flights can cause injury, either to people on the ground or through a mid-air collision.
The packages carried by drones pose risks in terms of privacy. Though standard cameras and video equipment have seemingly low risks, many drones already have payloads, which include thermal imaging cameras, facial recognition cameras, and open WiFi sniffers. This has led to concerns about privacy protection.
In 2014, researchers at the London-based Sensepoint security firm designed software that was deployed on a drone and allowed the vehicle to steal data from mobile devices surrounding it.
A document issued by rights group Statewatch, titled Eurodrones Inc., reports that the EU is secretly investing into surveillance drone projects without the knowledge of citizens. All of the above instances prove that private citizens' privacy may be compromised by the growing use of drones.
The 2011 crash of a CIA drone in Iran underlines the hacking risks of drones and other unmanned vehicles. The local authorities had claimed that they hacked the GPS of the drone to divert its trajectory. This is a potential danger not only for drones but autonomous mobile robots, and self-driving cars. The systems have to be made intruder proof.
Emerging regulations for UAS traffic management-US
The FAA Modernization and Reform Act of 2012 recognized that civilian demand for small-unmanned aircraft systems (sUAS) has exponentially increased. This has prompted the FAA to expedite R&D activities geared towards sUAS. The passage of the Act in 2012 identified the need to prioritize drone safety and efficiency for the near future. The Act mandated that a plan be created to integrate civil UAS into the National Airspace System (NAS) by September 30, 2015. In 2015, the FAA published a Notice of Proposed Rulemaking (NPRM) to allow the routine use of certain small UAS. The final rule, which creates a new Part 107 in Title 14 of the United States Code of Federal regulations, was published on June 28, 2016 and took effect on August 29, 2016.
The Small Unmanned Aircraft Regulations (Part 107) as published on March 23, 2018, contains the provisions in the table below.
Currently, BVLOS flying is prohibited under the FAA's Part 107 rules pertaining to the UAS. However, if UTM becomes a reality, it will clear the path for the regular operations of BVLOS UAS. This will allow the widespread use of drones for delivery, search and rescue operations, precision agriculture, railroad inspections, and many other applications.
Emerging regulations for UAS traffic management-global
The aviation regulating authority in Europe is The European Aviation Safety Agency (EASA). The EASA published a Concept of Operations for Drones in 2015. This focused on the integrations and acceptance of drones into the existing aviation system in a safe and proportionate manner.
In July 2015, a regulatory framework for the operation of drones was published, followed by a technical opinion paper in December 2015. The technical paper contained 27 proposals for a regulatory framework and risk control. In 2016, a "Prototype" Commission Regulation on Unmanned Aircraft Operations was published on August 22. It combined the efforts made in 2016 and presented a formal regulation guidebook with respect to the operation of UAS.
The Europeans have dubbed their UTM project U-Space, which is a set of new services and procedures to support safe, efficient, and secure access for many drones. While the first U-space services are scheduled to be operational by 2019, there is a strong possibility that many of the functions will begin sooner.
The FAA is unable to respond speedily to the number of requests for the registration of commercial drone pilots or issue waivers and permits. The approval process is lengthy, and many applications are denied. The introduction of Low Altitude Authorization and Notification Capability (LAANC) aims to speed up the approval process to near real-time. However, LAANC was not designed to be a UTM that can enable the large-scale usage of drones in heavily populated areas.
In order to reduce costs, the UTM being developed by the FAA will provide air traffic information limited to particular geographical areas. For example, the system will only show the information around the specific area in which you are located and not information across the state or country.
UAS traffic management system architecture
The key challenge in creating the UTM architecture is determining the specifics of managing four-dimensional trajectories for both manned and unmanned aircraft and allocating appropriate resources among different aircraft. Some of the many aspects that need to be considered include the aircraft connectivity constraints of commercial flights, resource capacity constraints, geofencing constraints for unmanned aircraft and geographical restrictions within the airspace. A balanced approach is required to solve the capacity and demand of airport and airspace resources at a large scale. Areas of focus include concept and use case development, data exchange and information architecture, communications and navigation, and sense and avoid. Research and testing will identify airspace operations requirements to enable safe visual and BVLOS UAS flights in low-altitude airspace.
The core components that will enable UTM are V2V communication, UAS Service Suppliers (USS), drone tracking, remote identification, and sense-and-avoid or detect-and-avoid (DAA) sensors.
V2V and V2I communication
V2V communication refers to communication between two vehicles. Along with communicating with the USS, UAVs and other vehicles need to communicate with other elements in the system in order to avoid collision. V2I refers to communication of vehicles with infrastructure technology. It allows vehicles to share information with the components that support a country's road transport system. Companies such as Hyundai Mobis (OTC:HYPLF), SEMCO (OTC:SMSGF), and LG Electronics (OTC:LGEAF) are developing and collaborating with other companies to create components such as RFID, cameras, traffic lights, lane markers, streetlights, signage and parking meters.
