The e-university, trumpeted by education secretary David Blunkett in his speech at Greenwich in February, is in trouble as elite institutions hit snags.
They fear that the project, which aims to offer globally competitive virtual distance learning, is divorced from their core activity of providing high-quality campus-based higher education to full-time students.
Neil Gregory, head of the research and contracts division at the London School of Economics, said: "It might be an unpalatable truth but the e-university will be all about brand. Unless those with international reputations are included, and I am not convinced they are, it will have difficulty in getting off the ground in any real sense."
Problems with identifying who would be responsible for awarding qualifications threaten to limit the size and scope of the e-university, due to launch early next year.
Robin Middlehurst of the University of Surrey said: "The main difficulty is the ability to award a degree where there are components that come from more than one institution, perhaps internationally, or combining competency-based provision in industry with an academic award.
"In the long run, the e-university needs degree-awarding powers of its own. The criteria for degree-awarding powers may have to be changed, with the jurisdiction either still with the Quality Assurance Agency or with a new agency that deals with collaborative ventures."
Her study of the virtual learning market will be presented to the e-university steering group next month.
Ron Cooke, vice-chancellor of the University of York, who chairs the steering group, said: "We are looking at expectations and discussing how they might be delivered. Quality assurance is a crucial consideration. Bidders (to run the e-university) will tell us how they would like to do it."
The e-university could operate as a free-standing institution in competition with existing universities - as a broker that commissions its own material, in the same way as the University for Industry - or as a consortium of university partners.
Consultant PricewaterhouseCoopers is deliberating over the preferred business model. Once its report is published next month, funding chiefs will invite formal expressions of interest to run the e-university.
Three contenders have emerged so far. The universities of Leeds, Sheffield, Southampton and York are expected to make a joint bid. John O'Donovan, academic secretary at the University of Sheffield, said: "The White Rose partners plus Southampton are considering an e-university bid."
A consortium led by University College London will also throw its hat into the ring. Its members include Imperial College, the LSE and the London Business School and it has invited Oxford and Cambridge universities to join.
Yet not all of these partners see e-learning as their mission. Rodney Eastwood, head of planning at Imperial College, London, said: "The college expects to remain as a residential university with the focus of its teaching being face-to-face and laboratory-based. Nevertheless, it has welcomed the e-university initiative and will seek to explore its application to research-led universities, especially for continuing education."
In Scotland, the obvious vehicle for the e-university is Scottish Knowledge, the group of universities, colleges and commercial partners that exports expertise in education and training.
There could also be a role for the Open University. Sir John Daniel, vice-chancellor of the OU, said: "We are not looking at gearing up the OU bid immediately. When there is a playing field and the rules of the game have been established, we will form a team and start to play."