Regulating Drone Delivery Networks

By Ramsay Eyre May, 2026

For over a decade, drone delivery has been heralded as the next frontier of commercial transportation and logistics. However, drone delivery companies have been unable to scale their operations. Part of the problem, from the perspective of the companies invested in drone delivery, were federal regulations that in effect prohibited drones from making deliveries. In 2025, following years of effort by industry and allies in Congress to create new rules governing drones, the second Trump Administration proposed a new set of drone regulations pursuant to the FAA Reauthorization Act of 2024. These rules are intended to significantly expand the number of drones authorized for flight across the country, including for delivery. Whether that is their effect remains to be seen.

But should drone delivery scale up across the country, significant problems are likely to appear: congestion and nuisances, abuses of economic power and harms to innovation, widespread surveillance, and consequences for workers and the environment. Without attention to these problems, regulators tempted to let drones scale quickly may make a disastrous policy choice, ushering in an era of commercial delivery marked by skies flooded with relatively unrestricted flying objects. Such a situation might not only threaten public safety—it might also lead to widespread backlash, limiting drone delivery’s public acceptance and thus the success of the industry.

This Article offers solutions to these problems—a pathway for how to regulate drone delivery services with attention to the structural problems the technology is likely to pose. Taking insights from the law and policy of networks, platforms, and utilities (NPUs), it recommends the creation of a new, comprehensive licensing system aimed at preventing abuses of economic power, ensuring innovative markets, protecting privacy and property rights, promoting safety, and preventing nuisances. This system would involve federal regulators working in collaboration with local governments to account for the needs and preferences of individual communities. It also suggests that the U.S. Postal Service explores creating a public drone delivery network as a complement to its existing parcel delivery service. These policies, if pursued, may contribute to a healthy, innovative, and socially responsible system of American last-mile delivery.

Introduction

For over a decade, drone delivery has been heralded as the next frontier of commercial transportation and logistics.¹ The industry has seen worldwide growth, and drone delivery businesses have developed services that, in future iterations, could potentially transform online retail and package delivery.² Indeed, some of the biggest corporations in the United States—including Amazon, Google, Walmart, and UPS—are invested in competing for this market.³ Currently, however, drone delivery companies are unable to scale their operations in the U.S., due partly to technological limitations and partly to federal regulations that prohibit unmanned aircraft systems (UAS) from carrying the property of another—i.e., making deliveries—beyond the visual line of sight (BVLOS).

With the aim of expanding the commercial viability of drones, lawmakers in Congress and officials in three presidential administrations have attempted to create new rules governing drones. A major report in 2022 by a working committee of the Federal Aviation Administration claimed that “a new regulatory framework” was necessary to “capitalize on UAS, enhance safety, and promote sustainable transportation solutions” while “ensuring America’s continued leadership in aviation innovation.”⁴ These efforts culminated in the Federal Aviation Administration Reauthorization Act of 2024, and a new regulatory framework proposed by the Trump Administration in 2025 intended to scale up BVLOS operations around the country.⁵

The problem is that scaling drone delivery across the country could have serious downsides: congestion and public nuisance, abuses of economic power and harms to innovation, widespread surveillance, and consequences for workers and the environment—in addition to the generally recognized safety risks of commercial drone flight. Without paying attention to these problems, regulators tempted to let drones scale quickly may make a disastrous policy choice. The resulting situation might not only threaten public safety, but also lead to widespread backlash, limiting drone delivery’s public acceptance and thus the success of the industry.⁶

This Article offers solutions to these challenges—a pathway for how to regulate drone delivery services. It argues that rather than relying simply on risk management, technical standards, or behavioral regulations, drone delivery should be regulated more like a public utility or an infrastructure service. The recently revived field of networks, platforms, and utilities (NPU) law and policy offers valuable insights for drone delivery. NPU law studies the dynamics of highly concentrated, networked, and/or infrastructural industries, including transportation technologies.⁷ It focuses attention on market structure because of a recognition that many of the most worrisome features of such industries are themselves the product of market structure. Since the 1970s, much legal and economic scholarship has opposed the application of NPU law, inspired by the Chicago School of economics and its advocacy of deregulation.⁸ But as the downsides of deregulation in various sectors have become more apparent in recent years—including system-wide failures in financial markets⁹ and transportation networks¹⁰—a new generation of scholars has given NPU analysis a seat back at the table, reassessing the conclusions drawn by scholars affiliated with the law and economics movement.¹¹ As this Article endeavors to show, NPU law and policy offers a useful framework and set of tools for examining the problems posed by new technologies, including drone delivery. Building a regulatory framework with an attention to market structure, using the tools NPU law offers, can help policymakers address a variety of potential problems with scaled-up drone delivery, while enabling the industry to develop in a socially responsible way.

Part I begins with an overview of how drone delivery works, including the relevant technology and logistics systems.¹² It also surveys the drone delivery market, which is likely to be dominated by the companies most heavily invested in it, including Amazon, Walmart, and Google. Should deregulation enable the industry to significantly expand, two potential scenarios may play out in its market structure. The first and more likely scenario is a network paradigm, defined by highly integrated and concentrated networks offering point-to-point deliveries or operating out of large delivery hubs. The second and less likely scenario is a commodity paradigm, where businesses of different sizes procure drones as tools that they incorporate into their regular delivery operations. Though scaled drone delivery may not exhibit one of these scenarios exclusive of the other, and each involves an inherent degree of speculation, thinking of drone delivery this way may help policymakers imagine the full range of problems that such scenarios might pose for policymakers, and identify the solutions that might be necessary to forestall them.¹³

Part II argues that without regulation attentive to market structure, scaled-up drone delivery is likely to lead to serious problems for the public and for the industry itself. Unrestricted entry would likely result in congestion, threatening to spark backlash among communities who view drones as a nuisance. Operating drone delivery networks may also enable companies to abuse their economic power over rivals, as some of drone delivery’s incumbents have done in other industries. Such abuses could harm innovation in retail, logistics, and delivery. Drone delivery companies are able to record people’s homes and property, and collect data on their consumer behavior. If the companies poised to dominate drone delivery replicate the practices that they have deployed in other sectors, they are likely to capitalize on these types of data to further entrench their power. Drone delivery may also portend labor displacement and pose risks to the environment, as ecosystem disruption disturbs wildlife and energy usage increases with new patterns of consumer behavior.

Part III examines the current state of drone delivery regulation, which is largely inattentive to market structure. Regulations currently governing delivery drones are designed either for drones not intended for commercial delivery or, alternatively, for piloted commercial aviation. Drone delivery services fit uncomfortably into both categories, and the FAA has, as a result, granted limited, experimental waivers to existing regulations for drone delivery companies. Though the Trump Administration’s new proposed rule partially addresses this problem by creating a unique regulatory category for BVLOS drone operations, it still forgoes attention to market structure in favor of a narrow “risk-based approach” meant to address certain safety issues while promoting the rapid upscaling of drones across American airspace.¹⁴

Part IV offers a better way forward—a pathway for how to regulate drone delivery services with attention to market structure. A licensing system that functions as a genuine entry restriction can ensure that drone delivery networks genuinely serve the interests of American neighborhoods, in compliance with a simple set of rules to protect privacy, prevent abuses of economic power, and keep communities safe.¹⁵ Under this proposed framework, federal drone delivery licenses would be conditioned upon both federal approval and local approval under one of two models from which localities can choose—a contract model or a true public utility model. In addition to the regulatory options that the FAA and local governments may implement, this Article suggests that the U.S. Postal Service explores another option for organizing drone delivery services: a public drone delivery network. Such a network could coexist, complement, and compete with private providers to offer affordable services in certain localities, just like the Postal Service’s existing package delivery service does. In fact, the idea of a public drone delivery network is one that USPS has explored before: Under the first Trump Administration, it put out a request for information about how it could set one up, but it later dropped the project.¹⁶ Initiating a new round of planning for public drone delivery could help policymakers address some of the issues with drone delivery’s market structure, and it might even lead to a service that some members of the public might consider a preferable alternative to private offerings.

Beyond structural regulation and potential integration with the postal system, drone delivery raises other important questions that policymakers should consider. Is it socially optimal to offer drone services for last mile delivery, as opposed to traditional delivery via trucks, especially considering the labor and environmental costs? If so, how might these effects be mitigated? To tackle these challenges, this Article suggests policymakers commission a report on last-mile delivery to explore the intermodal effects of expanded drone delivery, which may inform additional recommendations to policymakers in Congress and in the executive branch.¹⁷ While no regulatory framework can comprehensively address all the potential problems with a given industry ex ante, policymakers will have a good starting point from which to assess them under a regulatory framework that advances the public interest and a healthy, fair drone delivery industry.

I. An Overview of Drone Delivery

Any discussion of how best to regulate a technology, mode of transportation, or any other locus of economic activity must start with how it works. Of course, how it works may be in large part shaped by the regulatory framework under which it operates—and this is certainly true of drone delivery. That said, different sectors have different basic organizational characteristics, and a workable understanding of these characteristics is necessary to govern them effectively. This Part will undertake that analysis for drone delivery. It begins with an overview of how drone delivery currently operates in the few places where it is authorized to do so. Then, it turns to a consideration of how a fully scaled drone delivery industry might develop in the future. Imagining how drone delivery is likely to develop over time, given the organization of similarly situated industries, may help policymakers understand the full range of potential risks and determine what regulatory tools may be required to prevent them.