Technologies now being used for drone tracking like LTE and ADS-B will most likely be used for V2V communication as well. However, there are likely to be additional solutions available for shorter-reach communication such as DSRC (Dedicated Short-Range Communication). DSRC may also be used for communicating with self-driving cars that are on the road. Cellular 5G Americas published a white paper in March 2018 that compares Cellular V2X (C-V2X) and DSRC and why C-V2X is a more viable technology for V2V communication.
DSRC vs. 5G: It is a wireless communication technology, which operates on the 5.9GHz band of the radio frequency spectrum. It is the current dominantly used system in the US connected vehicles market and is prescribed by federal regulators. It is designed to allow vehicles in the intelligent transportation system (ITS) to communicate with other vehicles or infrastructure technology (both V2V and V2I). It is effective over short to medium ranges and receives very little interference even in extreme weather conditions. The communication happens through transponders known as onboard units (OBUs) or roadside units (RSUs). The advantage of C-V2X over DSRC lies in the fact that the latter has longer range and enhanced reliability. C-V2X has more consistent performance in congested traffic. It also has better ranges for both LOS and BVLOS vehicles. In the future, there will be wider adoption of 5G cellular for V2X. However, challenges remain in countries' allocation of 5G spectrum, deployment of onboard units by manufacturers, and evolution of existing products to support 5G New Radio to fully utilize the end-to-end capabilities of 5G.
The key aspect of V2V communication is to enable safe and secure communication between USS, drones, and other autonomous machines such as self-driving cars, unmanned surface vehicles (USVs), and other mobile robots. Cyber-security is a key element for any V2V communication channel. Companies like OnBoard Security and DigiCert have developed systems for V2V and IoT cybersecurity, but more advanced technology is needed for autonomous vehicles.
UAS service supplier (USS)
USS will manage the core functionality of UTM. We see the USS being composed of commercial companies with the approval of the FAA. The USS will be responsible for real-time information to all applicable stakeholders regarding the UAS and also communicate with commercial drone operators about airspace authorization, UAS identification, real-time aircraft tracking, conflict advisors, and geofencing.
Drone tracking & remote identification
Using technologies like LTE, radio frequency, Automatic Dependent Surveillance - Broadcast (ADS-B), and Wi-Fi, USS will track and identify drones in the air. The industry has yet to zero in on which of these technologies offers the best solution, but it is likely that the UTM architecture will utilize a combination of these technologies along with cellular networks.
ADS-B is currently used to track all manned aircraft and will likely be made mandatory on all manned aircraft by 2020. The problem of using ADS-B in UAVs so far has been the bulky size of the technology; however, there are companies working on reducing the size to make it compatible with commercial drones. Due to spectrum bandwidth constraints, ADS-B may not be made mandatory on the millions of drones, however, it may be mandated for more advanced autonomous applications. The density of the drones can be handled by the LTE bandwidth of the telecom companies, thereby making it a complementary solution. A combination of all the aforementioned technologies is, in our view, the ideal solution for drone tracking and identification.
Detect-and-Avoid (DAA) sensors
Detect-and-Avoid capabilities in UAVs are mandatory in case of lost connectivity. UAVs, self-driving cars, and robots can communicate with other autonomous mobile systems, USS and regulators, however, when communication breakdowns with technologies like LTE, ADS-B, etc. occur, these autonomous vehicles must be able to avoid obstacles. To tackle this, many UAVs are now equipped with sensors such as LiDAR, radar, and 3D imaging. These sensors, coupled with advanced machine learning capabilities, allow drones, self-driving cars, and mobile robots to sense and avoid other unmanned and manned vehicles without the need to be connected to a network. Similar technologies are widely used in autonomous vehicles and thus are readily available. However, there is still ample space for companies to develop a better and more robust system. Intel (INTC)-backed Precision Hawk, DrDrone, and Fortem Technologies are some companies, which have developed DAA sensors and are working on improvisations.
Beyond Visual Line of Sight (BVLOS) refers to UAS flights that are beyond the pilot's line of sight. This is different from the VLOS system where the flight is always in the visual line of sight of the pilot/operator. There is technology like First Person View (FPV) available that makes BVLOS possible. However, currently, BVLOS flying is prohibited in the US unless there is a visual observer of the flight who has unaided sight of the drone.
Development of a UTM architecture will present a way for the wide adoption of BVLOS. The UTM system will allow for safe conduct of the flights because of the shared network and communication. However, the consensus industry view is that BVLOS will be allowed from 2020.
Switzerland and Denmark were the first countries to grant permanent authorization to private sector companies. The companies were Parrot (OTCPK:PAOTF)-owned SenseFly and Heliscope/Scopito, respectively. PrecisionHawk, a US based company announced that it has developed the first FAA approved BVLOS-enabled drone platform. After three years of research, the company developed an FAA-approved drone system to operate BVLOS.
Commercial applications include package delivery, railroad inspections, pipeline inspections, power line inspections, windmill inspections, precision agricultural inspection, and mapping.
The government and public applications include search and rescue operations, firefighting, law enforcement, and conservation management.
For example, UK utility National Grid (NGG) launched a pilot to test how drones can help improve management of its high-voltage energy transmission lines, 7,724km of high-pressure gas transmission pipelines, and 23 compressor stations.
Air taxis and flying cars are other applications for BVLOS, though they are not expected to be launched for several more years.
