Drones, once known as weapons of war, are undergoing a dramatic makeover as a hot new business tool in the sky. But, as with unmanned military craft, domestic drones are prompting concerns over safety and privacy.

No agency tracks how many drones are now buzzing overhead. But it’s likely hundreds a day hit the skies nationally on commercial missions, equipped with video cameras and launched by entrepreneurs looking for faster, cheaper and easier ways to provide services.

Lightweight drones, some hardly bigger than a Frisbee, shoot dramatic bird’s-eye videos of ski races and outdoor weddings. They provide aerial footage for car commercials and real estate promotions.

The new breed of small domestic drones – known more formally as “unmanned aviation systems” or “remotely piloted aircraft” – can sell for $1,000 to tens of thousands of dollars, depending on size and sophistication. Users say operating the remote-controlled, spider-like craft costs far less than hiring a helicopter or plane, and allows users to fly into tight spaces, including indoors.

“Drones are the future of aviation,” said Patrick Egan, a Sacramento, Calif.-based consultant and an advocate for unmanned commercial craft. “It is already here. They are around you. And they are flying and doing jobs; you just weren’t aware of them.”

There is a hitch, though: Federal policy prohibits the commercial use of drones. The Federal Aviation Administration requires that commercial flights use certified aircraft and licensed pilots. Low-altitude use of drones by hobbyists is allowed, as are some research projects that use the technology.

That commercial ban appears to be only temporary. Congress has given the FAA until September 2015 to write an initial set of rules on how to safely allow unmanned, commercial aircraft into U.S. airspace.

FINE AGAINST OPERATOR DISMISSED

In a likely setback for the FAA, a judge overturned its first fine against a drone operator Friday. Judge Patrick Geraghty of the National Transportation Safety Board, which decides appeals of enforcement actions by the FAA, dismissed yesterday the agency’s $10,000 fine against Raphael Pirker for reckless flying. The FAA has no authority over small unmanned aircraft, Geraghty ruled.

“This has very significant implications for companies that have been eager to proceed with commercial applications for UAS technologies,” Brendan Schulman, Pirker’s lawyer, said in an interview.

At the time of Pirker’s flight to shoot a promotional video over the University of Virginia in Charlottesville on Oct. 17, 2011, “there was no enforceable FAA rule” on the type of model aircraft he used, Geraghty said in his decision.

The FAA argued that Pirker’s flight, with a plane made with a foam wing and weighing less than 5 pounds, was “careless and reckless,” putting it under the agency’s authority to enforce flying safety.

Pirker flew under bridges, near statues and over pedestrians, as documented on video he shot that day.

The decision counters the FAA’s assertion, most recently made in an update posted on its website Feb. 26, that there are “no shades of gray in FAA regulations. Anyone who wants to fly an aircraft – manned or unmanned – in U.S. airspace needs some level of FAA approval.”

EVOLUTION OUTPACES REGULATIONS

As with other new technology, the evolution of drones has outpaced government regulations and sparked debate over what controls are appropriate. Advocates describe them as benign worker bees that could generate billions of dollars for the U.S. economy. Some advocates argue against any government restrictions, contending regulations could stifle a revolutionary industry. Others say the technology poses grave safety risks and personal privacy issues that must be addressed.

Large corporations and law enforcement agencies appear to be sitting on the sidelines while government sorts through the questions. But a growing assortment of smaller companies is eagerly embracing unmanned aircraft as a business tool, lured by the creative possibilities. Some business owners are pressing ahead, apparently unaware of the FAA prohibition. Others are proceeding on the assumption the federal government won’t try to clamp down on all drone users.

Roseville Automall in Roseville, Calif., recently used a drone to shoot video for what its advertising consultant described as a “visually appealing, unique and memorable” TV spot, designed to set the mall apart from competitors. Bruce Cambern of Skyhawk Communications, the auto mall’s advertising firm, said he wasn’t clear on what exactly the FAA might allow, but that he believes the agency should not be concerned about the use of a small drone at low heights and low speeds over private property.

“We don’t go up very high at all, barely past rooftop,” he said.