A. How Drone Delivery Works

Drone delivery is the autonomous transportation of goods to businesses and consumers by aircraft known as unmanned aerial vehicles (UAVs)—which, in combination with each other and the ancillary technologies that enable them to operate, constitute the unmanned aerial systems (UAS) at the center of current policy discussions.¹⁸ As the FAA defines them, UAS are constituted by “an unmanned aircraft and the equipment necessary for the safe and efficient operation of that aircraft.”¹⁹ An unmanned aircraft, in turn, is defined by statute as an aircraft that is operated without the possibility of direct human intervention from within or on the aircraft.²⁰ Importantly, while the aircraft are unmanned and therefore highly automated for much of their operational capacity, UAS are not autonomous systems in a strict sense, as they include a remote human operator.²¹

In the areas where they are permitted to operate, UAVs—drones—may be used to deliver medical supplies, groceries, household items, takeout orders from restaurants, and other goods to consumers and between businesses.²² To assist in navigation, UAVs rely on a technology stack of cameras, GPS navigation chips, RADAR/SONAR technology, and “flight controllers,” which synthesize information from all the other components to direct a drone along its path.²³ They also require other technology to operate, including chargers, docking stations, and landing pads.²⁴ Businesses offering drone delivery for consumers often offer an application for users to select items, initiate payments, and provide an address for drop-off.²⁵ Items are loaded into the drones from a centralized delivery hub or a business, transported to the drop-off point, and released via hooked tethers, compartment doors, or by dropping the packages, before the drone returns to a delivery hub to charge and be sent out for its next delivery.²⁶

Importantly, the technology itself is limited in several important respects. Drones used for home delivery can carry only small loads, typically of weights between two and eight pounds.²⁷ They are also limited by distance, being optimized for “last-mile” delivery from a local storage hub to their destination.²⁸ When making deliveries, drones require large areas where they can safely land or release packages via tether, which they can do with an accuracy of an area the size of around two parking spaces.²⁹ Currently, drones are also required to be controlled by human operators, under the provisions of the FAA regulations governing drone delivery.³⁰ Different ratios of operators to drones, however, may be granted in different levels of certification, and thus between different companies receiving waivers.³¹

Despite these limitations, commercial drone delivery has been the subject of considerable investment and growth in recent years. In 2022, the market was valued at $8.77 billion globally, and is projected to grow to $58.41 billion by 2030.³² Some of the largest companies in the U.S. are among those most heavily invested in drone delivery, including Amazon, Google, Walmart, and UPS. As of 2025, the six companies which possessed the regulatory authorization from the FAA necessary to operate drone delivery networks in the U.S. are Wing (a subsidiary of Alphabet, the parent company of Google), Zipline, DroneUp, Flytrex, Prime Air (a subsidiary of Amazon), and UPS Flight Forward (“UPSFF”) (a subsidiary of UPS).³³ Certainly, the industry has not been without its internal challenges: Several drone delivery companies, including Prime Air and Wing, executed a wave of layoffs in 2023.³⁴ But given that these paralleled a wave of layoffs across the tech industry, it is unclear whether they were triggered primarily by drone delivery itself performing below expectations.³⁵ At least one company signaled that its layoffs were meant to shift focus towards its drone delivery business and away from enterprise services it had once intended to subsidize drone delivery.³⁶

Due partly to regulatory restrictions and partly to technical limitations, drone delivery remains a nascent industry that has not yet scaled. Pilot programs have started in only a select few regions of the country. Wing’s domestic operations, for example, are limited to Christiansburg, Virginia.³⁷ Prime Air operates in only two towns: Lockeford, California, and College Station, Texas.³⁸ Prime Air’s drones travel no farther than a 4-mile radius surrounding Prime storage hubs, and in the first half of 2023, the company made only around 100 deliveries.³⁹ Flytrex operates in four cities across Texas and North Carolina,⁴⁰ while Zipline services customers within 50 miles of the Walmart in Pea Ridge, Arkansas, and near Intermountain Healthcare in Salt Lake City, Utah.⁴¹ UPS Flight Forward, with its partner Matternet, has focused on delivering medical supplies in North Carolina and Florida.⁴² In total, figures from McKinsey and Co. indicate the first half of 2023 saw half a million drone deliveries worldwide, of which North America contributed around 15 percent, or 75,000 deliveries.⁴³ Compared to the 21.2 billion parcels delivered in the U.S. alone in 2022, drone delivery has nowhere near the scale of other delivery methods in the U.S.⁴⁴

The drone delivery market in its nascency is highly concentrated among the few corporations whose regulatory authorization and partnerships with larger firms enable them to successfully offer drone delivery services in the United States. Of the six companies with the necessary FAA waiver, only Zipline and Flytrex are independent companies whose core business is in drone delivery. The remaining four are either subsidiaries of, or dependent on significant investment from, major retailers and package carriers whose core business lies elsewhere: Wing is a subsidiary of Alphabet, the parent company of Google; Prime Air is a subsidiary of Amazon; UPSFF is a subsidiary of United Parcel Service (UPS); and DroneUp is dependent on significant investment from Walmart. Notably, Walmart also contracts with other players besides DroneUp to offer drone delivery services to its customers, including Zipline, Flytrex, and Wing.⁴⁵ UPSFF, meanwhile, leases its drone technology from Matternet, the European company whose proprietary M2 drone delivery system is one of the leading UAS on the global market and also seeks to develop its own drone delivery networks.⁴⁶ These partnerships and ownership arrangements often result in integration between a company’s drone delivery operations and its parent entity’s other proprietary technologies. Wing, for example, offers a mobile application called OpenSky, whose interface incorporates satellite imagery from Google Maps, enabling flight controllers to gain real-time authorization to fly and navigate flight paths.⁴⁷ Prime Air is integrated into Amazon’s larger logistics and delivery operations, while UPSFF uses drones to augment its parent company’s established truck-based package delivery service. Thus, these technologies may be thought of as constituting independent layers within the drone delivery tech stack.

B. How Drone Delivery’s Market Structure Might Develop

It is perhaps no wonder that drone delivery’s market structure is currently highly concentrated: it is a nascent market, and its growth has been limited by both regulatory and geographic restrictions. But should regulatory changes permit drone delivery to scale, it is worth considering how its market structure might develop. Of course, there is an inherent degree of speculation in imagining what its industrial organization might look like under a set of conditions that do not yet exist. But assuming drone delivery turns into a market with relatively unrestricted entry and counting on the continued participation of the current incumbents, some reasonable conjectures can be drawn about how it might operate, including by analogy to similarly situated industries.

To understand how the drone delivery industry is likely to develop, it is helpful to imagine two hypothetical market structures, which may emerge as business models for drone delivery firms: (1) a network paradigm defined by fleets of drones operating out of big storage hubs or making point-to-point deliveries between multiple businesses and consumers, which is in effect highly concentrated; and (2) a commodity paradigm defined by individual businesses procuring and operating their own drones, where the likelihood of concentration is less clear on its own terms—though, just like other markets, it may tend towards consolidation. Even though drone delivery might not fall into one of these buckets exclusively of the other, thinking of it this way illustrates the range of possibilities for how it could develop, thereby helping us better understand what policy tools may be required to prevent drone delivery’s likely risks in either scenario.⁴⁸

1. The Network Paradigm

Under a network paradigm, drone delivery would operate in networks—large integrated systems with many drones that would transport goods from large storage hubs to consumers or make point-to-point deliveries between businesses and consumers. This is essentially how drone delivery behaves under the current waiver-based regulatory framework, though at a far smaller scale. In this mode of organization, drone delivery would be likely to exhibit many of the characteristics of traditional public utility or infrastructural industries, including network effects, economies of scale, and high barriers to entry.⁴⁹ Drone delivery services, like telephone networks or online marketplaces, would only be useful insofar as other businesses and consumers used them, and both retailers and end customers would naturally prefer a drone delivery network that most other retailers and customers also use. Consequently, drone delivery networks would exhibit economies of scale—the more points it could serve, the more valuable it would be. These network effects—coupled with the high capital costs involved in organically developing a network⁵⁰—would serve as a high barrier to entry for would-be entrants, making drone delivery under the network model unlikely to flourish into a competitive industry of many firms. Thus, like other networks, drone delivery would likely be highly concentrated: a small number of companies, whose position derives from their possession of large storage hubs, logistics networks, ancillary technologies, and/or fleets of drones, would be likely to dominate drone delivery both nationally and within local areas. In this sense, drone delivery would operate similarly to Amazon and Walmart’s existing delivery operations as large hub-and-spoke systems, or to delivery platforms like DoorDash or UberEats, which make point-to-point deliveries. Indeed, at least one drone delivery network—Wing—has already partnered with DoorDash to offer deliveries alongside its usual vehicles.⁵¹

Indications of the network model taking hold are already evident in the way drone delivery operates under the waiver-based regulatory system. At present, Walmart—the country’s largest retailer⁵²—is perhaps best positioned to dominate the drone delivery market, through its contracts with Zipline, Flytrex, and Wing, and its significant investment in DroneUp.⁵³ One contributing factor to Walmart’s dominance is the scale of its physical presence across the country: 90 percent of Americans live within 10 miles of one of Walmart’s over 4,600 U.S. locations.⁵⁴ Walmart’s omnipresence enables its drone delivery networks to essentially integrate with an established storage and logistics business, thereby granting it significant power in the downstream drone delivery market.⁵⁵ Indeed, marketing materials from Walmart’s collaboration with Wing depict its drone delivery operations with all the characteristic features of a network. The Walmart store functions as a hub, from which large numbers of drones take off from landing pads in the store’s parking lot, making deliveries to multiple different points—i.e., consumers’ homes—throughout the surrounding suburban neighborhoods.⁵⁶ Similar dynamics are likely to apply to Walmart’s leading competitors. Prime Air has underperformed initial expectations,⁵⁷ and Wing has limited distribution at present, like the other companies. But the dominance of their parent entities—Amazon and Alphabet/Google, respectively—in e-commerce, online search, maps, and advertising may also aid in expanding their reach in drone delivery, given the integration of these proprietary technologies into the drone delivery tech stack.⁵⁸ Each of these businesses intends their services to function as networks, either by operating an independent point-to-point delivery service or by leasing their technology to larger delivery, logistics, and retail companies for their own networked services.⁵⁹

2. The Commodity Paradigm

Under the commodity paradigm, drone delivery would be characterized by the drone as a commodity—an object that individual businesses procure and use to make their own deliveries without integration within a larger network. In this scenario, the drone is much like a vehicle that a pizzeria, for example, would own to make local deliveries. While not as common as the network model in drone delivery’s current state, there are also hints of drones being used in this way, such as by Chick-fil-a restaurants in Florida, piloting deliveries directly to consumers, where it is not clear that they have integrated with larger networks.⁶⁰

Should drone technology eventually enable drone delivery to scale this way, the risks of concentration are not as immediately clear as they are in a traditional network paradigm. Yet there is reason for caution. Just like other commodity markets, a market for business-to-consumer drones could become highly concentrated. But more importantly, in the presence of coexisting large networks, the commodity model is less likely to take hold at scale, for several reasons. First, drone delivery is a service. It is not an end unto itself (i.e., the ownership and operation of drones), but rather a means to other commerce-delivering products to consumers—and thus is more likely to develop as a service than as a commodity market.⁶¹ Second, incumbents and startups in the drone delivery sector are evidently intent on establishing drone delivery as a networked business. Their business model is characterized by integration with large storage hubs and logistics networks. Even if making point-to-point deliveries from third parties to consumers, they intend to offer large fleets of drones which they own and operate themselves or on behalf of others.⁶² Third, drone delivery relies on inputs over which drone delivery incumbents have considerable power, ranging from satellite imaging and maps to e-commerce and physical retail. Those companies with control over those inputs—including companies like Amazon, Google, and Walmart—are likely, then, to exert power vertically throughout the drone technology stack. Fourth, it may be more cost-effective for a small business to outsource drone delivery services, rather than insource them. The infrastructure required to operate drones—landing pads, chargers, the aircraft themselves—is expensive, and the benefits of outsourcing these fixed costs may override the costs of owning and operating drones on a per-business basis. Should large drone delivery networks exist alongside the commodity paradigm, it is likely that they would outcompete smaller drone companies given their economies of scale and consequent ability to charge lower prices.

II. Problems with Unrestricted Drone Delivery

While innovative, drone delivery’s growth raises significant concerns. The problems of congestion, nuisance, surveillance, and dangers to property, workers, and the environment are all likely to emerge as the industry expands. Understanding and proactively addressing these issues is not only in the public interest, but also in the interest of a healthy and successful drone delivery industry, should American communities desire it.