Current regulatory status across nations
22 million self-driving cars are expected to be on the roads by 2025. By 2040, it is estimated that 95% of all new vehicles sold will be fully autonomous. In such a scenario, there is a need for a UTM-like architecture that can identify, track, and monitor the autonomous vehicles. There is also need for V2V technology, Detect-and- Avoid sensor technology, and environmental data collection software. Companies like Uber that are working on launching air taxis, expect these taxis to be unmanned or without a pilot on board. Thus, they are working with NASA and the FAA to develop enabling technologies and regulations.
The US Army is working towards applying autonomy and artificial intelligence to the operations, requirements, and missions, with a focus on manned-unmanned teaming. At AUVSI 2018, Brigadier General Walter Rugen, deputy commanding general, support, 7th Infantry Division and Director, Cross Functional Team (Future Vertical Lift) of the US Army, argued that, "more autonomy onboard unmanned aircraft systems (UAS) should be aimed at reducing the human workload, so that the soldier can focus on more critical functions, hence highlighting the use of UAS for dirty, dull, and dangerous missions."
The view of the US military is that autonomous and manned systems should complement each other. This is because machines do not have the curiosity of a soldier, an element that could lead to developments on the ground. It is also critical from an intel-gathering capability perspective.
Autonomy in unmanned systems is growing due to efforts to command and control for UAVs in 'swarms', as autonomy reduces manual labor, lowers costs, and increases the range of operations.
Considering the above, it is logical that a combined UTM architecture for manned and unmanned vehicles in foregone conclusion in the path to the optimization of traffic efficiency. This also means that when including the AV market, there will be a tremendous increase in the potential for UTM and USS stakeholders.
Amazon (AMZN), Uber (UBER) and other big technology companies are working towards using small autonomous aircraft ferrying packages and people from place to place. The success of these companies depends on the completion of a UTM architecture that can control the airspace securely. Uber's proposal to launch air taxis can succeed only if the monitoring and management system is successfully deployed and is able to handle large volumes of UAVs.
Air Taxis: Uber has announced that it has signed an agreement to provide NASA with details and data about the inaugural UberAir services it has planned in Dallas, US. In return, NASA will use the data to make simulations of small passenger-carrying aircraft flying over the Texas Metroplex during peak air traffic times. Uber will analyze those simulations to help plan air taxi management in Dallas as well as Los Angeles, and Dubai-the other cities planning to start testing UberAir by 2020. Initially, the UberAir taxis will use human pilots, slowing graduating to flying them autonomously (proposed to be fully launched by 2023). The challenges posed by Air taxis are multifold. They include safety certification of taxis, controlling noise emitted by these taxis so as to protect the interests of the communities, installing cybersecurity measures, safety measures for crowded areas, backup measures for technical failures of UAVs (e.g. running out of battery) and integrating traffic management with existing low flying commercial aircraft.
Commercial package delivery drones: There are currently 6,000 drones flying in the US airspace at any given point. However, this number is expected to increase 100-fold once permissions for autonomous drone package delivery is provided. The concern for FAA currently is that such high numbers will overwhelm the existing UTM infrastructure. In May 2018, the US Department of Transportation announced that it would allow a greater range of tests in 10 sites as part of its drone integration strategy. The tests allowed will include flying drones at night, above population centers, and BVLOS. Amazon made its first successful octocopter drone delivery of an Amazon Fire TV streaming media player (weighing about 280 grams) and a bag of popcorn to a home in Cambridge, England in December 2016. DHL (OTCPK:DPSGY), UPS (UPS) and other shipping businesses are testing similar services.
Application of robotics
Many companies in the robotics space are now catering to not only the UAV space but also applications on the land (UGV) and sea (USV). The main applications have been in the military segment for surveillance, reconnaissance; counter IED missions etc. where there is a threat to human lives and may result in human casualties.
Companies range from providing UGV gear or completely developing robots that can carry out missions. Such firms use advanced robotics to increase the safety of troops on the ground.
The UGV market is estimated to be valued at USD1.5bn in 2016 and is projected to reach USD2.82bn by 2021. Besides the major military applications, UGVs have seen applications in the fields of by emergency services such as fire brigades, ambulances, police, etc., providing great support for a wide variety of tasks, including assistance to disabled people, fumigation, harvesting, transporting, patrol monitoring and detection, investigation, exploration and inspection at tunnels, buildings, etc.
Stakeholders working towards a common UTM architecture
Some of the prominent stakeholders in the development of the UTM system are: - UAS service suppliers - Commercial drone operators- Communication systems providers- Data service providers- Law enforcement- Air Navigation Service Providers (ANSPs)In the US, the development of UTM falls under the overall purview of the FAA's Air Traffic Management System. Currently, air traffic services are not provided in low altitudes (under 400 feet AGL) and are therefore uncontrolled. A joint research team with the moniker Research Transition Team (RTT) has been established between the FAA, NASA, and industry to coordinate the UTM initiative.
