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Susan Smith-Harmon

Susan Smith-Harmon

Amazon's delivery drones: An idea that may not fly

Tuesday, 03 December 2013 02:47 Published in National News

   NEW YORK (AP) — Jeff Bezos' idea to let self-guided drones deliver packages may be too futuristic for Washington to handle.

   The Amazon CEO is working on a way to use the small aircraft to get parcels to customers in 30 minutes or less. While flight technology makes it feasible, U.S. law and society's attitude toward drones haven't caught up with Bezos' vision.

   Amazon.com Inc. says it's working on the so-called Prime Air unmanned aircraft project but it will take years to advance the technology and for the Federal Aviation Administration to create the necessary rules and regulations.

   The project was first reported by CBS' "60 Minutes" Sunday night, hours before millions of shoppers turned to their computers to hunt Cyber Monday bargains.

   Amazon CEO Jeff Bezos said in the interview that while his octocopters look like something out of science fiction, there's no reason they can't be used as delivery vehicles.

   Bezos said the drones can carry packages that weigh up to five pounds, which covers about 86 percent of the items Amazon delivers. The drones the company is testing have a range of about 10 miles, which Bezos noted could cover a significant portion of the population in urban areas.

   Bezos told "60 Minutes" the project could become a working service in four or five years.

   Unlike the drones used by the military, Bezos' proposed flying machines won't need humans to control them remotely. Amazon's drones would receive a set of GPS coordinates and automatically fly to them, presumably avoiding buildings, power lines and other obstacles.

   Delivery drones raise a host of concerns, from air traffic safety to homeland security and privacy. There are technological and legal obstacles, too —similar to Google's experimental driverless car. How do you design a machine that safely navigates the roads or skies without hitting anything? And, if an accident occurs, who's legally liable?

   Delivering packages by drone might be impossible in a city like Washington D.C. which has many no-fly zones.

   But technology entrepreneur and futurist Ray Kurzweil notes that "technology has always been a double edged sword."

   "Fire kept us warm and cooked our food but also was used to burn down our villages," says Kurzweil.

   "It's fascinating as an idea and probably very hard to execute," says Tim Bajarin, an analyst with Creative Strategies who sees Bezos as an unconventional thinker. "If he could really deliver something you order within 30 minutes, he would rewrite the rules of online retail."

   Amazon has already done that once. In 1995, with investments from family and friends, Bezos began operating Amazon as an online bookseller out of a Seattle garage. Over nearly two decades, Amazon grew to become the world's largest online retailer, selling everything from shoes to groceries to diapers and power tools.

   Amazon spends heavily on growing its business, improving order fulfillment and expanding into new areas. Those investments have come at the expense of consistent profitability, but investors have been largely forgiving, focusing on the company's long-term promise and double-digit revenue growth.

   The company spent almost $2.9 billion in shipping last year, accounting for 4.7 percent of its net sales.

   There is no prohibition on flying drones for recreational use, but since 2007, the Federal Aviation Administration has said they can't be used for commercial purposes.

   "The technology has moved forward faster than the law has kept pace," says Brendan Schulman, special counsel at the law firm Kramer Levin Naftalis & Frankel LLP.

   Schulman is currently challenging that regulation before a federal administrative law judge on behalf of a client who was using a radio-controlled aircraft to shoot video for an advertising agency. Autonomous flights like Amazon is proposing, without somebody at the controls, are also prohibited.

   The FAA is slowly moving forward with guidelines on commercial drone use. Last year, Congress directed the agency to grant drones access to U.S. skies by September 2015. But the agency already has missed several key deadlines and said the process would take longer than Congress expected.

   The FAA plans to propose rules next year that could allow limited use of drones weighing up to 55 pounds. But those rules are expected to include major restrictions on where drones can fly, posing significant limits on what Amazon could do. Many of the commercial advances in drone use have come out of Europe, Australia, and Japan. In Australia, for instance, an electric company is using drones to check on remote power lines.

   "The delay has really been to the disadvantage of companies here," Schulman says. "Generally, the government wants to promote the advancement of science and technology. In this case, the government has done exactly the opposite and thwarted the ability of small, startup companies to develop commercial applications for this revolutionary technology."

   Amazon isn't the only company awaiting guidelines. A Domino's franchise in the United Kingdom released a test flight video in June of the "DomiCopter," a drone used to deliver hot pizza.

   "We think it's cool that places like Amazon are exploring the concept," says Domino's spokesman Chris Brandon. "We'd be surprised if the FAA ever let this fly in the States — but we will surely stay tuned to see where this all goes."

   Matt Waite, a journalism professor at the University of Nebraska and head of the university's Drone Journalism Lab, says a bigger problem for Amazon is that the rules are not expected to allow autonomous drones, so a remote pilot would have to be in command of the aircraft at all times.