A. Congestion and Nuisance

The first and most obvious consequence of a significant expansion in the number of drones eligible for regulatory approval would be the large numbers of new drones flying around, making deliveries. With unrestricted entry by firm and by time of day, companies offering drone delivery may deploy large fleets of drones in American neighborhoods. In fact, they may be incentivized to do so: Should drone delivery exhibit network effects, expanded BVLOS approval may prompt networks competing against each other to take full advantage of unrestricted entry by deploying ever-larger fleets of drones, despite the risks involved.⁶³ Ultimately, whether drone delivery is dominated by the network paradigm or the commodity paradigm, unrestricted entry is likely to lead to congestion without some limit on local operations.⁶⁴

While it is difficult to determine exactly how many drones could be expected to operate within a given geographic area absent entry restrictions, it is not hard to imagine that large numbers of what are essentially flying robots might be a great nuisance to many communities. Drones may substantially increase ambient noise levels, thereby contributing to noise pollution. In fact, the public health literature on drones and noise emission suggests that noise from drones is “substantially more annoying than road traffic or aircraft noise” due to several unique acoustic properties coupled with quantitatively higher noise emissions.⁶⁵ Annoyance may be a measure of more or less subjective evaluation (though different models have been constructed to quantitatively measure it⁶⁶)—but recordings of Wing’s delivery drones from a 2019 pilot program, to use just one example, do not bode well for their eventual public acceptance.⁶⁷ Delivery drones may be disturbing to children, pets, wildlife, those with sensitivity to sound, and those who simply enjoy the quiet of their neighborhood. As one Arizona resident told a reporter regarding her experience with drones in her neighborhood:

You are supposed to have a reasonable enjoyment of your property in sort of a peaceful and quiet manner—obviously, we know there’s a road and those kinds of things—but most people don’t think there’s going to be a loud vehicle essentially hovering over their house for an unknown amount of time . . . I mean, if it’s like [Amazon] Prime, they can be up past your house dozens of times a day. It’s very loud and very disruptive.⁶⁸

Drones may also be visually unappealing, especially in large numbers. Collisions and crashes may be dangerous, and might destroy private property, leave debris obstructing traffic or walkways, or even injure people on the ground. One crash of an Amazon delivery drone even ignited a wildfire that spread up to 25 acres.⁶⁹ Though it was not a factor in that particular case, part of the reason drone delivery is so risky is the method of package release. Many drones drop packages via the use of tethers hung from the aircraft, and current technology enables these tethers to drop them with an accuracy of a space around the size of two parking spots.⁷⁰ Depending on the nature of the delivery area, this may be a large margin of error. Even in places where this is not the case, or when drones deliver packages in a different way, malfunctions could be quite dangerous.⁷¹

For those concerned with respecting private property, drones may also run the risk of chronic trespassing: To navigate to and from their destinations, they may have to fly over private property without authorization from its owners, infringing on the privacy and property rights of individuals in ways that traditional modes of delivery that travel on public roads, such as the postal service and delivery trucks, do not. Wing’s drones, for example, fly at an altitude of approximately 150 feet—not all that high up, all things considered.⁷² One way to address this might be to clarify the scope of landowners’ property rights in low airspace, through a rule requiring drones to fly above a certain altitude except when arriving at their destination.⁷³ Such a proposal would accord with the precedent set by United States v. Causby,⁷⁴ a 1946 case in which a landowner sued the federal government for violating the Takings Clause of the Fifth Amendment by flying military airplanes from a nearby airport over his farm. In that case, the Supreme Court held that “if the landowner is to have full enjoyment of the land, he must have exclusive control of the immediate reaches of the enveloping atmosphere.”⁷⁵ Similar logic could well apply to drones being flown by private corporations. Under the holding of Griggs v. Allegheny County, state and local governments may even be subject to takings suits if they allow aircraft to fly in low airspace above private property.⁷⁶ This vulnerability makes clear rules about minimum altitude even more critical at the local level. But given that remedies to individual violations of a minimum-altitude rule would necessarily be ex post, and there might be many such violations, such a behavioral regulation may not be sufficient to prevent the harms of congestion and nuisance without a larger scheme of entry restriction in a landowner’s geographic area.⁷⁷

In short, without careful regulations, American neighborhoods may be subject to a cacophony of noisy, obtrusive objects traveling over private property to deliver ever-larger numbers of consumer goods—a situation that, for many, would be highly undesirable. Indeed, a poll commissioned by the Vanderbilt Policy Accelerator (VPA) in June 2024 found that 70% of Americans are worried that more drones will disturb their neighborhoods and may be unsafe.⁷⁸ Drones used for parcel delivery in particular are viewed with greater skepticism than any other UAS use case, as indicated by one recent review of the literature on the public acceptance of drones, which found that “scenarios likely to infringe on daily lives receive least support, for example, ‘retail use such as package delivery.’”⁷⁹ This suggests that congestion and nuisance might also make it more difficult for the drone delivery industry to gain public trust, scale, and remain economically viable over the long term. Should drone delivery introduce greater efficiency or convenience as a method of last-mile delivery, it would be less likely that those benefits would reach the American public if the industry were associated with widespread nuisance. Regulations governing drone delivery should therefore be designed to avoid these problems, thereby promoting both the public interest and the eventual success of the drone delivery industry.

B. Abuses of Power and Threats to Innovation

Controlled by only a few firms, an unrestricted and consolidated drone delivery market is susceptible to the usual risks of concentrated markets: monopoly or oligopoly pricing, reduced quality, self-preferencing, discrimination against customers and rivals, and harms to innovation.⁸⁰ Since it is still early in drone delivery’s technology cycle, it is difficult to determine exactly how or whether dominant firms currently abuse their power over this specific market. But the conduct of Amazon, Google, and Walmart in other markets they control is instructive. Business owners that depend on Amazon’s platform services, like its online marketplace and cloud computing infrastructure, have routinely complained of Amazon deplatforming or copying their products and self-preferencing their own, or engaging in discriminatory pricing and terms—all because Amazon is their primary competitor.⁸¹ Walmart’s alleged use of its buyer power to squeeze discounts from suppliers not offered to other companies may also carry over to its conduct in drone delivery, shutting out would-be competitors from the market through preferential deals with Zipline, Flytrex, DroneUp, or other companies.⁸² Its investment in DroneUp, meanwhile, may incentivize that company to give preferential treatment to Walmart’s products over those of competing retailers—or it may enable Walmart, a major retailer, to give preferential treatment to DroneUp over its competitors. Google, meanwhile, has been found guilty of maintaining an illegal monopoly in online search, and is the subject of a separate lawsuit from the Department of Justice for abusing its market power to harm competition in online advertising.⁸³ Much of Google’s monopolistic conduct, these cases alleged, consisted of preferential deals that limited user engagement with rivals and stifled competition through serial acquisitions and abuses of dominance—practices which could well translate into drone delivery.⁸⁴

Beyond enabling discrimination against a firm’s customers and rivals, unregulated concentration in drone delivery may also harm innovation. This can happen in two ways. First, self-preferencing and discrimination against retail competitors harms innovation in the downstream retail marketplace. In other words, it creates a dynamic innovation problem. Think of it this way: If DroneUp—a drone delivery network dependent on significant investment from Walmart—has a functional monopoly on point-to-point drone delivery in an area and can charge monopoly prices to non-Walmart retailers or refuse to serve them, those retail businesses suffer compared to Walmart. These higher prices are akin to paying a tax on every purchase, making those businesses less competitive. Over time, lower profits and thus higher barriers of entering retail markets ultimately discourages innovation and investment in the retail ecosystem.⁸⁵ To put it differently, when platforms—in this case drone services—are integrated with commercial activities, there is a conflict of interest that harms innovation in the commercial sector.⁸⁶

Second, in the longer run, the dominance and influence of parent companies or investors can also disincentivize innovation in the drone sector itself. Economists have described a phenomenon called “kill zones,” in which venture capitalists are discouraged from investing in innovative startups likely to be acquired by large firms, thereby chilling technological innovation and potentially forestalling future generations of delivery technology.⁸⁷ Business scholars have also shown that large monopolistic firms, by virtue of their scale and power, tend to have a greater incentive towards profit-seeking in their existing businesses rather than investing in innovation.⁸⁸ These dynamics may play out in the network paradigm of drone delivery, in which several of the leading networks are either subsidiaries of or dependent upon investment or business from large firms whose core business lies elsewhere. In this market structure, new companies face high barriers to entry, and are thus hindered from bringing innovative products and services to market.

C. Surveillance and Data Commodification

To operate, UAVs use cameras and sensors to navigate from storage hubs to their destinations.⁸⁹ These cameras and sensors record images and videos of peoples’ homes and other property—raising significant concerns about personal privacy and property rights.⁹⁰ Public opinion polling has shown that a large majority of Americans are concerned about companies using drones to collect personal data and are outright opposed to them recording images or video of their homes.⁹¹ A poll commissioned by the Vanderbilt Policy Accelerator in 2024 found that 66 percent of Americans oppose drones taking videos or images of their homes.⁹²

Homeowners have also expressed concerns that without a reasonable expectation of privacy in their homes and in their yards, they feel that their property rights are violated. One Arizona resident articulated a feeling of helplessness when complaining to DroneUp about drones flying around her property:

The gentleman from DroneUp delivery basically told me I had, essentially, no legal rights . . . They could be wherever they wanted, as long as it was above a blade of grass, anywhere on my property. Front yard, back yard, above your roof, in front of your windows; I had no rights.⁹³

From one perspective, these concerns should be taken seriously as infringements on “the right to be let alone,” both for individual property owners and the communities they live in.⁹⁴ But such concerns may also harm the drone delivery industry itself, given that constant surveillance may hinder public acceptance of drone delivery, resulting in lower service demand or a broader public backlash or resistance. It may even provoke violent responses that threaten community safety, as one Florida man demonstrated when, under suspicion of surveillance, he fired a gun at a Walmart delivery drone flying over his house.⁹⁵ This recalled a similar incident in 2015, when a Kentucky man shot down a drone flying over his property, claiming he “was justified in taking down the drone, saying he was protecting his privacy rights.”⁹⁶ Indeed, upon reports in December 2024 of unidentified drones flying over the East Coast of the United States, one member of Congress even vowed to shoot down future drones herself.⁹⁷

Another related concern is the use of surveillance data to entrench drone delivery companies’ market power. Drone delivery companies have the ability to both record people’s homes and property and collect data on their consumer behavior, like their order history, product preferences, addresses, and payment information.⁹⁸ Companies poised to dominate drone delivery, including Amazon and Google, have a well-documented history of capitalizing on these types of consumer data to strengthen their market power. Google, for example, shares data collected from its proprietary platform services—like Search or Maps—with its other verticals, like its advertising business, allowing it to create “detailed user profiles by connecting activity data to the user’s Google Account.”⁹⁹ Amazon, likewise, has been granted a patent that would allow it to capitalize on data scraped from drones, capturing and processing information on people’s homes and other property to provide real-time and future purchase recommendations.¹⁰⁰ This raises concerns that Amazon might replicate the practices of tech platforms in other contexts. The massive amounts of consumer data that tech platforms collect and analyze enable them to lock in customers and insulate themselves from competition by innovative startups—including, potentially, drone delivery companies—thereby chilling innovation and enabling abuses of market power.¹⁰¹

