Even when ANSPs have an appetite for emerging ATM technologies that offer performance and/or efficiency benefits, the odds are stacked against these innovations truly disrupting the status quo. Ivan Baruta from aviation consultants Helios examines the barriers to disruptive innovation and suggests some ways in which they might be overcome, taking space-based ADS-B as a case in point.
In ATM, as in any industry, technology can become institutionalised. This is when users take it for granted, are comfortable with it, and employ its features effectively in their routine activities without requiring significant oversight. In this situation, technology can act as one of the pressures for stabilising the industry. For decades, radars were considered the only technological means of surveying and controlling air traffic, and therefore none of the main stakeholders pushed ahead to develop other innovative means of surveillance. If radar technology had not been taken for granted and seen as 'the only way to go', then innovation in the form of ADS-B and potentially other technologies might have perhaps have come sooner. Thus, the institutionalisation of a technology can act as a barrier to change.
On the other hand, when new technology comes on board, it can disrupt the status quo and force an institutional change across the whole industry. Consider virtual ATC and remote towers, where new technologies have prompted a radical rethink about how to deliver core and contingency air navigation services for a range of airports, but where speed of implementation remains slow. Or drones, where new entrants to the industry and rapid uptake have prompted demands for new traffic management systems, but where there are still no final answers as to how to solve issues surrounding concepts of safety or certification. In each of these cases, we see new technologies acting as 'agents' for change, but at the same time a range of barriers slowing the pace of the change.
The problem for ANSPs is that these barriers to change are more prominent in the ATM industry (compared to some other liberalised industries) and the reason is down to the high level of institutionalisation of the ATM industry itself.
To explore this point, let's look at another example of a potentially disruptive innovation waiting in the wings – space-based ADS-B. ANSPs traditionally operate their own air traffic management infrastructure. However, pursuing the implementation of a state-based terrestrial ATM infrastructure has so far resulted in only 10% of the Earth's surface being sufficiently covered to enable aircraft surveillance. Space-based ADS-B presents a different model of the provision of surveillance data for ANSPs, one where they would subscribe to a global service owned and operated by an external provider. This is an attractive alternative, especially in oceanic and low-density areas where ground infrastructure is currently lacking. Besides its surveillance function, the technology is also viewed by ICAO as one of the best means of constant global aircraft tracking. Despite these endorsements, there are a range of barriers that could nevertheless slow or prevent its widespread implementation.
Regulatory bodies and policy makers can stop or significantly slow the entry and subsequent institutionalisation of any new and potentially disruptive technology or innovation. Regulators in the ATM industry often struggle to respond quickly enough to the pace of change brought by the latest technologies. This is caused perhaps by the bureaucratic nature of their role as government entities, often by the lack of resources, but also because of the safety criticality of the ANS provision and supranational nature of aviation regulation, together with a desire for interoperability. Hence, even though some ANSPs or other stakeholders may be ready to embrace a change, current ATM-related regulations may offer them limited flexibility in terms of how they provide their services. Conversely, where prescription is not the problem, lack of clarity may be the case. For example, with space-based ADS-B, lack of clarity surrounding liability could result in significant cost requirements on the side of the space-based ADS-B service provider. This fact is exacerbated by the inconsistent legal frameworks in aviation applied across the world. The risk therefore is that all regulators would have to buy into this new scheme of delivering safety-critical data prior to the service provider being able to start offering the service.
The nature of space-based ADS-B as a shared service, provided on a subscription basis where ANSPs do not own any infrastructure, is currently not favoured by the ATM regulatory framework, under which ANSPs are not yet ready to give away their assets and national ATM surveillance infrastructure. The regulatory mechanism covering the financing of ANSPs does not provide incentives for ANSPs to make such a transformation. For instance, the returns of European ANSPs are based on capital assets and they are calculated as the Weighted Average Cost of Capital (WACC) return in percentage multiplied by the Regulatory Asset Base. Hence, the basis for earning a return may need to change first, if the subscription services that create operating rather than capital costs are to become a significant part of ANSPs' total costs. Otherwise, ANSPs may not be incentivised enough to switch to these services, because their rates of return would diminish.
Another key barrier to change is the current institutional setup of the ATM industry. Most ANSPs are still public entities and even though many of them are now labelled as 'corporatised', there is a wide variation in the actual level and definition of their corporatisation. At one end of the spectrum, non-corporatised government ANSPs often report to several government agencies, which forces them to focus on conforming to the needs of various political oversight bodies rather than their customers. Thus, as Robert Poole says, government ANSPs may be "slow to embrace promising innovations" and "particularly resistant to high-potential innovations that would disrupt their own institutional status quo" (Poole Jr., R. W., 2014. Organization and Innovation in Air Traffic Control, Los Angeles: The Reason Foundation.). This is supported by several case studies, suggesting that commercialised ANSPs usually implement new technologies and procedures more quickly than government ANSPs. So, it is perhaps not surprising that government ANSPs, or those corporatised ANSPs where the 'government' aspect is still prevailing, have yet to embrace space-based ADS-B technology, unlike some of their commercialised counterparts, who are already early subscribers to it, and who all happen to be the global leaders in the commercialisation of the institutional setup of ANS provision.
