E-outfits go the distance

February 7, 2003

After faltering in the dotcom downturn, e-learning providers are working hard to recover ground. As Stephen Phillips reports from San Francisco, many institutions are now focusing on professional training for distance learners

Three years ago it was hard to find any walk of life not caught up in the internet hype gripping the planet. Higher education was no exception: e-learning was touted as a golden opportunity for universities to reach more students while slashing costs. As usual, the commercially minded US institutions led the rush to cash in.

Today, after the implosion of the internet speculation bubble, fevered expectations have given way to a more realistic, sometimes painful, appraisal of online learning's possibilities and limitations.

New York University and Temple University have both folded their e-learning initiatives, and profits also proved elusive for Fathom.com, a liberal arts education venture funded by Columbia University, which is to be wound up on March 31.

Nevertheless, though demand has not matched get-rich-quick projections, peddling courses online cannot be written off as just another dotcom gimmick.

"E-learning was one of those things that people thought would explode. When the internet suffered a well-deserved revaluation, (it) was forgotten," says Andrew Rosenfield, chief executive of UNext, a high-powered online business education venture backed by the universities of Chicago, Stanford, Columbia, Carnegie Mellon and the London School of Economics.

But to lump online education in with other dot-bombs is to throw the baby out with the bath water. "Unlike most of the internet, this is the real thing. For people balancing work and family, the ability to learn online at their own pace has overwhelming value."

As well as UNext, surviving e-learning players include Harvard Business School Interactive, an online extension to its graduate business school, and Stanford University and the University of Chicago, which are still involved in various enterprises.

All told, more than 150 US institutions offer undergraduate degrees online, while 200 offer graduate degrees, according to investment bank Bear Stearns. Market researcher International Data Corp expects online enrolment, which is growing by one-third a year, to top 2.2 million by 2004.

Rosenfield compares e-learning to booming internet auction sites but, unlike pioneering online auctioneer eBay, Chicago-based UNext and other higher education e-learning outfits have yet to deliver on the high hopes vested in them.

Since opening for business in 2000, a modest 10,000 or so students have passed through the virtual doors of Cardean University, UNext's diploma-granting institution. That is not much to show for the $110 million (£6.7 million) invested by high-profile backers such as software mogul Larry Ellison and 1980s "junk" bond trader Michael Milken.

Rosenfield is bullish about prospects, however, setting his sights on the 12 million Americans with two-year associate degrees who may be in the market for further qualifications to boost their salaries or land a better job. Then there are the 35 million with college credits but no degree.

"We think that serving these people is a huge opportunity," he says.

Online education, however, is no easy sell: courses call for motivation and self-discipline. In other words, they are not for everyone.

Fathom.com, a consortium of 13 Anglo-American universities including Chicago and Michigan that was assembled by Columbia, appeared to reach the same conclusion last year, adding a slew of professional qualifications from external providers to broaden its appeal.

However, after spending $28 million over three years, Columbia has announced that the venture will fold. A spokesperson says it is the victim of "trying economic conditions", while Fathom.com vice-president Anne Rollow claims the idea was ahead of its time.

Those critics of Fathom.com who predicted that it was too highbrow to make a profit seem to have been proven correct.About 65,000 people signed up for one of the 2,000 courses offered, although it was not revealed how many were converted into paying customers.

The eclectic curriculum devised by Fathom.com member institutions was pitched at so-called lifelong learners. But armchair autodidacts and hobbyists represent a pretty rarefied market, offering slim pickings, observe hard-nosed Wall Street critics. "Working adults trying to advance their careers don't care about Shakespeare," says Gary Bisbee, online education market analyst at New York investment bank Lehman Brothers.

The undoubted star of the e-learning show has been the University of Phoenix Online. It has become the most successful online venture by aiming at mature students wanting a career fillip.

The virtual institution, which has more than 40,000 students taking its stripped-back syllabus, raked in $91 million from online enrolment for the three months to May 31 - up 68.4 per cent on the corresponding 2001 fiscal quarter.

Phoenix Online's success comes from its ability to use its offline parent for marketing, as can the University of Maryland's distance-learning arm, which has more than 17,500 students.

Phoenix Online also scores full marks with analysts for keeping it simple.

Shunning the slick interfaces of lavishly funded UNext and Fathom.com, students are presented with no-frills, text-based course materials and have email discussion groups.

According to Bisbee, too many bells and whistles limit online courses'

"addressable market".

"The trick is to keep the technology low level enough that people can use it." Many people do not have the broadband internet connection needed to run sophisticated applications such as streamed video, Bisbee adds.

Rosenfield says that UNext's presentation, though sophisticated, falls within the bandwidth limitations of average computer users with standard dial-up modems.

Tapping former students was the thinking behind the Alliance for Lifelong Learning, a non-profit distance-education venture founded by the universities of Stanford, Yale and Oxford. The venture, however, was recently opened to the public (and renamed AllLearn) amid questions over its ability to attract alumni.

A surer bet may be the demand for e-courses from students in far-flung countries. In a vote of confidence for this market, U21global - an online university targeting Asia and Latin America, which involves the universities of Virginia and New York and 14 other institutions - attracted $25 million in funding last year.

The fortunes of the current crop of players remain uncertain, but e-learning seems likely to stay the course. While it may not be the road to riches or the distance-learning Holy Grail that many originally thought, it is emerging as an integral part of universities' offerings.


Experts say internet qualifications must close the credibility gap with employers and professional bodies before they can attract more students.

"There's no reason why the virtual classroom should have second-class citizenship," says Robert Tucker, president of online education consultant InterEd. But his research suggests that while e-learning was at first embraced, there has been a backlash from which it is only slowly recovering. One reason was the limitations of early technology, now addressed by interactive second-generation systems.

The number of universities offering degrees that can be taken entirely online has risen to more than 30 this year, according to InterEd. A few organisations, however, do not recognise online-only courses, including the American Bar Association.

Some institutions now offer online nursing degrees that also timetable in practical clinical instruction.

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