D. Costs to Labor and the Environment

Other concerns with expanded drone delivery involve costs for workers and the environment. In the process of adopting drone delivery, companies may displace traditional delivery workers, like postal workers and truck drivers.¹⁰² Though the figures on this are sketchy and may not be up to date, analysts predicted as late as 2017 that drone delivery is expected to accelerate job automation, with projected losses of $127 billion in human labor.¹⁰³ Should drone delivery replace trucking in certain areas, these losses may also jeopardize significant advances in pay, benefits, and conditions made in recent bargaining efforts between union truck drivers and delivery companies.¹⁰⁴ They may also allow Amazon, the owner of Prime Air, to elude the 2024 judgment of the National Labor Relations Board declaring it a joint employer of delivery workers employed by franchisees, whose labor might also be at risk of displacement from drone delivery.¹⁰⁵ Costs to workers are an active concern for the vast majority of Americans: Polling from the Vanderbilt Policy Accelerator in June 2024 found that nearly 3 in 4 Americans are worried about traditional delivery workers losing their jobs due to drone delivery.¹⁰⁶ And even without conclusive evidence that it would take place in every case, it may be better to act cautiously in the face of rapid, large-scale labor displacement, given its socially harmful effects, than to let it proceed uninhibited.¹⁰⁷

Current regulatory proposals and drone delivery companies also claim that adopting drone delivery will provide environmental benefits; in fact, it is one of the principal claims used to market the technology.¹⁰⁸ Drones are usually electric-powered, with batteries charged on the electric grid much like other electric vehicles, though DroneUp has invested in the development of a fleet powered using hydrogen fuel cells.¹⁰⁹ Proponents of drone delivery assert that electric-powered drones are likely to contribute to lower carbon emissions relative to the internal combustion engines of traditional last-mile delivery vehicles.¹¹⁰

But upon scrutiny, claims that widespread drone delivery adoption will constitute a net benefit to the environment may be too optimistic, as it is not yet clear that the purported benefits will outweigh likely costs. While there is some evidence confirming that electric UAVs may reduce greenhouse gas (GHG) emissions under certain circumstances, other environmental assessments have shown drones resulting in far greater GHG emissions than electric trucks, and at shorter distances even more than diesel trucks.¹¹¹ One reason drone delivery might eventually present additional environmental risks is shifting consumer behavior. Consumers expect their packages to be delivered quickly, and given that drones can accommodate only relatively light loads, users may end up ordering more frequent deliveries of smaller sizes.¹¹² More drones in the sky are the result, and because they are powered by an electric grid whose generation remains largely dependent on non-renewables,¹¹³ the cumulative effect may not necessarily be a cleaner alternative to fleets of traditional delivery vehicles which carry larger loads—many of which, like postal trucks, are already being converted to EVs.¹¹⁴ Greater demand for storage may also lead to increased energy usage on the part of the buildings that function as delivery hubs.¹¹⁵ In other words, more frequent drone delivery may offset clean energy gains made by drones relative to other modes of delivery, unless more fundamental transformations in electricity generation take place across the grid. Likely environmental costs also extend to wildlife. Reporting has indicated that birds view drones as threats to their safety and that of their nests, which may lead to physical confrontations leading to injury or death.¹¹⁶ For these reasons, though drone delivery may have environmental benefits under certain circumstances, it also has probable costs that should be given due consideration. Such uncertainty calls for a careful regulatory approach.

III. Current Law and Proposed Reforms

Policy debates regarding drone delivery regulations have not yet sufficiently addressed these problems. While there is a general acceptance of the safety risks inherent in drone delivery, existing proposals tend not to adequately address the other risks outlined above in favor of advocating industry growth. This section describes both the current state of the law regarding drone delivery services and surveys recent efforts at regulatory reform, including the recent proposal by the Trump Administration to make significant changes to the federal regulatory regime.

A. Current Law Governing Drone Delivery

Two separate federal regulations govern entry into the drone delivery business. One, 14 C.F.R. § 135 (“Part 135”), regulates all commercial delivery aircraft operation in the United States, which includes commercial aircraft with pilots on board.¹¹⁷ The FAA offers four different types of certificates under Part 135 based on the type of aircraft—single pilot, single pilot command, basic, and standard—of which the standard certificate is, according to analysts, the “most coveted as it places no restrictions on the size and scope of operations” for commercial air delivery.¹¹⁸ Part 135 is currently the only regulation that expressly permits aircraft operators to “carry the property of another for compensation beyond the visual line of sight [BVLOS].”¹¹⁹ But Part 135 certification involves standards that are not applicable to drones—for example, a requirement that aircraft carry on-board manuals—making it an awkward fit for drone delivery.¹²⁰ This has meant that drone delivery companies seeking Part 135 certification must obtain waivers for these extraneous requirements, rather than fully complying with the regulation as written. As of 2023, FAA records indicate that these waivers for BVLOS certification were obtained by five companies: Wing, UPS Flight Forward, Amazon, Zipline, and Flytrex.¹²¹ In 2024, DroneUp announced that it too had received approval for BVLOS drone deliveries.¹²²

The other regulation—14 C.F.R. § 107 (“Part 107”)—is specifically geared towards drones, rather than piloted aircraft, but it constrains drone delivery by mandating that the drone remains within its operator’s visual line of sight (“VLOS”), and that it travels no further than three miles away.¹²³ But Part 107 also contains some important safety requirements. It establishes a licensing regime under which drone operators are required to obtain a remote pilot certification.¹²⁴ Drones certified under Part 107 are also required to fly below an altitude of 400 feet, preventing drones and some piloted aircraft from sharing airspace.¹²⁵

As under Part 135, drone companies seeking certification under Part 107 must also seek waivers to operate—in this case, to waive the VLOS requirement, which is the only way to navigate drones to customers’ homes and offices at scale. Obtaining these waivers is a lengthy and complex process, involving an initial application to the FAA, information about the responsible parties and pilots, safety documentation, and operational information including the geographic and temporal parameters of planned flights.¹²⁶ Once it has solicited this information, the FAA renders a decision on the waiver and whether to grant the operator a certificate—an approval so far granted to only 1 percent of the 1,200 submitted waiver applications.¹²⁷ These waivers—which are, importantly, regulatory exceptions¹²⁸—are what have allowed drone delivery companies to operate to date, albeit in narrowly limited capacities, subject to the FAA’s significant discretionary authority over waiver recipients and their flight plans.

In addition to federal regulations, drone delivery companies must also comply with state, municipal, and tribal regulations. Some states, like Arizona and Florida, restrict drones from flying over or near critical facilities such as hospitals, prisons, power plants, and dams.¹²⁹ In some states, including Texas and Arizona, municipalities are generally preempted from enforcing their own regulations over drone delivery, with certain limited exceptions.¹³⁰ But in others, municipalities may place additional restrictions on drone flight, like in California, where the city of Malibu, for example, only allows unmanned aircraft to fly if the operator obtains a permit to use it in filmmaking.¹³¹

B. Proposed Reforms

Recognizing the difficulty that drone delivery services have faced in scaling their business nationwide, policymakers in both Congress and the executive branch proposed changes to the current regulatory structure. Several years of efforts, from the beginning of President Trump’s first term through the end of President Biden’s term, culminated in a new proposed rulemaking promulgated by the second Trump Administration in 2025. Recounting this history is important for considering the dominant trends in drone policy in recent years, and for comparing it with alternatives, such as those proposed in Part IV of this Article. While aimed at promoting growth in the drone delivery industry, these proposals do not adequately address the problems posed by a significant expansion of drone delivery, including congestion and nuisance, abuses of economic power, surveillance, and costs for workers and the environment. If implemented without addressing those concerns, such proposals are likely to lead to undesirable outcomes for both the health of the drone delivery market and the public.

1. Executive Branch Analyses and Actions, 2017–2025

In 2017, the Trump Administration issued a memorandum to establish the Unmanned Aircraft Systems (“UAS”) Integration Pilot Program (“IPP”).¹³² This program, housed at the FAA, partnered with states, cities, and tribes to study how to safely integrate UAS into the system of federal airspace regulations, including tests conducted on package delivery and BVLOS drone flights. Its final report, issued in 2021, said that the program “highlighted the need for a transition away from waivers and exemptions to more permanent solutions like certifications and revised regulations.”¹³³ Following this program, the FAA established a new program called BEYOND to work towards streamlining BVLOS approval for drones. That program is expected to complete its operations as early as October 2024.¹³⁴

While the recommendations made in the program’s report generally lacked specificity—that the FAA should “consider the type of standards and regulations to broadly enable safe, secure, and routine BVLOS operations and the effects on future regulatory strategy” is a representative example¹³⁵—they focused on the need for UAS operations to scale, while neglecting the likely drawbacks. For example, while several of its findings and recommendations noted that existing regulations hinder UAS scalability, not even one discusses market structure—even though drone delivery’s industrial organization would be a critical factor for regulators to consider if it were to rapidly scale.¹³⁶ With a nearly singular focus on allowing the commercial drone industry to grow—and a stated priority of “[quantifying] the societal and economic benefits of UAS operations,” without a similar quantification or public consideration of risks not having to do with aircraft safety—it is not clear that the IPP prompted the FAA to consider potential harms associated with a rapid expansion of the drone delivery industry.¹³⁷

In 2021, the FAA under the Biden Administration chartered the UAS BVLOS Aviation Rulemaking Committee, which subsequently completed its work in March 2022.¹³⁸ Over nearly 400 pages, its final report makes a case for significant regulatory overhaul, characterizing commercial drone flight as an industry that “seeks to provide significant economic, environmental, and equity benefits to the public, but finds itself held back due to bureaucratic hurdles.”¹³⁹ The report advocated for crafting regulations tailored to BVLOS drones rather than fitting them into pre-existing regulations for commercial air travel, proposing a new “Part 108”.¹⁴⁰ But like the IPP’s final report, with its focus on fostering industry growth, it focused on a myriad of social benefits purportedly associated with drone delivery, while neglecting to balance its analysis with an equal consideration of its potentially harmful consequences—that is, other than safety considerations focused on determining an “acceptable level of risk.”¹⁴¹ Indeed, the two “guiding principles” that it described as informing the entire scope of its work are “safety” and “societal benefits.”¹⁴² What could have been an opportunity for substantive inquiry into the risks of airspace congestion, a realistic study of public opinion not simply seeking to promote the integration of UAS, an analysis of the drone industry’s market structure, and an evenhanded assessment of the risks and benefits for labor and the environment was instead given to a comparatively simple balancing act between “acceptable risk” and the many societal benefits scaled drone flight might offer. With the arguments accumulated in this report, the FAA seemed poised to significantly amend UAS regulations without a comprehensive structural approach to an otherwise relatively unrestricted drone delivery market.