Access to finance
Access to finance is another constraint to disruptive innovation, particularly for some government ANSPs that are generally dependent on an allocated government budget. However, even among the commercialised ANSPs, methods of financing vary considerably and many are subject to heavy State involvement. On the other hand, there are several examples of non-commercialised ANSPs that have achieved the same level of budgetary independence as their commercialised counterparts, without having to leave the umbrella of their respective governments. So, it might be argued that greater levels of independence could happen in the ATM industry regardless of the underlying institutional structure of ANSPs. And this financial independence seems to be necessary for any ANSP to react to disruptive innovations more flexibly than is the case today.
One of the main barriers to implementing emerging shared regional or global services, including space-based ADS-B, is the current structure of the ATM industry that is based on national ATM service provision. The ANSPs are considered by many to be natural national monopolies, at least for the provision of en-route services. The impact of this is to a large extent mitigated by international regulations that require ANSPs to work towards similar performance standards and provide similar quality of ATM service. However, technical and operational regulations cannot solve the political pressures exerted by wider stakeholders, namely governments that feel the need to safeguard all core aspects of the ATM service provision as a matter of national security and sovereignty, or in response to public sentiment. Hence, any service that would require an ANSP to give away part of or all its core ATM services in favour of another ANSP or a third-party provider is currently difficult to implement.
ANSPs have been delivering their services using technologies, such as ground-based aircraft surveillance systems since 1947, and are likely to resist any new technologies as long as the current technological means are still acceptable from the safety and operational point of view. So, while technology may act as a catalyst for institutional change, it can also become one of the forces stopping the change. This might occur when a new and potentially disrupting technology is inferior, or insufficiently mature in certain aspects, compared to the incumbent technologies already approved by regulators and generally accepted by stakeholders. For space-based ADS-B the main technological barriers against its global implementation today arise from perceived performance challenges in high-demand continental areas - which are yet to be thoroughly tested, and the existing ATM procedures - that were designed around the legacy ground-based infrastructure. It means that new airspace concepts will be needed or the technology's performance will need to further evolve before space-based ADS-B can be implemented also for high-density continental airspace.
The complex structure of the ATM industry and its highly institutionalised setup often prevents ANSPs from embracing innovation at a pace that would be expected from ATM's high-technology operational environment, and that is indeed required by ANSPs' customers - the airlines. These operate mostly in an open competitive market, while ANSPs more often enjoy national monopolistic positions. This kind of market disturbance creates pressures on regulators and airlines to change the current institutional structure of ANSPs. As a result, ANSPs already have to face various market forces that were not present in their segment in the past, such as competition for the market in tower services in some States, leading to greater industry rivalry and competitiveness.
Disruptive technologies such as space-based ADS-B (and remote/virtual towers and drones) may act as a catalyst for change, prompting more commercialised business models for ANSPs. However other factors may need to be addressed first, if the industry is to transform.
A more flexible regulatory framework that defines technical protocols for the provision of the ATM service rather than static standards, together with a change in the incentivisation of the ANSPs facilitating the move from asset-based to subscription-based services, would encourage innovation in the form of space-based ADS-B.
Indeed, if regulators and policy makers were to promote higher levels of independence and flexibility amongst national ANSPs, they would enable these long-established stakeholders in the market to become 'institutional entrepreneurs'. Experiences with commercialised ANSPs have shown that taking these organisations away from direct government control allows them to raise required capital and innovate more easily. Historically, self-funded commercialised ANSPs have been able to materialise their investments and innovations with almost no need for government funds. So, through commercialisation, ANSPs can gain independence and separate themselves from various political pressures, be more sensitive to customer needs, and agile in reaching a decision and implementing change.
Finally, fostering competition among ANSPs would create market dynamics, enabling the exits of some incumbent organisations and entries of newcomers. Competition in, or at least for, the market (where feasible and beneficial), could prove to be the key that unlocks more widespread innovation in the ATM industry.
About the author: Ivan Baruta joined Helios in 2010 and has been based in its Middle East office since 2013. He supports clients with operational data analysis, modelling, development of business cases and market studies, safety studies, procurement support, technical studies and project management. In 2016 he completed his MBA at Warwick Business School, taking disruptive innovation and Space-based ADS-B as the subject for his final year dissertation. This article is based on the original research conducted as part of that thesis.
 ICAO, Global Aeronautical Distress & Safety System (GADSS) v5.0, Montreal, 2015
 Abeyratne, Ruwantissa I.R., Revenue and Investment Management of Privatized Airports and Air Navigation Services – A Regulatory Perspective, Journal of Air Transport Management, vol. 7, issue 4, 2001
Neiva, Rui, Economic Efficiency of Air Navigation Service Providers: An Assessment in Europe, 2014
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