Ongoing and upcoming UAS traffic management system programs
The FAA is collaborating with NASA to develop a UTM architecture in the US. In March 2018, NASA completed the 'Technical Capabilities Level (TCL) 3' phase of its UTM project for drone systems. This was the first real-world attempt where multiple USS platforms were integrated to manage and de-conflict UAS operations simultaneously in the same region. Once the TCL level 4 phase is complete, the system will be transitioned to the FAA. According to the Nevada Institute for Autonomous Systems, NASA provided its Flight Information Management System, a software platform the FAA will reportedly use as a prototype in the near future, to UAS partners across the US to assist in the project. The areas of focus covered throughout NASA's various research and testing phases include communication, navigation, surveillance, data exchange, network solutions, BVLOS cases, and more. The recent testing period in Nevada, labeled as 'Technical Capability Level 3,' simulated scenarios that tasked the UTM to operate drones safely and efficiently, simultaneously, above populated airspace.
The following image shows data in a UTM system flows.
The FAA is currently working on the first step of a UTM system, the LAANC, which supports air traffic control authorization requirements for UAS operations conducted under the Special Rule for Model Aircraft (part 101e) and the sUAS Rule (part 107). Airport notification and airspace authorization processes are currently manual for sUASs. LAANC will provide part 101 & 107 UAS operators a streamlined solution to enable real-time automated notification and authorization. Concurrently, the FAA and NASA have developed a joint UTM research plan to document research objectives and map out the development of UTM. NASA is conducting research at UAS test sites to further explore UTM capabilities that will accommodate rulemaking as it expands opportunities for UAS integration. The FAA expects UTM capabilities to be implemented incrementally over the next several years.
The FAA has already selected companies such as Skyward and Air Map to design the software that will be used to request and be granted FAA airspace authorization via the LAANC program. The UTM will support real-time or near-real-time organization, coordination, and management of primarily low altitude (<400 feet AGL) UAS operations. The system is based on communication between FAA and the UAS operators. The FAA provides the constraints and the operators are responsible for responding to the constraints and managing their UASs accordingly. A distributed network of highly automated systems via application programming interfaces (APIs) is the primary means of communication and coordination between the FAA, operators, and other stakeholders. There is no direct voice communication between the pilots and the air traffic controllers.
Collaboration with private players
LG U+, Amazon (AMZN), Boeing (BA), GE (GE), and Google (GOOG) among others are developing a private UTM system for drones. The proposed system will allow drones to fly a couple of hundred feet above the ground. Cellular and web applications will be used for remote tracking and avoiding collisions.
It is estimated that the development of the entire UTM architecture for the US will take over two years. The system will be different from the existing ground-based radars of the FAA. However, it will have the capability of interacting with existing systems. The system will identify and track unidentified drones and provide this information to law enforcement agencies on the ground.
In Korea, LG U+ is the first company to announce a plan to deploy commercially a BVLOS system after the nation's transport ministry lifted some regulations on UAVs to allow drones' after-dark flights and BVLOS. The plan calls for drone owners to have the capability to know the location of their drones in real-time through the company's LTE networks. The company claims the system will enable autonomous operation during an entire flight.
Challenges faced by the UAS industry
A regulatory framework or lack thereof remains the biggest challenge for the UAV industry. Though many countries have recently passed favorable UAV laws, there is lack of clarity on certain aspects like BVLOS flights, flights over heavily populated areas, etc. In the US, it is unlikely that BVLOS will be commercially available before 2020. The only company to receive FAA-approval for its BVLOS enabled drone platform is Intel-backed PrecisionHawk. This is a major step forward for more enabling regulation. The lack of definitive regulations also poses a challenge in designing FAA-compatible drone business models.
Though there has been tremendous advancement in the development of VLOS and BVLOS systems, the development of a safe-proof UTM has proved to be a challenge. The technical challenges faced in the development of UAS and UTM systems are:
- Remote identification
- Sense-and-avoid in GPS-denied environments
- Battery endurance
- Real-time data processing
- Command-and-control communication links
UAS service supplier (USS)
At present, there are no companies that have developed themselves into a full-fledged USS. However, some companies have approached NASA and the FAA to support the development of the concept. When UTM goes live, the companies that are helping create the UTM solution and assisting in the writing of drone regulations will have a competitive advantage.
USS is one of major components of the system and is likely to be the most investable and sustainable theme. While there are many early-stage startups that have the technology to make USS and UTM a reality, companies like Google and Microsoft will also have proprietary USS systems for their own vehicle networks. Terra Drone Co., Ltd., a Japanese commercial drone service company, has commercialized a UTM system for the first time in Korea collaborating with LG U+, a Korean cellular carrier owned by LG Corporation (OTC:LGCOF). It is likely there are a variety of USS providers, thus multiple winners in the longer run.
USS has many business models open to it. Providers can charge for their services with a subscription model or service model charging per-vehicle connection.
An ideal USS would provide an independent, highly automated, and scalable system that monitors and manages airborne drones, as well as handle data from other sources such as weather, terrain, and ATC, and provide access to the data to commercial drone users. For regulators, the USS will transmit notifications to public safety and other government agencies.
