What is a transponder?
A transponder is a device installed in a manned aircraft that responds with a code when it receives a radio request from air traffic control’s systems. This code is used to help air traffic control identify what aircraft are nearby and where they are.
Transponders have modes that do slightly different things. In some airspaces specific modes may be required. Not all transponders are capable of all modes.
In Mode A the transponder simply provides the code that it is configured to provide.
In Mode C the transponder provides the code plus the altitude. This is done by pairing the transponder with altitude reporting equipment.
Mode S provides more information over enhanced methods. Mode S also has the ability to integrate with the ADS-B systems on the aircraft.
More on Mode S here: https://www.skybrary.aero/index.php/Mode_S
When preparing to depart, a manned aircraft will contact ATC. ATC will provide a “squawk” code. The pilot will enter the code into the transponder and put it on standby.
Right before taking off the pilot will change the transponder to “ALT” to enable the transponder.
ATC’s systems will interrogate the transponder by radio and the transponder will report back with the code and the altitude (mode C).
How does this apply to RPAS?
Besides being an exam question in the Transport Canada Advanced permit exam, the chance that you are going to have to worry about transponders is pretty slim.
Transponders small enough for drones are available, but if you install one and check in with ATC for clearance you are going to confuse people!
While the rules say that you are not allowed to fly your drone in transponder airspace without a transponder (mode C), the real intention is in the following sub-paragraphs where it says that air traffic control (ATC) is able to give you permission under the right circumstances.
901.46 Transponder and Automatic Pressure-altitude Reporting Equipment
(1) Subject to subsection (2), no pilot shall operate a remotely piloted aircraft system if the aircraft is in the transponder airspace referred to in section 601.03 unless the aircraft is equipped with a transponder and automatic pressure-altitude reporting equipment.
(2) An air traffic control unit may authorize a pilot to operate a remotely piloted aircraft that is not equipped in accordance with subsection (1) within the airspace referred to in section 601.03 if
(a) the air traffic control unit provides an air traffic control service in respect of that airspace;
(b) the pilot made a request to the air traffic control unit to operate the aircraft within that airspace before the aircraft entered the airspace; and
(c) aviation safety is not likely to be affected.