2. Legislative Proposals and Actions, 2017–2025

Several legislative efforts aimed to direct the FAA to reform the regulations governing drone delivery, and thereby rapidly increase the number of drones eligible for regulatory approval.¹⁴³ In 2023, Senators Mark Warner and John Thune and Representatives Rudy Yakym and Rob Menendez introduced one such bill, the Increasing Competitiveness for American Drones Act.¹⁴⁴ It would direct the FAA to establish a “risk methodology,” which would grant different levels of regulatory scrutiny to different drone operators based on aircraft weight.¹⁴⁵ But by simply creating different tiers based on safety risks—these risks themselves evaluated solely on the narrow metric of aircraft weight—the legislation neglected other likely risks posed by the rapid scaling of drone delivery, including those posed by its market structure. Other bills included the UAS National Airspace Integration Act, sponsored by Senator Gary Peters, which would require the FAA to submit to Congress a “comprehensive integration strategy” for integrating drones into national airspace, along with periodic updates on its implementation.¹⁴⁶ Yet another was a bill introduced by Representatives Garret Graves and Nina Titus, “To provide for a rulemaking on operation of unmanned aircraft beyond visual line of sight, and for other purposes.”¹⁴⁷ Much like the Warner-Thune bill, it sought to grant the FAA the authority to craft new regulations regarding drones, including airworthiness and safety standards.¹⁴⁸ Parts of it were also incorporated into the FAA Reauthorization Act as passed by the House of Representatives in 2023.¹⁴⁹

The central provision of several legislative efforts—a requirement that the FAA adopt a risk-based methodology to allow a higher volume of BVLOS operations—was incorporated into the FAA Reauthorization Act of 2024.¹⁵⁰ The law required that the FAA propose a rule on BVLOS operations no later than four months following the Act’s enactment.¹⁵¹ It mandated that the regulations establish “acceptable levels of risk” based on weight and flight speed, and required the FAA to develop a risk-based methodology to determine these acceptable levels.¹⁵² It also included provisions that required the FAA to establish guidelines related to the transportation of hazardous materials;¹⁵³ required the development of procedures to approve “third-party service suppliers,” defined as entities other than the FAA who provide services that may affect UAS operations, including data and infrastructure providers (including private UAS air traffic control);¹⁵⁴ authorized temporary restrictions on drones flying above large public gatherings;¹⁵⁵ prohibited DOT’s procurement or use of drones from foreign entities;¹⁵⁶ encouraged the FAA to work with international organizations to establish rules governing drone operations over the high seas;¹⁵⁷ and established a test range for drone operations over the Gulf of Mexico.¹⁵⁸ However, by specifying that it only enumerates minimum requirements for the new BVLOS approval rules, it may authorize the FAA to enact other regulations—including the ones proposed in Part IV—that it may determine necessary to protect American neighborhoods and the health of the drone delivery industry.¹⁵⁹ Indeed, additional regulatory measures will be necessary to meet these ends, including ones that address market structure and prevent congestion and nuisance, abuses of economic power, harms to innovation, widespread surveillance, disruptive effects on labor, or environmental harms.

The steady progression of proposals over this period to loosen restrictions on drone delivery evidenced a desire by the drone delivery industry and its allies to allow the industry to grow. But while they routinely celebrated drone delivery’s potential benefits as justifications, they too often neglected the likely risks—not only those of accidents, such as is implied by the search for “acceptable level of risk,” but also those that are likely to arise because of unrestricted entry. These include risks involving areas like consumer experience and environmental effects, where drone delivery is said to have its greatest benefit.

3. The Trump Administration’s Proposed Rule

On June 5, 2025, President Trump signed an executive order directing the Secretary of Transportation, acting through the FAA Administrator, to issue a new rule governing drones—and in particular, authorizing BVLOS operations for “commercial and public safety purposes.”¹⁶⁰ On August 7, the officials complied, filing a notice of proposed rulemaking in the Federal Register with a very lengthy new proposed rule, as directed both by the executive order and the FAA Reauthorization Act of the previous year.

The rule makes several significant changes related to drone delivery. First, through the creation of a new “Part 108,” it would create a new licensing regime for UAS BVLOS operations, thereby creating a special category for commercial drone uses.¹⁶¹ As the executive summary of the proposed rule predicts, “many, though not all, operations under proposed part 108 will be commercial.”¹⁶² This alone could dramatically expand the number of drones eligible for regulatory approval by eliminating the need to assign waivers to companies under the other regulations. Second, it follows through on Congress’s requirement of a risk-based framework for drone licensing by creating separate risk tiers (and different licensing mechanisms) for different sizes of drones. It also contains a large number of technical rules about maintenance, design, and testing, all going to drones’ eligibility for a license under the new Part 108.¹⁶³

Though the communications promoting the new rule are quintessentially Trumpian, touting its potential to “unleash American drone dominance,”¹⁶⁴ what is notable about the policy it embraces is just how continuous it is with the bipartisan consensus on drone policy of the previous eight years: embracing industry-favorable deregulation, with tiered guardrails mostly along a narrow criterion of aircraft risk and weight. Otherwise, the rule neglects crucial considerations for creating a healthy and safe drone delivery industry. One telling example is its proposed solution to prevent collisions in the air and on the ground. It requires drone operators to integrate “automated data service providers,” into their operations to build a virtual air traffic control system.¹⁶⁵ Nowhere, however, does it stipulate an upper limit on the quantity or density of drones to be permitted within given geographical areas. This means that the safety of BVLOS flights depends almost entirely upon the proper functioning of these automated systems, no matter how many drones there might be in a given area. Another representative example is the proposed rule’s section on privacy. While the rule’s cost-benefit analysis notes that “the magnitude of benefits shown in these examples would be reduced by any disbenefits from increased risks that accompany new or scaled BVLOS operations, including noise, annoyance, and privacy intrusions,”¹⁶⁶ it is remarkably devoid of policies limiting the amount and types of data drone delivery companies can collect on drone delivery companies’ customers and other users. It is also not clear how much say local communities will have in whether or not the FAA approves drones to fly in their area. While the rule is indeed lengthy, its treatment of the full range of concerns with upscaled drone delivery suggest it is doing closer to the bare minimum of what the FAA Reauthorization Act required.¹⁶⁷

IV. How to Regulate Drone Delivery

The drone delivery sector has at least three features that render a more structural approach to regulation than the one offered by the Trump Administration essential. First, there is a significant public interest in restricting entry. Just as it is important to ensure that the broadcasting spectrum is not overcrowded with signals, neighborhoods are not crowded with power lines, or busy airspace is not congested with an unlimited number of airplanes, it is important to ensure that the number of drones in the sky does not exceed an amount determined to be both safe and desirable for the communities they serve. There is a strong public interest in ensuring that drones do not crash into each other, create nuisances with noise pollution and surveillance, or otherwise threaten public safety. As a result, there must be some upper limit on how much drone delivery there can be within a given geographical area and at what times. The task for policymakers is to determine how to design and enforce such limits, and how to allocate service among prospective providers.

Second, there is a strong likelihood that drone delivery services, if permitted to scale, will continue to function as networks with the traditional features of networked industries.¹⁶⁸ These network effects may incentivize drone delivery companies to deploy large fleets of drones to serve the maximum number of both retailers and customers and would thereby incentivize drone delivery firms to trend towards consolidation and conglomeration.¹⁶⁹

Finally, and importantly, drone delivery services are infrastructural services. Drone delivery is not a means unto itself, but rather a means to other commerce: transporting goods from businesses to end consumers.¹⁷⁰ This puts dependent businesses in a precarious position: Their profits and access to the service can be expropriated, restricted, or eliminated by service providers. The danger to the marketplace of a drone operator foreclosing reasonable access is considerable—especially in combination with high barriers to entry and the strong public interest in preventing unlimited entry, which make competition alone unlikely to regulate firms effectively. Together, these three factors—drone delivery’s infrastructural nature, its network effects, and the public interest in restricting entry—necessitate structural regulatory solutions to prevent some of drone delivery’s likely harms. And, importantly, it critical to get out ahead of the likely problems associated with drone delivery, thereby avoiding the “Collingridge dilemma”—that once new technologies have become entrenched in society, they will be more difficult to regulate than would have been the case in advance of their entrenchment.¹⁷¹

This Part offers a framework for properly conceiving of drone delivery regulation and then proposes four policy ideas for how to regulate these services in the public interest. First, it offers an exposition of the law and policy of networks, platforms, and utilities (NPUs), a set of tools historically used in industries to which drone delivery is structurally analogous in its networked organizational model. Taking the lessons of this field of inquiry, it then outlines a comprehensive licensing system for drone delivery services. This system would require drone operators to obtain certification both from the FAA to operate in general—subject to structural rules that apply to all operators—and from local governments to operate within particular geographic areas. Local governments would submit plans to the FAA to license operators under either a contracting model, with competition on price schedules in exchange for a contract to serve the area, or a utility model, with cost-of-service rate regulation to prevent monopoly pricing and terms. It discusses potential challenges with these models and how their policy design and implementation might address them. Second, it recommends that the U.S. Postal Service consider operating a public drone delivery network. It discusses the reasons why USPS is well-positioned to operate a public drone delivery network alongside its existing package delivery service and note some considerations for implementing the service. Third, it proposes that the federal or state policymakers commission an expert report on drone delivery’s intermodal effects across our system of last mile-delivery and how to avoid disruptive consequences.

A. Drone Delivery and NPU Law

As described in Part I, drone delivery is likely to develop as a networked industry for a variety of reasons: It is a means to other commerce, rather than an end unto itself. In its function as a delivery service, it connects buyers and sellers of goods and thus acts as a middleman with inherent power over both sides of such transactions. It possesses likely economies of scale and network effects, meaning that its value increases and its usefulness depends on many users utilizing it. And, as described above, there is a public interest in restricting entry into drone delivery, given the many risks and downsides of congested airways.¹⁷²

These qualities position drone delivery alongside other industries that share similar structural features—not only those in transportation, but also those in energy, finance, and communications. A recently revived area of study—the law and policy of networks, platforms, and utilities (NPUs)—synthesizes the regulations that govern or have governed these sectors into a coherent field of academic inquiry, one which offers important insights for the governance of frontier technologies, including drone delivery.

These traditional NPU sectors—which involve dynamics distinct from trade in ordinary commodities—have each, historically, been subject to one or more policy mechanisms meant to eliminate the risks of their monopolistic or oligopolistic structures, including opportunities for rent-seeking, profiteering, and discrimination.¹⁷³ These tools include nondiscrimination rules or neutrality mandates, meant to prohibit the differential treatment of similarly situated users in prices and terms; rate regulation, meant to ensure fair prices for consumers (and, in some cases, fair wages for workers) in the absence of price competition, plus a reasonable rate of return for investors; structural separations, to limit the lines of business in which a firm may engage so as to prevent conflicts of interest that might incentivize them to discriminate or profiteer in the first place; interoperability rules, which require component parts of systems to be operable with the component parts of another, to eliminate the economic power generated by locking in users; and, in some cases, public options or public ownership, meant to avoid the pitfalls of—or potentially influence through competition—the profit motive pursued by private businesses and to orient the enterprise instead towards public-spirited goals, including the provision of universal service.