Current estimates for the number of commercial drones sold over the next decade represent a CAGR of 13.5%. By 2030, sales should grow by 1.8mn units annually. The USS industry is expected to be commercial market opportunity of ~USD270mn in 2020. However, over the next 10 years as the install base grows, estimates call for the USS market to generate USD1.9bn in revenue by 2030, representing a 20% CAGR over that time frame. As it is still in its infancy, it is, however, challenging to estimate the actual commercial amount.
Commercial drone operators
While the FAA in the US and the EU's European Aviation Safety Agency banned the use of commercial drones in the transportation and logistics segment, the use of commercial drone-enabled services is permitted in sectors such as construction, media, and entertainment. Commercial drone operators enable organizations to make better decisions by acquiring, managing, and processing field data using autonomous drone fleets. In the UK, drone operators are required to have the permission of the CAA to carry out commercial operations; this is commonly known as permit for Commercial Operations (PfCO). The commercial drone-enabled services market is forecast to grow at a CAGR of 35.47% from 2018 to 2020.
Flight operation management / flight information management systems
The management system forms the gateway for data exchange between UTM participants and national civil aviation systems. Through these systems, authorities can provide directives and make relevant information available to UAS operators via the USS network. The management system creates a mechanism for creating situational awareness among all UTM participants. In the US, they are the components that will be built and managed by the FAA to support operations.
Law enforcement agencies around the world will form an important component of UTM. Regulations cannot exist without enforcement. Law enforcement will be responsible for traffic control and the prosecution of traffic violations. The foreseeable interaction with the UTM system includes receiving drone traffic information, automatically levying fines, and providing intercept advisories.
Air navigation service provider/regulator
National aviation authorities are the primary stakeholders with regard to any aircraft traffic management operations. The national aviation authorities will regulate all aspects of UAS including the registration of drones, and their integration into the airspace. The regulation may vary from nation to nation. However, they will primarily be responsible for certification of development and operation of the system and maintenance of restrictions, granting of permissions, and analysis of data. There is a need for a global unmanned traffic management architecture, which companies such as ANRA Technologies and Terra Drone Co. are developing.
The future of autonomous and unmanned vehicles
Artificial intelligence, the Internet of Things, and machines communicating with each other are seen to be the drivers of the future of UAVs and UGVs. In recent experiments conducted by DARPA and ARL an unmanned helicopter and an unmanned ground vehicle demonstrated autonomous cooperation. In these experiments, the helicopter provides aerial support and surveillance building a three-dimensional model of the terrain. The UGV plans a detailed path avoiding obstacles that the helicopter sees the in path. As the ground vehicle moves along the path, it compares its three-dimensional perceptions with the helicopter's three-dimensional map, registering the aerial and ground world models. The result is efficient travel, as well as a detailed map containing registered information from the vantage of both ground and air.
Market growth projection
The key market drivers for the UTM industry are:
- The rapid proliferation of drones in the airspace. According to estimates, 450,000 commercial drones will be sold by 2020.
- Emerging regulations in the UAS traffic management system- Multiple stakeholders working towards creating an integrated UTM architecture
- Opportunities for replacing the current ATM with UTM for both manned and unmanned aviation
- According to Eurocontrol, 2017 saw about six UAS controlled airspace flights/day. By 2040, this number is expected to grow to 100 flights/day.
Opportunities in defense
For military and other government-use drones, the future is in small and cost-effective solutions. At AUVSI 2018, senior officials from militaries and government agencies related to intelligence, police, and other first- responders gathered to tell industry what they want from drone companies. For the US, the Department of Defense (DOD) is looking to be more agile in its procurements. The highest level of interest from the varied agencies is for drones replacing soldiers in situations such as entering unknown buildings. The US Army is very concerned with its dependence on high-cost manned legacy aircraft and is looking to mitigate its "runway dependency," that is to eliminate such costly systems as soon as possible. The other trend in development for unmanned drones for the military is the drive to reduce the number of humans required to operate them- again, the driving issue is cost reduction.
Global UTM system market
The global UTM system market is expected to reach USD3.75bn by 2026.
Current sales estimates for commercial drone sales exceed 500k globally in 2020, which is when UTM systems go online. From 2020-2030, the number of commercial drones sold will grow 13.1% CAGR, and by 2030 we expect more 2mn units to be shipped annually. Based on our 15.2% CAGR assumption for commercial units, we estimate more than 11mn commercial drones will be active in US airspace alone by 2030.
Based on a USD250 and USS per-connection fee for drone operators, the commercial market opportunity is USD300mn in 2020. Over the next decade, however, the USS market should generate USD2bn in revenue by 2030, a 20% CAGR for commercial drones alone. If manned aircraft operators wish to connect to the USS, the current charge will likely be double that for commercial drones.
Growth opportunities for key stakeholders
At present, there is no comprehensive commercial UTM system sold by any company - public or private. However, there are ongoing development activities by both private and public stakeholders, which are expected to generate revenues of more than USD1bn by 2026.
The global commercial drone-enabled services market is one of the fastest growing markets and is extremely competitive, with the presence of several vendors. Intense competition, rapid technological advances, and frequent changes in consumer preferences present significant risks for vendors.
