However, Amazon’s plan for drone deliveries has not been all smooth sailing. In June 2014, the FAA released a memo stating that Amazon’s plan for drone deliveries is illegal, which would seem to cause a rift between Amazon and the FAA. Just last month, however, Amazon joined the FAA’s drone task force. The question I pose is, “why?”
On the surface, it would seem as though Amazon joined the task force because they want to make sure their business venture is successful. As a member of the task force, Amazon may feel that they will be in a better position to help limit regulations, allowing them more freedom regarding drone deliveries. This may be true, but I think there is more to this.
As the drone registry program currently exists, there is no fee to register. A drone operator is only required to give his name and address, which is inputted into an FAA database. However, what if in a few weeks, those rules change? What if you now had to pay a high fee to register an individual drone? What if you had to go through expensive training to be allowed to register? What if the FAA allowed only so many drones to operate in a given area, and sold the rights, similar to how cities sell taxi medallions?
The possibilities exist for costs to rise extensively and quickly. I believe that is why Amazon is on this task force. They want such regulations to be put in place. They want the prices to jump, so that competition will be limited in the market. I believe Amazon sees this as a strategy to raise rival firms’ marginal and fixed costs. As Amazon works closely with those who make the regulations, they will be set to benefit from the regulations, while other firms may be squeezed out for their inability to comply. Thus, Amazon will be able to corner the market on drone deliveries and increase their profits dramatically.