The history of NPU law and policy traces its roots to the law of innkeepers and common carriers as first articulated by medieval English courts in the 13^th century.¹⁷⁴ Over successive centuries in the common law, it developed into a coherent set of principles that undergirded the legal and policy analysis of many different utility-like industries, from grain elevators to telephone services. Beginning with the formation of the Interstate Commerce Commission in the late 19^th century, it was translated into an important set of tools in administrative law that Congress designated regulatory commissions to apply to new sectors like railroads.¹⁷⁵ By the early twentieth century, these principles had become central to modern regulation in all manner of infrastructural industries.¹⁷⁶

In the second half of the 20^th century, NPU law—known by other names including “regulated industries”—suffered sustained attacks from legal scholars affiliated with the Chicago School of economics, whose emphasis on neoclassical price theory as the proper empiric for economic policymaking contrasted with the much more capacious set of concerns that NPU law traditionally sought to address, including the various harms of unregulated, concentrated market structures.¹⁷⁷ This intellectual shift precipitated the deregulation of the traditional NPU sectors, including airlines (with the Airline Deregulation Act of 1978), telecommunications (with the Telecommunications Act of 1996), and banking (with the Gramm-Leach-Bliley Act of 1999).¹⁷⁸ Core to each of these laws was an express reversal of the tools used to govern these sectors as public utilities, such as structural separations (such as that between commercial and investment banking) and rate regulation (in the case of the airlines).¹⁷⁹

More recently, the study of NPU law has re-emerged alongside an ever-wider recognition of deregulation’s downsides.¹⁸⁰ This re-emergence invites a wide variety of practical applications, not least of which is the application of its principles to the governance of new technologies that function akin to earlier generations of networked industries. Rather than being prescriptive, offering concrete answers, or dictating the proper mechanisms by which various economic sectors should be governed—in other words, being the end point of policymaking in particular industries—the NPU framework offers a point of departure, introducing a set of questions that students and practitioners of law, business, government, and public policy can use to comprehend and help resolve the full range of problems various sectors might pose under different organizational structures.¹⁸¹ In this sense, it offers a corrective to policymaking under a deregulatory paradigm, which emphasizes a narrow view of consumer welfare and restores a more comprehensive approach of systemic design to matters of economic and industrial policy.¹⁸²

NPU law is an ideal framework through which to view drone delivery because the central problems that NPU law seeks to understand and address are remarkably similar to those posed by expanded drone delivery. One such problem is the risk posed by unrestricted entry—a dynamic common to other NPU industries. Policymakers dealing with the rise of electrification in the early 20^th century, for example, recognized that there was a public interest in restricting entry to prevent a tangled multitude of power lines from congesting city streets.¹⁸³ Entry restrictions were also central to communications industries like radio, which required them due to the inherent scarcity of airwaves.¹⁸⁴ Like power lines and radio signals, there are only so many drones a given area can accommodate before any benefit of expanded service provision is far outweighed by the nuisance of congestion.

Another similarity between drone delivery and other NPU industries is in its status as a platform that supports and facilitates external economic exchange, rather than being a commodity or a retail good—in other words, being a means to other commerce rather than an end unto itself. This distinction—between the network model and commodity model—has been drawn at length in an earlier section of this Article, but it is worth re-emphasizing here in relation to other industries traditionally regulated as NPUs.¹⁸⁵ Most obvious are the similarities to railroads, which functioned as a shipping platform that, under the purview of the ICC, were subject to various structural rules to prohibit them from exploiting their position as economic middlemen.¹⁸⁶ Other related industries include those dealing with money, including banking and payment systems. By augmenting the nation’s money supply by issuing deposits and facilitating transactions between multiple parties, respectively, banks and payments systems serve not as commodities or goods themselves, but as supports for the basic functioning of the modern economy. In this sense, they serve an important public interest, leading scholars to describe them as basic infrastructure or public utilities.¹⁸⁷

A third and, for the purposes of this discussion, final characteristic shared between drone delivery and other industries historically subject to utility regulation (though there may be others) is its network effects and related economies of scale. Because drone delivery networks will be useful only insofar as other consumers and businesses use them, their value will increase to both parties the more points they can connect. Thus, drone delivery networks only make sense as large-scale, interconnected systems. This dynamic mirrors that which exists in the airline industry on a larger geographic scale: The more locations an airline can serve, with more frequency, the more valuable it is to flyers.¹⁸⁸ Within certain geographic parameters, drone delivery networks may also resemble telephone networks, which are only useful if they can connect a user to every other telephone.¹⁸⁹ These network effects may have an added consequence in the case of drone delivery: they may incentivize the networks to grow larger and larger, further heightening the risks of unrestricted entry.¹⁹⁰

One objection that might be raised to the application of utility regulation in drone delivery is that such a scheme is not necessary as compared to more narrowly tailored behavioral regulations or health-and-safety regulations. For example, if delivery drones are notoriously noisy, why cannot jurisdictions simply enact rules specifying minimum altitudes at which they must fly, or maximum decibels of sound they should be permitted to emit? What of the risk management frameworks proposed by the UAS BVLOS Aviation Rulemaking Committee?¹⁹¹ The answer is two-fold: On one hand, behavioral regulations are insufficient. While behavioral regulations are certainly necessary to prevent specific abuses, there are other problems—such as the inherent risks of congestion and concentrated power—that cannot be solved by behavioral regulations alone and render structural regulations necessary alongside them. On the other hand, there is an issue of incentives: Unstructured by public authorities, which may ensure fair prices and a fair rate of return on invested capital, what will keep companies from circumventing behavioral regulations in the search for ever-higher profits?¹⁹² Both the presence of issues posed by the structure of the industry itself and the impact of that structure on the business strategies and technological features the firms may pursue render NPU regulation a more satisfying framework for governing drone delivery than safety- or risk management-based behavioral regulations alone.

Yet another potential objection concerns the existence of antitrust and consumer protection laws as substitutes for utility regulation. Why enact a system of utility regulations when market power and consumer harms can simply be policed by the officials tasked with enforcing those laws? There are at least two reasons. First, historical experience suggests that antitrust and consumer protection enforcement may not be enough to address the full range of harms with which utility regulation is concerned. In the 1970s and 1980s, deregulation advocates suggested that antitrust enforcement could fill the gap left by deregulating airlines.¹⁹³ But antitrust did not fill that gap, both because the network effects of airlines caused them to trend towards oligopoly and because deregulation advocates simultaneously argued for a light-touch antitrust enforcement philosophy.¹⁹⁴ The result was airline consolidation and related harms to America’s airline sector.¹⁹⁵ Second, utility regulation lowers the enforcement costs of antitrust and consumer protection law because it prevents violations ex ante, rather than requiring ex post enforcement against violations that have already occurred. By structurally removing the ability of firms to engage in exercises of monopoly or oligopoly power—through rate regulation or structural separations, for example—utility regulation lowers the risks of such harms occurring in the first place.

Taking the set of questions that NPU law and policy introduces, let us move to consider how best to design regulations to prevent the likely harms, and thereby promote the potential benefits, of expanded drone delivery networks.

B. Licensing System with Structural Regulations

Licensing is one of the most important policy tools commonly used in networked industries, including those involved in transportation and shipping. The FAA already grants a type of license to drone operators through waivers to Part 107 and Part 135.¹⁹⁶ But, as the agency’s UAS IPP report itself contends, the regulatory framework governing drones should “transition away from waivers and exemptions to more permanent solutions like certifications and revised regulations.”¹⁹⁷ Either through legislation or administrative rulemaking, Part 107 should be revised to create a framework for licensing and regulating BVLOS drone delivery, or a new, separate regulation should be created.¹⁹⁸ The provisions of the FAA Reauthorization Act of 2024 indeed provide for a new set of regulations to be crafted and issued by the FAA.¹⁹⁹

A licensing system for drone delivery will not be workable, however, unless it functions as a genuine entry restriction. In general, there are two types of licenses. One type functions the way driver’s licenses do: Anyone who meets certain minimum requirements gets a license to do something—in this case, operate a motor vehicle. There are an unlimited number of such licenses to be granted, and an unlimited number of applicants who might receive them. But other licensing regimes, such as those found in public utility or infrastructure industries, do not simply allow anyone who meets certain requirements to do something. Instead, the public grants a designated party a license or a certification to perform a particular service, subject to strict conditions to provide the service at fair terms and ensure broad access. Not all of those who meet the minimum requirements will be granted certification: There are a limited number of certifications to be granted—sometimes no more than one. This type of licensing system functions as an entry restriction—and it is the type of licensing system that the FAA ought to consider for drone delivery operators.²⁰⁰

Why entry restriction? Put simply, without it, the problems described in Part II—congestion and nuisance, abuses of economic power and harms to innovation, surveillance and data commodification, and threats to labor and the environment—will all be exacerbated or more difficult to deal with. Without any upper limit on the number of drones allowed to operate in a particular locality, large fleets of drones are likely to be noisy and unsafe, and without the regulatory oversight that comes with entry restrictions, they may be permitted to entrench the power of large corporations over local and national commerce. In addition, by incorporating restrictions on surveillance as well as labor, safety, and environmental standards directly into the licensing system, policymakers can increase the likelihood that violations are not only effectively policed but are prevented from happening in the first place.