To succeed in this highly competitive environment, it is imperative for vendors to distinguish their offerings through clear and unique value propositions.
Vendors offer a variety of benefits such as innovative product features, low-cost products, a guarantee of high-quality images, and the easy availability of products. To prosper in the competitive market, vendors must develop new ideas and technologies and stay up-to-date with ever-emerging technologies. DJI is the largest company operating in the segment with revenues nearly six times its current market cap.
Investment scenario in UTM system startups
Over the past few years, 35 UTM startups have received USD371mn in funding.
Startups have attracted more than USD3bn in funding to explore new UAS applications, industries, and geographies. Three OEMs have received about USD1.4bn, and other big investments have gone to companies specializing in navigation and UTM (USD371mn) or data management (USD328mn). Businesses that compete in multiple segments have also had a strong showing, receiving USD356mn in funding.
The investment breakup according to the different segments/components of the UTM is as below.
Mergers and acquisitions
There have been many acquisitions among UAS service providers over the past three years. The merging of engineering technology and acquisition of more licensed pilots has driven most acquisitions. Some of the recent M&As in the space are:
Conclusions & Recommendations
Though the technology is developing rapidly, one of the major challenges faced is the basic problem of planning and executing a route from point A to point B. Not knowing what obstacles may be present in the path remains one of the major challenges for unmanned autonomous vehicles. This is the same reason why Uber's autonomous vehicles have crashed multiple times and since then the company has formed an alliance with Bell to secure aerospace engineering domain expertise for its Air Taxi program which it unveiled at CES 2019. Basic mobility issues have been tackled by the use of sensors which is complemented by advanced sensor interpretation, geometric planning, and behavior study by robots
There is a wide scope in the development of ancillary services for UAVs and UGVs ranging from infrastructure, mapping, algorithms, machine learning, regulatory and compliance issues.
In more advanced countries where traffic rules are respected, the scope of implementation is higher. However, in developing countries the situation is haphazard. With lack of UTM and regulatory intervention even government authorities are clueless on how to tackle the large number of drones used for entertainment purposes.
This gap has led to a larger scope for companies in the space for innovative solutions. From drafting new laws for unmanned vehicles to legal and regulatory guidelines, the possibilities of development in the space are infinite. Though automation of many of tasks in industries like mining, farming, logistics can be carried out by UGV, the cost economics remain an important factor.
The industry still needs to focus on the basic problem of tackling obstacles, building UGVs and UAVs at a lower cost, improving the battery life with efficient power management systems, which are currently limiting the range and the endurance of the vehicles The technology that has to be developed to tackle these issues has to be built on a bottom-up approach. That is, they are driven more by technological capability than by top-down consideration of unmet mission needs. The current method of using UGV and UAV employ a command center at a nearby or remote location to take decisions.
The development of UGVs and UAVs is dependent on the development of a variety of technologies. Amongst the major ones are the development of sensors and sensory data interpretation.
The perception subsystem of a UGV takes the data from sensors and develops a representation of the world around the UGV, called a world map, sufficient for taking those actions necessary for the UGV to achieve its goals. Without the perception capability, there can be no fully autonomous operation, and without a high level of autonomy, the transformational potential of UGVs will not be realized.
For Korean companies, we like LG U+, KT (KT), SKT (SKM), LG Electronics (OTC:LGEAF), Mobis, and SEMCO as they are well-positioned to develop disruptive products and applications and become key UTM players in the 5G world.
1. Atlas Dynamics
Atlas Dynamics, founded in 2015, is a leading provider of fully autonomous drone-based solutions for professional users. Atlas serves a range of VLOS and BVLOS applications. Atlas claims that its drones achieve longer flight times, wider ranges, faster speeds, and greater altitudes with versatile sensors and payloads to serve key markets including infrastructure inspection, construction, security, first response, delivery, and insurance.
Qualcomm (QCOM) Ventures-backed AirMap is the leading global provider of aeronautical data & services for drones. FAA has collaborated with AirMap for LAANC authorizations. The company provides information on maps, airspace, restricted airspace, assistance with communicating with airports, real-time traffic alerts, etc. AirMap connects airspace authorities with the drone ecosystem to unlock safe, efficient, and scalable drone operations. They provide access to the largest network of the drone ecosystem. AirMap is the only company with national and state UTM deployments in Switzerland, New Zealand, Japan, and the US.
Kratos (KTOS) unmanned systems have developed vehicle automation kits to transform existing fleets of vehicles into "optionally-manned" platforms. These automated vehicles can then be teleop controlled and offer semi- autonomous capability supporting GPS Waypoint Following, Leader/Follower, Obstacle Avoidance, etc. The company also supports a number of different unmanned sea surface target mission requirements used for fleet training and weapon system development in conjunction with the U.S. Navy, System for Naval Target Control (SNTC) and US Army, Army Ground and Aerial Target Control System (AGATCS).
4. Automotive Robotic Industry
Automotive Robotic Industry develops the most advanced mission oriented Autonomous Unmanned Ground Vehicles whose applications range from mission oriented security to fire and threat response systems, mission based applications such as surveillance, rescue, logistics solutions, etc.
