How to Share the “Trillion-Dollar Pie” of the Low-Altitude Economy? Don’t Let “Security” Block the Path to Innovation
Hello everyone, I’m your financial journalist. Lately, the term “low-altitude economy” has become incredibly popular. Scenarios like drone delivery services and eVTOL (electric vertical takeoff and landing) taxis, which used to only exist in science fiction movies, are becoming a reality. The government has identified this as a new industry worth trillions of dollars, and local governments are racing to build landing sites and designate flight routes.
However, behind this boom, there is a crucial and often overlooked issue: how should airspace resources be allocated to companies?
The core argument of the in-depth analysis article we’re discussing today is quite sharp: Currently, many places are falling into the trap of “pan-securityism” when granting licenses for the low-altitude economy. Under the guise of safety, they are actually keeping private enterprises out, leading to a lack of competition and low efficiency in the market.
To make this more understandable, I’ve broken down this technical article into five easy-to-understand points, showing you the institutional struggles behind this trillion-dollar market.
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1. What is the low-altitude airspace, and why can’t we fly there just anywhere?
First, let’s clarify what the low-altitude economy involves.
1. It’s the “land in the sky”
The low-altitude economy mainly refers to the airspace below 1,000 meters (or even 3,000 meters). You can think of it as the “land in the sky.”
- Legally: This “land” belongs to the state and is not private property. If you want to fly a plane or a drone in this area, you must get permission from the state.
- Economically: It’s similar to “radio waves” or “highways.” At first, the sky is wide, and everyone can fly without interference (this is called non-exclusivity). But as more aircraft are added, it becomes similar to a congested highway during rush hour, with the risk of collisions.
2. Why can’t we rely solely on the market or the government?
- Relying solely on the market: Companies might fly recklessly to compete for airspace, leading to safety accidents or creating monopolies with exorbitant prices.
- Relying solely on the government: The government managing everything would be inefficient and hinder innovation, making it difficult to develop high-tech industries.
3. The solution: Franchising
The best approach is franchising. Imagine the government as the landlord and the airspace as the property. Instead of operating it itself, the government leases it to the most capable and reliable companies through bidding.
- The rights of the franchisee: They have exclusive use of the airspace for a certain period to make a profit.
- The obligations of the franchisee: They must ensure safety, provide quality services, and not raise prices arbitrarily.
The key logic: This is a model where the government sets the rules, and the companies operate under those rules. The question is: How are these franchisees chosen—based on connections, status, or ability?
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2. The awkward reality: Using “safety” as a pretext for state-owned enterprises to monopolize
The article mentions a typical example: The cancellation of the low-altitude economy franchise bidding in Pingyin County, Jinan, in 2024.
What happened?
The local government intended to hold a bidding process but, fearing “airspace safety,” decided to grant the rights directly to a state-owned enterprise. This move was questioned for potentially excluding and restricting competition, leading to the cancellation of the bidding.
This is not unique to Jinan; it’s a common phenomenon: Many governments believe that “safety is more important than anything, and state-owned enterprises are the safest choice.”
- The logical mistake: They think that state-owned enterprises are more reliable and obedient, thus safer.
- The actual consequences: Although the procedure may comply with the Bidding Law, it violates the Anti-Monopoly Law’s principles of fair competition.
- Effect on private enterprises: Many private companies are more advanced in drone technology, operations, and cost control, but they are disqualified from bidding or are unfairly penalized in the evaluation process.
In simple terms: It’s like allowing only uniformed official drivers to operate taxis, excluding those private drivers who are more skilled, provide better service, and charge lower prices, harming both customers and the industry.
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3. The biggest misconception: Opposing “safety” to “competition”
This is the article’s main critique: The mindset of “pan-securityism” is a major flaw.
Many people think that competition leads to chaos and accidents, so they prefer monopolies and regulation for safety.
Economists and lawyers disagree: Competition is the best long-term guarantee for safety.
Why does competition enhance safety?
1. It drives technological improvement: Competing companies will invest in safer systems, better batteries, and smarter algorithms.
2. It promotes survival of the fittest: Only the best companies, selected through competition, have the necessary safety measures and resources.
3. It prevents complacency: A monopolistic company has no incentive to improve services or reduce prices; it may focus on maintaining its monopoly.
Conclusion: Using safety as a shield to avoid competition leads to a stagnant market and halted innovation.
The correct approach: Through fair competition, the best companies are selected, and the pressure of competition forces them to invest in safety.
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4. Institutional gaps: Only entry, no exit
In low-altitude economy demonstration zones like Shenzhen, Hefei, and Hangzhou, projects are advancing quickly, but there’s a major flaw in the system design: “One-time authorization, lifetime use.”
The current situation:**
- Enter, but cannot exit: Once the government grants a license, there’s often no clear exit mechanism.
- Lack of sunset clauses: Franchises should have a limited term, with regular re-bidding. Instead, many agreements are permanent.
- Lack of regulation: The government grants the rights but lacks oversight. If a company deteriorates in service or becomes monopolistic, the government may not be able to revoke the license.
The consequences:**
1. Inertia: Companies become complacent and stop innovating.
2. Stalled innovation: New, more efficient private companies are prevented from entering the market.
3. Waste of resources: Scarce airspace is wasted in inefficient hands.
In simple terms: It’s like giving a restaurant an exclusive license for 10 years. If it performs well in the first two years but becomes poor later, no one can do anything about it, and customers are stuck with poor service.
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5. How to change this? Implementing legal controls and incentives
The article proposes specific reforms, focusing on full-life-cycle regulation. In other words, treat franchise rights as a dynamic process, not a static reward.
1. Preliminary review: Assess the impact on market competition before granting licenses.
- Consider the benefits: How much will consumers save? What innovations will companies bring? Will it create monopolies?
- The goal: Translate abstract safety concepts into measurable social benefits.
2. Dynamic regulation: Set a clear expiration date and performance metrics for franchises.
- Sunset clauses: Franchises should have a limited term, with regular re-bidding.
- Performance requirements: Specify safety targets, price limits, and R&D investments.
- Exit mechanisms: The government should have the power to revoke licenses if metrics are not met.
3. Return to market choice: Make franchise rights a tool for innovation, not just protection for specific companies.
The core message: For the low-altitude economy to thrive, we need to establish clear rules and ensure fair competition. Only by doing so can we create a vibrant, efficient industry that truly benefits everyone.
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In summary, the key takeaway from this analysis is that the low-altitude economy needs more than just infrastructure; it requires proper institutional design. The biggest risk is not a lack of technology but rigid systems. If we continue to prioritize safety at the expense of competition, the industry will remain closed, inefficient, and unable to reach its potential.
The future direction is clear: Safety is essential, but competition is the driving force. By implementing fair competition and dynamic regulation, we can ensure that the best, safest, and most efficient companies have access to airspace, promoting continuous innovation and benefiting the public.