Amazon takes critical step toward drone delivery (AMZN)

Amazon will open a new research facility for its drone delivery operations near Paris, France, where a team of developers will build the company’s own air traffic control system for its drones, Bloomberg reports.

This is the first Prime Air facility in France, and marks a critical step in the progress of Amazon’s drone delivery ambitions.

The system will aim to prevent Amazon's delivery drones from colliding with other objects in their path, and will provide information about weather conditions and the location of objects — like construction cranes — that could present obstacles. The software system will be uploaded to Amazon’s drones, allowing them to share information with each other in real time, as well as with a central control center.

Air traffic control is a pre-requisite for coordinating large fleets of drones, and regulators will not allow large-scale drone delivery operations without such systems in place. The US and UK governments both have projects underway to develop such systems — NASA is testing one in cooperation with the US Federal Aviation Administration (FAA), with the goal of releasing it sometime in 2019; and the UK’s Civil Aviation Authority (CAA) is developing a system for drones in conjunction with NATS, an air traffic control systems provider. Amazon is actually providing the CAA with data from its drone tests in the UK to help develop the system, and said it is helping NASA’s efforts as well. Amazon decided to develop its own in-house traffic control system because of the lack of mature systems designed specifically for managing large numbers of drones at low altitudes.

However, Amazon does not have a timeline for when it might finish its air traffic control system. The company will want to develop the system as quickly as possible, in order to clear regulatory hurdles and bring its drone operations closer to fruition. While different regulatory bodies around the world have taken different approaches to regulating commercial drones, none yet have authorized drones to deliver packages in urban areas because of safety and reliability concerns with the new technology.

This last mile is the most expensive and inefficient part of parcel delivery, and a wide range of companies are exploring how drones can speed up the last mile and cut costs. E-commerce companies want to cut delivery times and costs to improve their customer satisfaction and loyalty, while legacy retailers seek the same advantages to grow their online sales.

Meanwhile, logistics providers are experimenting with drone delivery to cut costs and ward off new competition from startups and technology companies, which have latched on to drone delivery as a potential path to disrupt (or partner with) legacy logistics firms.

However, delivering packages by drones to consumers’ doorsteps is still years away from becoming a common occurrence. Important obstacles still need to be overcome relating to drone regulations, the development of autonomous flight and traffic control systems for drones, and consumer acceptance.

Jonathan Camhi, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on drone delivery that examines the benefits it can provide as an e-commerce fulfillment method, and explains the different approaches companies are taking as they experiment with the nascent technology. In addition, it details the key players working in the space and discusses the challenges drone delivery faces in reaching mainstream adoption.

Here are some key takeaways from the report:

Amazon takes critical step toward drone delivery (AMZN)

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