Altitude Angel is an aviation technology company focusing on creating global-scale solutions that enable the safe integration and use of fully autonomous drones into airspace worldwide. The company's geospatial database covers more than 80 countries and is a key component of its autonomous drone navigation system. This allows any drone to tap into its situational awareness database, helping them to operate BVLOS.
The services of Altitude Angel will be highly effective for safety of autonomous BVLOS vehicles; however, the service is not yet ready for full commercial deployment.
6. Analytical Graphics
Analytical Graphics (AGI) produces commercial off-the-shelf software products for the aerospace and defense industry. The company's primary products are Satellite Tool Kit and Orbit Determination Tool Kit. AGI's software provides a four-dimensional canvas for a wide array of applications. The company creates software that accurately models, analyzes, and visualizes objects in space and time - through space or sky, on land, or at sea. The company offers space missions, space situational awareness, ISR, UAV, and aircraft missions, missile defense, electronic systems, cyber mission assurance, and test and evaluation, as well as modeling, simulation, and analysis solutions.
DeDrone protects organizations from malicious drones by securing the airspace using advanced hardware and software technology. The company's RF-300 has sensors for airspace security, which also collect hard data on drone activity in the airspace. It detects a variety of drones and has a maximum coverage range of more than one mile. The RF-300's localization technology enables users to find the location of the pilot and drone, making elimination of the threat more efficient.
8. SK Telecom (SKM)
SK Telecom is part of the SK Group and is Korea's leading wireless telecommunications providers. In 2018, the company entered into a partnership with China's DJI to develop a drone-based live video streaming solution. The companies have agreed to conduct R&D on a drone-based live video control solution and to cooperate on global sales and marketing plans for this solution. SKT plans to supply a live video streaming encoder, mobile app, and server software using its streaming technology. This will enable live streaming of HD footage on drones. The solution will expand other applications for drones such as agriculture, logistics, public safety, and broadcasting. The plan is to enable video transmission over 5G once the technology is commercialized enabling streaming of 4K and later 8K drone videos.
Kittyhawk unifies the mission, aircraft, and data to empower safe and effective drone operations. It provides real-time tracking and drone flight conditions. Kittyhawk is a universal platform with applications for back-office, planning, reporting, and field operations.
Microdrones provides solutions for surveying/mapping, precision agriculture, and infrastructure inspection/planning. The microdrones platform and data collection solutions give surveyors, engineers and agronomists new ways to access their geospatial data and interpret it so they can put it to work for making business decisions.
PrecisionHawk is a manufacturer of drones (Lancaster) and has more recently focused heavily on developing software for aerial data analysis (DataMapper) and LATAS (Low Altitude Traffic and Airspace Safety), a drone safety platform. PrecisionHawk was the first US Company to receive an FAA exemption to fly commercial drones BVLOS. LATAS was launched to manage the millions of drones that will enter the airspace domestically and internationally.
The company is currently working on an app to help users demonstrate to the FAA that they can operate BVLOS safely through a means of proving where the signal dead zones are and how to mitigate the issue.
The company's drone solutions simplify the collection and analysis of geospatial data, allowing professionals in surveying, agriculture, engineering, and humanitarian aid to make better decisions, faster. SenseFly makes a family of fixed-wing drones it calls the eBee series, and a quadcopter called the Albris.
Skyward's drone management platform connects people, processes, and equipment involved in drone operations into a single workflow. The system provides a central drone flight logbook for organizations, which enables users to integrate new aircraft into business workflows; use any combination of drones from different manufacturers; record and maintain flight record database; track pilot flight hours; and maintain regulatory compliance
Unifly offers a UTM system for authorities and drone operators. The Unifly UTM platform connects authorities with pilots to integrate drones into the airspace. Authorities can visualize and approve drone flights and manage no-fly zones in real-time. Drone pilots can manage their drones, plan, and receive flight approvals in line with regulations. Unifly is a spinoff company of the Flemish Institute for Technological Research (VITO), which specializes in aviation software development. Unifly's focuses on the development of software to facilitate drone traffic in very-low-altitude airspace.
vHive provides an AI solution to improve enterprise performance using autonomous drone fleets. Its technology lowers complexity and reduces field time and cost. As organizations are using drones as rapid, accessible and precise tools to collect field data, though until recently, for basic, small-scale missions. vHive's Mission AI is designed to enable organizations to manage missions at scale, by taking into account mission goals and types, the number of drones and capabilities, data capture sensor types and mission parameters such as regulations, safety, environmental conditions, and real-time mission dynamics.
16. Aeryon Labs
Aeryon builds high-performance drones for military, public safety, and industrial operators. Aeryon's UAS family is a multi-mission platform that can handle a maximum payload of 2 kg. It has an open architecture for alternative mission types, including counter-improvised explosive device (IED), signals intelligence (SIGINT) and electronic warfare (EW), communications relay, and intelligence gathered during counter-operations. The SkyRaider drone carries a suite of long-range, high-resolution, stabilized daylight, and IR-imaging payloads. A front-mounted dual EO/IR provides wide-angle day and night situational awareness and a piloting view when used with non-optical payloads.
