September 2, 1999
Click Here for the Ivory Tower
A Start-Up Enlists Elite Schools for Online Learning and Raises Eyebrows
By LISA GUERNSEY
or
almost as long as students have
been going to college, educators
have been trying to bring college
home to them. More than 100 years ago
at Cornell University, professors traveled to rural areas on horseback to teach
farmers about the latest agricultural research. Correspondence courses have
been available for decades, first through
the mail and then through television and
video.
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Todd Buchanan for The New York Times
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ENTREPRENEUR - Andrew M. Rosenfield of Unext.com, an ambitious venture in Net-based teaching.
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But the development of the Internet
has created new excitement around what
has become known as distance learning.
This summer a start-up company called
Unext.com (www.unext.com), based in
Deerfield, Ill., announced a venture that
is one of the most ambitious yet: delivering executive training and, eventually, a
full M.B.A. program over the Internet.
This summer, Unext.com (pronounced
you-next) christened its virtual school
Cardean University after a Roman goddess, Cardea, who could "open what is
shut and shut what is open," in the words
of a company press release.
The plan attracted attention not only
because one of the initial investors was
the former junk-bond king, Michael R.
Milken, but because of the five prestigious institutions the company had
brought on board -- the University of
Chicago, Columbia University, Carnegie
Mellon University, Stanford University
and the London School of Economics and
Political Science -- a veritable all-star
team of elite universities.
The plan is for Unext.com to produce,
market and distribute the courses -- as
well as hire a corps of employees to serve
as mentors and e-mail correspondents
for Cardean's students. The universities
will provide the curriculum and the impressive credentials, without risking
their endowments on untried technology.
Some of them have projected that their
own campuses will each earn at least $20
million in royalties from Unext.com within five to eight years.
"This is a way to embark on distance
education by using what others bring to
it," said John Preis, associate dean for
finance and administration at Columbia
University's School of Business. "We
think this is a home run." Distance learning, it seems, has come of age.
But has it? Since the dawn of the Web
in the mid-1990's, the concept of earning
degrees entirely online has become a
rallying point for university presidents,
politicians and profit-seekers alike. Yet
while millions of people are diving into
online shopping malls and chat rooms,
virtual universities have been something
of a bust.
"I think it's going to be the joke of the
21st century," said Carole S. Fungaroli,
an adjunct professor in English at
Georgetown University who is writing a
book about the value of university degrees. "I don't see anything that these
people are offering that you can't get
better on campus."
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Will online courses dilute
or enhance higher
education?
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Western Governors University, a venture started by 17 states and Guam,
opened its online doors to much fanfare last
year but has enrolled only 120 students, far
below its projections.
California Virtual University, a project initiated by the California
Board of Regents in 1997, folded this spring,
citing financial problems. Many other virtual university projects have appeared to be
nothing more than online catalogues of
courses that can be taken for credit only by
students who are already on campus.
One place the distance education concept
has been successful is Wall Street, where
analysts' reports are thick with data on the
rapidly growing adult-student market. The
Apollo Group, the company that runs the
University of Phoenix, an accredited institution that offers online degrees, has seen its
stock soar more than 1,500 percent since
1994. Apollo, which also operates other educational programs, now has a market capitalization of $1.7 billion.
Administrators at the universities that
have signed up with Unext.com readily admit that the possibility of becoming part-owners of a publicly traded Internet company is a part of Unext.com's attraction. "I
was less interested in the income stream
than in the market capitalization of Unext.com," Meyer Feldberg, dean of the Columbia University School of Business, told The
Wall Street Journal. "The huge upside essentially is the value of the equity in the
I.P.O."
There have been other concerns raised
about Unext.com. The management of the
company is made up of several Chicago
professors, including John P. Gould, a former dean of the university's Graduate
School of Business, and two Nobel laureates,
Gary Becker and Merton H. Miller. Several
other members of the Chicago faculty have
publicly raised questions about conflicts of
interest.
Whose interests will be served, the
company's or the institutions that need to
protect their good names and academic
integrity?
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Shana Raab for The New York Times
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Carole S. Fungaroli, who is writing a book on the value of college degrees, is a critic of virtual colleges.
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The entrepreneur behind Unext.com is
Andrew M. Rosenfield, a business consultant and University of Chicago alumnus who
was running Lexecon, a company that employed many of the same people who are
now involved in Unext.com. In the last decade, he has also served as a part-time law
professor and trustee for the university,
remaining immersed in the culture of an
institution known not only for breeding free-market intellectuals but also for being
strongly resistant to change.
In the mid-1990's, Rosenfield started
thinking about about creating an Internet-based education company that
would be both a radical departure
and a continuation of the values of
his alma mater. He wanted to create
an online environment that would
be "the technological equivalent of
the small break-out session or the
evening at the coffee shop, where
students really teach each other."