In addition to the requirements enumerated within the FAA Reauthorization Act of 2024, a revised licensing system should include a set of minimum requirements that all drone operators must meet to receive FAA certification, along with other regulations that localities might deem necessary. Though not sufficient for an operator to earn a license, these requirements would form a baseline set of rules that drone delivery services must follow, to which local governments may add additional rules based on the needs of their communities. In effect, this would mean that to operate, drone delivery companies would need both FAA certification to operate in general and a license from the local government to operate in a particular area. The minimum federal requirements should include the following:

● Uniform safety, design, and training requirements. The FAA already has some safety requirements for drone operators, both in its current waiver-based system and in each of its proposals for reform. In fact, as this Article argues in Part III, existing proposals to govern drone delivery consist primarily of safety and “risk-based” regulations, while neglecting other important concerns.²⁰¹ Nonetheless, ensuring drone delivery services abide by a common set of safety rules is essential. As drone technology develops, it will be critical to monitor and update design and safety specifications on an ongoing basis. As part of this process, the FAA should require that all companies seeking licenses disclose to regulators their flight manuals, design plans, and other information regulators need to stay informed about UAV capabilities, whether such documents originate with the delivery network operator or with the subcontracted drone manufacturer.²⁰² In addition, to establish a minimum baseline for operator competence, all personnel involved in piloting drones should complete a certified training program, just as airline pilots, vehicle drivers, and other transportation personnel are required to do.²⁰³

● Minimum flying altitudes, noise minimization, and airspace routing. To protect against trespassing on private property and dangerous collisions, drones should be required to fly above a height determined by transportation analysts and community leaders, not to disturb people on the ground below, and to avoid other classes of aircraft. Policymakers should also consider rules to limit the noise that drone propellers emit. Legal scholars have also introduced several intriguing and creative solutions to provide unobstructed airspace for drones, including by restricting their travel to the space above highways and above repurposed railroad tracks, though it is unclear just how feasible these solutions are for last-mile delivery in various locations.²⁰⁴

● Neutrality mandates and/or structural separations. The DOT and FAA should condition drone delivery licenses on a neutrality mandate. A neutrality mandate would prohibit drone delivery services from favoring particular retailers, customers, or other third parties with preferential prices or terms—including, importantly, companies that may be competitors of the drone delivery company in other markets.²⁰⁵ Such a mandate would fulfill the Secretary of Transportation’s duty to ensure that policies governing the transportation sector “[prevent] unfair, deceptive, predatory, or anticompetitive practices” and “[avoid] unreasonable industry concentration, excessive market domination, monopoly powers, and other conditions that would tend to allow at least one air carrier or foreign air carrier unreasonably to increase prices, reduce services, or exclude competition in air transportation.”²⁰⁶ Enacting a neutrality mandate or nondiscrimination rule would also be highly popular, as polling from June 2024 indicates, finding that 78% of Americans believe drone delivery networks should not discriminate on prices and 73% support a federal ban on price discrimination in drone delivery.²⁰⁷

It is important to distinguish the neutrality mandate proposed here from the universal service requirements common carriers are subject to in other industries, because drone delivery may not be suitable for every geography or wanted by every locality.²⁰⁸ However, mandates for nondiscriminatory service within the geographical locations where a drone delivery provider is licensed may be implemented. Upon periodic review, regulators should consider whether universal service mandates would be feasible within specified geographic areas.

Should policymakers wish to be bolder, they could also consider conditioning drone delivery licenses on structural separations between drone delivery networks and retailers. Structural separations are a tool often used to regulate industries that operate like utilities or infrastructure.²⁰⁹ They address the same problem that neutrality mandates do—that is, the discriminatory or preferential treatment of suppliers and downstream businesses—but they are a structural solution, meaning that violations are not just prohibited, but prevented from happening in the first place.²¹⁰ They are also the classic tool in the American regulatory tradition to deal with the problem of the concentrated economic power held by infrastructural industries.²¹¹ Functionally, they prohibit integration between distinct lines of business, so as to mitigate conflicts of interest that could lead to discriminatory business practices or other harmful outcomes.²¹² In the case of drone delivery, vertical integration between drone operators and retailers—whether online platforms like Amazon and Google or physical businesses like Walmart locations—may incentivize such businesses to use their market power to stifle competition, either by acquiring competitors or giving their own services unfair advantages through preferential pricing or terms.²¹³ It may also allow retailers to use consumer data collected by drone companies to bolster their power, and vice versa. Prohibiting such vertical integration as a condition of receiving a license might allow for smaller retailers to compete more effectively and keep drone delivery from being used as a tool to reinforce the market power of dominant corporations.

● Crash and malfunction reporting. All collisions, near collisions, flight disruptions, technology malfunctions, or other accidents should be immediately, and ideally, automatically, reported to the FAA. In accident reporting, regulators at the FAA have a chance to do even better than those overseeing autonomous vehicles at the National Highway Traffic Safety Administration (NHTSA). As of 2023, NHTSA requires crash reporting for commercially available vehicles with advanced driver-assistance programs (ADAS) or “L2” systems—i.e., partially automated driver assistance technology—engaged in at least the 30 seconds leading up to a crash.²¹⁴ But the reporting timeline is not instantaneous, and can range from days to weeks under the terms of the NHTSA’s standing order.²¹⁵ One scholar has proposed that the NHTSA ought to mandate universal crash reporting for all new vehicles regardless of their level of automation within one day; the FAA should do the same for delivery drones, and should consider mandating instantaneous reports to the degree it is technically feasible.²¹⁶ In addition to reporting requirements, collision sites should remain unaltered, to the degree possible, to enable investigations to commence promptly. At least one drone delivery company, Amazon, has been reported to clear accident sites prematurely and thereby preempt investigation by public authorities.²¹⁷

● Data minimization and prohibition on data monetization. Drones are necessarily equipped with cameras to assist in navigation, but licenses should be conditional on operators deleting all live footage, photographs, or other recorded data involving private persons or property within a reasonable time following the conclusion of a delivery. These sorts of data should only be retained by the company in the case of an accident to assist investigators or to address consumer complaints related to theft or damage. In addition to the requirement to continuously delete these sorts of data, drone operators should also be prohibited from selling, licensing, distributing, or otherwise monetizing data and images collected during drone deliveries.

These rules, along with those in the Act, could serve as a minimum baseline for drone delivery services receiving FAA licenses to operate nationally. But what of operating locally? How does the FAA balance its mandate for federal regulation with the equally compelling need for local input and oversight? After all, drones are aircraft designed to be flown locally, even when engaged in interstate commerce, and not across the country as passenger or commercial airplanes are. Different communities, whether rural, suburban, or urban, may therefore have vastly differing needs, preferences, and tolerance levels for drone delivery. This is a fact that must be accounted for within the FAA’s regulatory framework. As one legal scholar has noted:

[The] historical model of regulating aircraft and operators at the federal level simply will not work, in the long run, to adequately address safety, privacy and security issues appropriate for each locality—urban or rural, sprawling or densely populated—with highly variable political and cultural systems. . . . Unless the FAA recognizes that local governments can and should play a significant role in shaping drone rules to address the specific safety, security and privacy needs of their communities and they are included in the enforcement scheme, the affected local interests will simply react by banning local usage.²¹⁸

Not only is including the specific needs of local communities in the enforcement scheme essential as a point of policy design: It is also something that most Americans would demand. According to a poll commissioned by VPA in June 2024, 77 percent of Americans oppose the preemption of state and local laws governing drone delivery and believe that local governments should be allowed to add their own more restrictive rules governing the service.²¹⁹ Doing so may also resolve ambiguities in the case law surrounding the federal preemption of certain local regulations governing drone delivery, because mechanisms of local governance are incorporated into the federal regulations themselves and thus would not qualify for either conflict or field preemption by courts.²²⁰ By incorporating both local governance and federal oversight, these models would be systems of cooperative federalism, wherein local governments have a leading role in crafting policy that affects their communities in cooperation with the federal government.²²¹

Though state and local governments may promulgate additional regulations governing drone delivery, the task in which local governments will have to play a crucial role is in the allocation of service between providers. Even if several drone delivery services might meet the above minimum requirements, localities will still have to determine how best to allocate service among them. But this task raises several problems: Without entry restriction, multiple competing drone delivery services would likely exacerbate congestion and nuisance issues; but with entry restriction would come the risks of monopoly and oligopoly power, including high prices, reduced quality, and unfair treatment of business rivals and customers. Thus, what is needed is a system of service allocation to balance at least three competing demands: (1) discipline on price and quality, (2) limitations on congestion and nuisance, and (3) adaptability to the differing needs and institutional capacities of local governments.

To do so, the FAA should offer local governments two options for how to award licenses to drone delivery companies at the local level, subject to FAA approval: (1) a contracting model, in which firms compete on pricing schedules in exchange for an exclusive, fixed-term contract to provide the service subject to strict terms; or (2) a true public utility model, within which market participation is limited to a single private firm coupled with cost-of-service rate regulation. Localities that want drone delivery service should submit a detailed plan under one of these models to the FAA for approval. Once approved, local governments would grant exclusive licenses to providers under the terms of their proposal. Importantly, no drone delivery service would be able to operate without receiving both federal licenses and a local license in its area of operation. Local governments would thus have to affirmatively opt in to drone delivery service, putting them at the forefront of decisions about their system of last-mile delivery.

1. Contracting Model

Under a contracting model, a governmental entity possesses exclusive authority over the provision of a service and contracts with a firm to operate that service through a competitive bidding process.²²² What results is not simply a regulatory relationship, but an outsourcing or procurement relationship, wherein the government outsources the provision of a service to a private entity via contract, contingent on strict terms to serve in the public interest. Similar dynamics and regulatory regimes occur commonly in infrastructural sectors, including in money and banking,²²³ electricity and other energy utilities,²²⁴ and sanitation.²²⁵ Given the infrastructural nature of drone delivery, a contracting model through competitive bidding would carry significant benefits for both the industry and the public interest: restricting entry into the drone delivery market (thereby avoiding the problems of congestion and nuisance), maintaining a degree of competition through the procurement process, and allowing different terms and conditions of service that fit best with the preferences of people in different localities. This balance may make the contracting model an ideal regulatory framework for drone delivery at a time when its technology and business model are rapidly developing.

Under this approach, local governments would submit plans to the FAA for approval. After FAA review to ensure the plans meet licensing requirements, the local government would be able to solicit bids from drone delivery companies for an exclusive contract to provide the service in the area under the local government’s jurisdiction, for a limited term of predetermined duration. While the companies would be required to submit detailed plans about their business models, costs, and technology, they would compete primarily on pricing schedules—how much they would charge for different tiers of service based on factors including package weight, product value, and distance from origin to destination. Once approved, the winning company’s pricing schedule would be fixed for the entire term of its contract. Theoretically, with multiple companies competing for bids, pricing schedules would be bid down to marginal cost, thereby preventing the charging of monopoly or supracompetitive prices. But it is critical that policymakers do not automatically assume the existence of a competitive marketplace for these contracts. To maximize the actual likelihood of competitive marginal-cost pricing, it would be the responsibility of both local governments and the FAA to promote a competitive ecosystem in drone delivery overall. They can do so through provisions in procurement contracts like nondiscrimination rules that would prohibit powerful firms from distorting competition in the drone delivery market, and thereby in the market for public drone delivery contracts.²²⁶

There are several problems inherent in the contracting model that its policy design should address. For example, what mechanism would discipline firms into maintaining their service quality and pricing schedules over time, if not competition or ongoing utility-style rate regulation?²²⁷ To address this issue, franchise contracts would not be indefinite or permanent, but would time out after a period of specified duration, and another bidding process would commence, ensuring regular intervals of competition on price and service quality.