The R80D has a feature called Automatic In-Air Replacement (AIR) system, which allows operators to maintain persistent eyes on a target by swapping multiple drones in real time (Vector Target Tracking). The SkyRaider is equipped with multiple embedded NVIDIA TX2 processors, which means the drone is a flying supercomputer with an engine for real-time AI at the network edge, including object detection and classification. SkyRaider has four redundant batteries, which gives it a long flight time.
FlightWave designs and manufactures unmanned aerial systems. The company's technology enables aerial operations worldwide, enabling organizations to extend their operations at lower costs. The company offers its Jupiter UAS drone as a hydrogen-or-battery-powered. The drone is equipped with Intelligent Energy's 650-W Fuel Cell Power Module. We believe this may disrupt the existing commercial drone market. The Jupiter drone with Intelligent Energy's Fuel Cell Power Module boosts the drone's capabilities, enabling it to fly for more than two hours with hydrogen fuel or just under an hour with an LI battery. The two power systems are designed to be easily swapped. The Jupiter's hydrogen power module system houses the hydrogen tank, regulator, and Intelligent Energy's fuel cell stack in a single unit. The extra energy storage enables the drone to carry a higher payload, which includes more onboard computing. The fuel cell power system gives Jupiter almost quadruple the range of other commercial drones.
Optelos's Drone Work Advisor is a cloud-based platform that helps drone service providers and enterprises eliminate the manual filtering of drone data. The company's platform uses AI machine learning to manage, visualize, analyze drone data, and provide answers. Consortiq is a drone software, training, consultancy, and hardware provider. The company's CQNet software helps drone operators plan and assess flights in real-time, sync and analyze autonomous flight logs, create and maintain flight records including aircraft details and maintenance monitoring, and manages risk. The companies are collaborating to provide a comprehensive suite of solutions. The goal of the partnership is to empower organizations to manage large-scale drone operations.
19. Intel (INTC) Insight Platform
Intel's Insight Platform is a digital asset management system for aerial data management and analysis. It enables users to store, share, and manage data from drone systems. The platform generates 2D and 3D models, take measurements, and run data analytics from aerial data. Mission Control is Intel's flight planning software for its Falcon 8+ drone. The company says that it increases workflow efficiency and enhances the automation of commercial drone flights. The software allows Falcon 8+ drone pilots to create 2D and 3D flight plans for a variety of missions. Intel announced three new payloads, as well as distance hold, and distance guard for its Falcon 8+ drone (designed by the team from the acquired ASCTEC). The three new payloads are for inspection, surveying, and mapping applications. Falcon 8+ now has distance hold and distance guard features on the Intel Imaging and Duel Imaging payloads. The distance hold feature allows the drone to maintain and hold a set distance from obstacles during inspections, and distance guard is another obstacle-avoidance capability.
Fortem Technologies develops AI-enabled airspace security and safety products for real-time intrusion detection and detect-and-avoid solutions. Fortem delivers a military-tested, commercially available solution that alerts, identifies, and classifies drones and other UAVs. Fortem has developed a compact, radar system for detecting airborne objects, a revolutionary safety capability for unmanned and manned aircraft. The Fortem TrueView radar system is small enough to be deployed on UAVs that can operate autonomously BVLOS. TrueView radar can simultaneously track thousands of objects-each smaller than a soda can, traveling at high velocity, across a 360-degree field of view.
The technology developed by Fortem is essential to the UTM architecture and has the potential to be the backbone of DAA solutions of UTM if developed further.
21. LG U+
LG U+ is a Korean telecommunication company which is owned by owned by LG Corporation, Korea's fourth largest conglomerate and parent company of LG Electronics. foster drone business as one of its new growth drivers by expanding its fledgling aerial robotics to a wide range of businesses in the public and private sectors, including transportation, logistics and safety inspections, powered by its nationwide wireless network.
LG U+ formed a partnership with Japan's Terra Drone to commercialize a UTM system in Korea with LG U+. The companies successfully completed their new 4G LTE control system, which allows operators to remotely monitor drones via an LTE network. This represents something that will impact the entire UTM industry directly and indirectly. Improvements in UTM systems, the addition of constant communication via a cellular network and the additional safety offered by AI are about something much larger. These developments will together contribute to the safe integration of manned and unmanned aircraft in the skies.
22. KT Corp. (KT)
KT is Korea's largest telecommunication company. The company has developed a platform to deploy robots and drones in emergencies. SKYSHIP is a helium-filled flying balloon with a pod in which all sorts of hardware are stored - drones, sensors, and the robots. The platform was created as part of a USD1.5bn public safety program using an LTE (PS-LTE) network that will be completed in 2020, following the launch of a nationwide 5G network in March 2019. When deployed, the drones and robots will be controlled by a team from a mobile communications command center. Rescuers ground will use augmented reality (AR) glasses that will enable them to communicate with medical teams and doctors. In addition to the drones and robots, there are also propellants, network modules, as well as a scanning device inside which can detect smartphone signals. The scanner can link victims' smartphone signals to mobile service providers' databases to obtain data, such as names and ages, for the rescuers.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Hyundai Motor Company is a passive shareholder in our bank.