   Indeed, the FAA said Monday that it is moving forward with "regulations and standards for the safe integration of remote piloted (drones) to meet increased demand." The agency reiterated that "autonomous (drone) operation is not currently allowed in the United States."

   Given the slow pace at which the FAA typically approves regulations, Waite calls Bezos' prediction of four or five years for approval unrealistic.

   Safety concerns could be the real obstacle in delaying drones for widespread commercial use.

   "You're putting a device with eight rapidly spinning blades into areas where people are assumed to be," Waite says. "The threat to people on the ground is significant."

   It's not hard to imagine that the world's biggest online retailer has some significant lobbying muscle and might be able to persuade the FAA to alter the rules.

   Amazon spokeswoman Mary Osako says the company has been in contact with the FAA "as they are actively working on necessary regulation."

   One of the biggest promises for civilian drone use is in agriculture because of the industry's largely unpopulated, wide open spaces. Delivering Amazon packages in midtown Manhattan will be much trickier. But the savings of such a delivery system only come in large, urban areas.

   Besides regulatory approval, Amazon's biggest challenge will be to develop a collision avoidance system, says Darryl Jenkins, a consultant who gave up on the commercial airline industry and now focuses on drones.

   Who is to blame, Jenkins asked, if the drone hits a bird, crashes into a building? Who is going to insure the deliveries?

   There are also technical questions. Who will recharge the drone batteries? How many deliveries can the machines make before needing service?

   "Jeff Bezos might be the single person in the universe who could make something like this happen," Jenkins says. "For what it worth, this is a guy who's totally changed retailing."

   If Amazon gets its way, others might follow.

   United Parcel Service Co. executives heard a presentation from a drone vendor earlier this year, says Alan Gershenhorn, UPS' chief sales, marketing and strategy officer.

   "Commercial use of drones is an interesting technology, and we're certainly going to continue to evaluate it," Gershenhorn says.

   The U.S. Postal Service and FedEx wouldn't speculate about using drones for delivery.

Nonbanks servicing student loans come under agency

Tuesday, 03 December 2013 02:35 Published in National News

   WASHINGTON (AP) — The federal consumer finance watchdog is expanding its oversight to Sallie Mae and other companies that collect student loan payments.

   A rule issued Tuesday by the Consumer Financial Protection Bureau extends the agency's supervision to nonbank companies that manage large volumes of student loans on behalf of lenders.

   The CFPB already oversees banks that service student loans, but it says most student loans are serviced by nonbank companies. It says the scrutiny is needed to ensure servicers comply with consumer laws at a time when more people are falling behind on their student loan payments.

   Nonbank loan servicers like Sallie Mae manage borrowers' accounts and answer their questions. Borrowers have complained that the companies lose paperwork or fail to credit payments.

   Sallie Mae also is the biggest U.S. student lender.

   Martha Holler, a spokeswoman for Sallie Mae, said that as the largest U.S. servicer of student loans, "We have been engaged with the CFPB in the review of our lending, servicing and collections operations."

   In addition to Sallie Mae, formally known as SLM Corp., other nonbank companies that service student loans include American Education Services, Nelnet Inc. and ACS Education Services, which is owned by Xerox Corp. The seven largest servicers cover a combined total of about 49 million borrower accounts, representing most of the student loan servicing market, according to the CFPB. The agency said it expects all seven companies will come under its supervision.

   Outstanding student debt in the U.S. totals about $1.2 trillion, according to the CFPB, and an estimated 7 million student loan borrowers are currently in default.

   Under the new rule, which takes effect March 1, any nonbank student loan servicer that handles more than 1 million borrower accounts will be subject to the agency's oversight. That means the agency will monitor the companies and examine their internal procedures, data and other information.

   While borrowers usually can choose their student lender, they normally have no choice over which company services the loan.

   "Student loan borrowers should be able to rest assured that when they make a payment toward their loans, the company that takes their money is playing by the rules," CFPB Director Richard Cordray said in a statement. "This rule brings new oversight to those large student loan servicers that touch tens of millions of borrowers."

   The agency is the primary federal supervisor for a range of industries, including payday loan companies, student lenders, mortgage companies, credit bureaus and debt collectors. It was established by the 2010 financial overhaul law enacted in response to the crisis that started in 2008.

Slay to testify on Boeing plant tax incentives

Tuesday, 03 December 2013 02:25 Published in Local News

   St. Louis Mayor Francis Slay will be in Jefferson City Tuesday to testify in favor of tax breaks aimed at luring Boeing's 777X plant to St. Louis.  

   Yesterday, a bill was introduced that would expand state tax credit programs by $150 million for aerospace companies that create at least 2,000 jobs in Missouri.  

   Slay will make the case to a Senate subcommittee that landing the Boeing plant would be good for the St. Louis region and the whole state.  

   Governor Jay Nixon says Missouri is facing a December 10th deadline to submit an offer to Boeing.  

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