A second potential problem with contracting is that incumbents have an advantage during the contract renewal process.²²⁸ Having served an area for five years, or however long a contract term might last, a drone delivery company would likely possess a great deal of competitively sensitive information about how best to serve that area—both formally logged data and informal operating experience. Such information might provide a critical advantage in the bidding process, or it might make it more difficult for a competitor who wins the new bid on price to provide service of a similar quality. To remedy this issue, the data collected and used by drone delivery companies within the areas they serve—including operating plans, knowledge management practices, manuals, and handbooks—should be considered public property, in accordance with the strict privacy protections outlined earlier in this Part. They would not be shared with competitors during the performance of a contract, but they would be provided to subsequent providers who win bids, to ensure interoperability and thereby reduce switching costs. Winning a bid to be the exclusive private provider of drone delivery services within a particular locality is a powerful privilege. Making critical information available to the public would be a concomitant obligation—and it would enable local governments to ensure that another company could just as well take over should it be able to provide the service better, or at lower cost.²²⁹

A third potential problem involves the risks inherent in outsourcing critical public functions to private actors. This author has written elsewhere on the risks of outsourcing public capacity in new technologies—risks which may also be present in outsourcing drone delivery.²³⁰ These risks include higher costs, lower quality, depleted institutional expertise, and a lack of accountability relative to public actors.²³¹ It is also possible that firms competing for bids may attempt to unduly influence local governments, making corruption a relevant concern. It is partly for these reasons that this Article recommends the exploration of a public drone delivery network operated by the U.S. Postal Service.²³² But with a fixed pricing schedule, publicly owned operating information, consistent oversight, periodic contract bids, and various anti-corruption measures, it is possible that the likelihood and severity of these risks may be at least mitigated for private providers under a contract bidding model. Indeed, these are challenges that governments at every level face in procurement decisions. A whole literature spanning law, economics, and political science discusses the theoretical and practical problems inherent in government procurement, the lessons of which might well apply to a contract model of drone delivery regulation.²³³ While outsourcing may always lead to a principal-agent problem wherein the contractor’s interests differ from the government’s or where the agent’s actions are not in the public interest, the government still outsources the building of battleships, the collection of trash, and the augmentation of the money supply, among many other products and services.²³⁴ Seen through this frame, drone delivery may benefit from regulation through competitive contract bidding, especially when compared to the challenges posed by unrestricted market entry.

A contract bid may be a good model for regulating private drone delivery operations while the industry undergoes its initial stage of development and proves its concept in the American communities that elect to have it. But as the industry and the underlying technology change, so too may the ideal regulatory regime. The FAA should periodically consider whether franchise bidding remains an effective model for governing drone delivery at the local level. If the problems identified in Part II remain, it should consider moving away from franchise bidding and to other frameworks, including full public utility regulation or purely public provisioning.

2. Public Utility Model

In the absence of a framework which ensures a modicum of competition between providers, such as the contracting model, localities should adopt a comprehensive suite of regulations to govern drone delivery as a public utility. In addition to the neutrality mandates and/or structural separations between drone operators and retailers that would be required under either model, local public utility regulation should include cost-of-service rate regulation—the defining feature of utility governance in industries such as electricity.

Under a public utility model, like in franchise bidding, licenses function as genuine entry restrictions, whereby entry into the market is limited to a certain number of players, even though others might meet the requirements. But rather than franchises or procurement contracts, public utility entry restrictions often take the form of certificates of “public convenience and necessity,” or PCNs, which similarly allow for selective allocation.²³⁵ Importantly, PCN certification regimes serve interests not limited to ensuring licensed entities have the requisite expertise or meet safety standards: They address problems inherent in a market-based approach to infrastructural industries, including destructive competition and “cream-skimming,” or the siphoning off of the most profitable areas or customers.²³⁶ To put it more affirmatively, public utility entry restrictions can promote fair competition and innovation, ensure broad geographic access, protect national security, prevent exorbitant prices or unfair terms, and ensure reliability and consistent service for other businesses, customers, and the public at large.²³⁷

Rather than approving all license applicants who meet certain requirements, as in the FAA’s existing proposals, local governments would grant a limited number of PCN certificates in each geographic area, perhaps only one. Under this model, in which there is little if any competition between multiple private providers—like in electricity—it is critical to condition the license on cost-of-service rate regulation.²³⁸ Rate setting is important to prevent the regulated entity from charging monopoly prices or lowering their output, while ensuring a fair rate of return on invested capital.²³⁹ It could be performed either by existing local or regional public utility commissions, or by new authorities appointed specifically to govern drone delivery. A key challenge with rate regulation, as in any public utility industry, is determining exactly what the cost of service and a fair rate of return is.²⁴⁰ No process to evaluate these metrics is perfect. But to maximize the accuracy of the rate-setting authority, the licensed drone delivery operator should be required to submit detailed cost accounting information, including proposed executive compensation. Rates would be publicly posted and may also be subject to competition from a public option provider, such as the USPS public network proposed below.²⁴¹

The public utility model could accommodate PCN certificates for multiple actors within the same geographic area, but doing so would require greater administrative capacity from local governments than certifying a single provider. To prevent nuisance and overcrowding and ensure safe operations through effective coordination, a local regulator would need to allocate routes and times for different providers to serve specific areas. This may be possible, but it would place extra burdens on local governments.

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Importantly, licensing plans submitted to the FAA under both the contract model and the public utility model should include a geographical analysis of the locality, along with an upper limit on the number of drones or individual deliveries permitted within the area. Simply limiting the number of entities licensed to offer drone delivery does not necessarily limit their utilization to prevent congestion and nuisance. A cap on the number of drones or the number of flights they may take within a specified period, determined based both on geography and public input, can help avoid those issues.

C. Public Option Drone Delivery Service

Another approach to address many of the concerns with expanded drone delivery—including nuisance, surveillance, and abuses of power—would be for the United States Postal Service to operate a public drone delivery service, just as it does for regular package delivery. A public drone delivery network could either be the sole provider of drone delivery services in the areas where drone delivery makes sense, or it could compete with private providers in the areas which elect to have them under one of the licensing models described above. Public provisioning can be a cost-effective and efficient way to shape the drone delivery market towards public-minded ends. As shown in other industries, from healthcare and education to banking and package delivery, public options can also have a disciplining effect on private firms by competing with them on price, quality, safety, and other features.²⁴²

The USPS is well-positioned to operate a public drone delivery service. It possesses a fully scaled logistics network that it uses to make more than 23 million deliveries every day, nationwide.²⁴³ It already operates nearly 35,000 physical locations—namely, post offices and mail processing facilities—that could function as storage hubs from where drones make deliveries, supplementing other modes of postal delivery.²⁴⁴ The ubiquity of its infrastructure, coupled with its constitutional pedigree, empowers it to serve nearly the entire American population.²⁴⁵ And it is affordable and well-liked: It charges rates that are typically lower than its private competitors, and in public polling, it consistently ranks as the government agency with the highest levels of popular support.²⁴⁶

USPS has explored opening a drone delivery service before: In 2019, it issued a Request for Information (RFI) to consider the viability of a drone delivery network operated by the postal system.²⁴⁷ But it did not follow up its RFI with a pilot program. Given renewed interest and action in drone delivery policy, it should put out a new RFI to reevaluate a public drone delivery option, which should include an examination of the ways in which drone delivery technology may have advanced in the years since. Congress should also consider line-item appropriations to pilot public drone delivery at USPS, and should the pilot prove successful, consider funding it permanently.

In setting up a public drone delivery network and thereby expanding the capacity of the postal system, many important decisions will have to be made, of which two are worth highlighting here. The first deals with personnel capacity: USPS will have to rapidly hire personnel able to competently operate drone delivery on a systemic level and implement a training program to enable postal workers to operate drone delivery out of local post offices. In this effort, it should make full use of the tools available to hire personnel with expertise in scaling delivery networks, including personnel from private companies who may wish to contribute to USPS’s public service mission.²⁴⁸ And it should strive wherever possible to design and implement using in-house expertise, rather than outsourcing to consultants, who would no doubt seek highly compensated contracts but often provide service of questionable value.²⁴⁹

The second concerns procurement: Opening a drone delivery network will require either the construction of thousands of drones by publicly operated manufacturers, or else the procurement of these drones from private companies. In either situation, large procurement contracts will be required—either for component parts, like batteries or electronic chips, or for fully-built drones. Given the trends toward concentration already evident within the network model of drone delivery,²⁵⁰ USPS may find it challenging to procure innovative technology over the long term at fair prices and terms. Procurement officials should consider conditioning contracts on interoperability rules, which could apply to drone manufacturers as well as network operators. These and potentially other conditions may help ensure that the government gets a good deal; provides consistent, quality service; and promotes equal access for other businesses.²⁵¹

However, a public drone delivery network will also have to address issues that apply to private drone delivery services. While it might not pose the same risks of market power abuse (due to its ability as a public institution to price at cost and, more broadly, its orientation towards public good rather than profit-seeking and/or shareholder wealth maximization), it should be sensitive to other risks—including congestion and nuisance as well as surveillance, labor, and environmental risks.²⁵² Thus, public drone delivery should be an option of last-mile delivery only when local communities opt in to it, no less or more than in the case of private drone delivery services.

D. Report on Intermodal Effects

Drone delivery can be thought of as forming one component of a larger intermodal system of last-mile delivery, which also includes postal delivery, trucking, and mobile delivery platforms. Conceiving of drone delivery in this way can help policymakers cognize the disruptive effects that introducing drone delivery may have on both businesses and workers engaged in these other modes of delivery.

To consider these effects, federal, state, or local policymakers could create an independent commission of experts on last-mile delivery and charge it with writing a report on how different modes of last-mile delivery interact and what effect the introduction of drone delivery might have across this intermodal system. At the federal level, the commission could make policy recommendations to the Surface Transportation Board, the Department of Labor, the U.S. Postal Service, and other relevant agencies, to promote innovation while mitigating drone delivery’s disruptive effects on labor, the environment, and our transportation system. One such recommendation could be to require localities to calibrate the number of drones or deliveries it permits to maintain the viability of less disruptive delivery methods, thereby promoting innovation and efficiency while mitigating the drawbacks of technological disruption for existing businesses and their workers. If not by a publicly appointed commission, the intermodal effects of upscaled drone delivery should be the subject of further study by transportation experts.

Conclusion

Further along in its technological life cycle, drone delivery could prove to be an innovative and efficient method of delivering packages to consumers. But it is critical that policymakers do not overlook their obligations to promote public interest and a healthy, fair system of last-mile delivery because of the attractiveness of such a possibility. The public interest, in the case of drone delivery, is not limited to ensuring safety or realizing the potential benefits of its expansion. It also includes problems posed by the drone delivery business model that policymakers should address. Should they be left unaddressed, they may hinder drone delivery’s acceptance and threaten the long-term viability of the industry itself—not to mention subjecting American communities to the downsides of unwanted technological interventions. Luckily, there are tools that policymakers can use to regulate drone delivery in the public interest. It is critical that they explore these options now, at this turning point in the future of aviation technology.

* J.D. Candidate, Harvard Law School, 2028; Legal Fellow, Vanderbilt Policy Accelerator for Political Economy and Regulation. The author thanks Alex Blenkinsopp, Maria Castillo, Ben Dinovelli, Joel Dodge, Dan Geldon, Tobin Krieg, Grace May, Morgan Ricks, Ganesh Sitaraman, and Elizabeth Wilkins for helpful comments and conversations; Logan A’Hearn, Hala Bazzaz, Michael Bennett, Ariel Goldfine, and Gabrielle Sokan for research assistance; and Mateusz Blaszczyk at the Journal for his careful editing. An earlier version of this Article was published as Ramsay Eyre, Vand. Pol’y Accelerator, Regulating Drone Delivery (2024).