Christopher Brown of Next New Homes Group, a home sales and marketing company based in Roseville, called drones “a game-changer” for his industry. His company uses a small six-rotor copter to take videos and photos for housing developers to use in marketing materials.

“We used to have to hire a helicopter or airplane and hope the weather is perfect on the day we scheduled three weeks in advance, and hope we get the right shot from 1,000 feet,” he said. “Now we can do it from 100 feet with way more angles for one-tenth the cost.”

One Sacramento-area wedding photographer, who asked not to be named for fear of getting a call from the FAA, has begun offering drone aerials as part of his video package, mainly for outdoor weddings. At a recent wedding, he said his drone “drew more attention than the wedding cake. The guys will surround it.” He said he expects drones to be a wedding video staple within 10 years.

Sacramento videographer Justin Majeczky employs a home-built drone to take bird’s-eye videos of custom homes, showing off the surrounding property and views for potential buyers – and has his fingers crossed the FAA will not shut him down. He recently shot swooping aerials of a $20 million Tahoe lakeside mansion, giving viewers a sense of what the home and its dock look like from the lake.

Despite the enthusiasm, federal officials, pilots and others say safety is a major concern, and that regulations are needed before thousands of drones take to the skies in urban areas in the next few years. While many drones weigh no more than 3 pounds, others weigh a hefty 50 pounds or more, and can fly high enough to cross paths with commercial aircraft.

A drone operator in New York was killed just a few months ago when he was hit in the head by his drone’s rotors. Last summer, a drone crashed into the grandstands at a Virginia sporting event, causing minor injuries to three spectators. In another incident, captured on a widely circulated YouTube video, a drone careened into a bride and groom during a pre-wedding shoot.

QUESTIONS REMAIN

Officials say the FAA needs to deal with questions of how remote aircraft operators will be able to detect and avoid other drones, and how to assure a drone can return safely to home base on its own if an operator loses contact.

Advocates contend that drones won’t be as dangerous as many people fear, if piloted by people who have proper training and skills. They point out that many domestic drones are merely the latest generation of the remote-control planes that hobbyists have flown for decades.

The FAA recently issued a statement saying it is taking its task seriously, and that it will proceed in “incremental” steps, starting first with proposals later this year for commercial use of unmanned aircraft under 55 pounds.

“Developing all the rules and standards we need is a very complex task, and we want to make sure we get it right the first time,” the FAA stated. “We want to strike the right balance of requirements for (unmanned aviation systems) to help foster growth in an emerging industry with a wide range of potential uses, but also keep all airspace users and people on the ground safe.”

The Air Line Pilots Association International, which represents commercial airline pilots, has been working with the FAA. Its vice president, Sean Cassidy, says his group is pushing to require that anyone who flies a drone commercially be required to have training and be certified as a drone operator. Hobby users of drones are not currently required to have training.

“They are going to occupy the same airspace as us; there has to be some system by which they are certified, so they understand the performance characteristics (of their aircraft) and have a sense of the seriousness of consequences if something goes wrong,” Cassidy said.

In states where police and sheriffs’ departments have expressed interest in using drones, privacy issues have emerged as a major debate point. The American Civil Liberties Union and others say they fear police could deploy drones for spying and illegal searches, including using a drone to hover in someone’s backyard or peer in the windows.

“The potential for abuse is ripe,” said ACLU attorney Linda Lye. “They can be tiny, the size of a hummingbird.”

In response to such concerns, the California Legislature is reviewing several bills that would restrict how law enforcement agencies can use unmanned aircraft. Both the Sacramento police and county sheriff’s departments declined to say whether they would be interested in deploying drones. They say they’re waiting for firm regulations.

Some entrepreneurs, who see money-making potential, are less patient, and believe the FAA is dragging its feet.

James Curtis, who recently flew his multi-rotor drone in downtown Sacramento for promotional videos and wants to do more work, said he feels hamstrung waiting for the FAA to give its OK, and is frustrated when he sees drones used openly elsewhere, such as during TV coverage of the Olympics.

“I’m good to go,” he said. “I have my gear ready. I know a lot of guys that want to start.”

Bloomberg News contributed to this report.