He also wanted to reach students
outside the United States who wanted access to education delivered by
American universities but who
could not travel to get it.
He mulled over the idea with Dr.
Becker -- his former professor and
now longtime friend, who had won
his Nobel prize for his theories about
human capital. The two brainstormed over lunch at the University of Chicago's faculty club and
while watching Chicago Bulls
games.
The first investor for the company, which was founded in December
1997, was Knowledge Universe, a
company owned in part by Milken. His involvement stirred gossip
throughout the higher-education
community last year, when Rosenfield started to shop his idea
around to select universities. By the
time Rosenfield has signed up
his first partner -- Columbia University, in March 1999 -- the contracts included the condition that
Milken's investment would never exceed a 20 percent ownership
stake and that he would have no voting
rights.
In the last four months, four more universities have signed on; the last was Carnegie
Mellon, which struck a deal in July.
Other
universities, like Cornell, were approached
by Unext.com to be pioneering members but
declined.
Cornell has already developed its
own distance-education technology, said
Jonathon D. Levy, executive director of
Cornell's distance-education office.
Critics say that the partnership could
damage the universities' academic credibility. The quality associated with getting a
degree from these schools cannot be replicated on the Internet, said John K. Wilson,
an outspoken graduate student at the University of Chicago who has written columns
accusing administrators of jumping in
blindly with "dollar signs in their eyes."
University administrators have responded vaguely to questions about how much the
deals may be worth. Preis, at Columbia
University, confirmed reports that his institution expected to make at least $20 million
in five to eight years. Other university administrators said they expected the same
return.
But Unext.com would not confirm the $20
million figure. "That's the universities' expectation," said Edwin Eisendrath, Unext.com's spokesman.
Eisendrath added
that not every university had signed the
same deal. He would not elaborate.
Within the business faculties themselves,
the reaction to the announced deals has
ranged from approval to confusion. Administrators at some of the participating
schools have pleaded ignorance about exactly what the deal means and who will be
affected. At the University of Chicago, a
committee was formed to talk about Unext.com before the deal was signed, but at
Columbia University, most professors had
not heard of the proposal before they awoke
to an announcement of the deal.
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Most distance-education courses are not
cheap.
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In Carnegie Mellon's case, a Chicago public relations firm sent out an announcement
about the university's involvement before
the university's press office had a chance to
see the release and fix a large error. The
announcement said Carnegie Mellon would
offer E-commerce courses through Unext.com, but the dean of the Graduate School of
Industrial Administration, Douglas M.
Dunn, said it had no plans to do so. The
university, Dr. Dunn said, is still negotiating
over exactly which courses Carnegie Mellon
will help create.
Meanwhile, some professors are wondering what involvement with Unext.com will
mean to their scholarly reputations, the coin
of the realm in the academic world.
Robert
Connolly, a professor in the Kenan-Flagler
Business School at the University of North
Carolina at Chapel Hill, has worked with
another distance-education company, called
University Access, to create several economics courses using the Web and videotape. The experience, he said, has improved
his teaching skills but hurt his standing in
his department.
"I can't get people in my own school to
talk to me about it," Connolly said.
Colleagues who have been willing to acknowledge his distance-education work expect that his research -- a professor's ticket
to tenure -- must be suffering, he said.
"They look at it and say, 'If you are spending time on that, that takes time away from
your research and publishing.' "
The American Association of University
Professors has also asked questions about
teaching quality in distance education
courses.
Last spring, when an online university called Jones International University became the first completely Internet-based school to gain accreditation, the association wrote a letter of protest to the accrediting agency. The letter cited "major
worries about the denigration of quality"
that could come with online education.
Most distance-education courses are not
cheap either.
The Caliber Learning Network, a company based in Baltimore, persuaded three universities -- the University
of Pennsylvania, Johns Hopkins University
and the University of Southern California --
to join it in offering business courses via
satellite television and the Internet.
Tuition is high; students who take
the University of Pennsylvania's
Wharton Direct program pay $2,500
each for six-week courses.
Most of the students can afford to
attend, said Alison Pierce, Wharton
Direct's director, because they are
already in upper-income brackets
and the companies for which they
work pick up most of the tab.
While Unext.com expects to benefit from companies' tuition-reimbursement programs as well, it will
offer lower tuition prices, Rosenfield said. The company has not
yet set its prices, but the cost of an
Internet-based education, he said,
should not be more than that of
attending schools in person.
Still, critics ask, what will a degree from Cardean University be
worth? Dr. Fungaroli has called
such online programs "a new version of a trade school."
And students who enroll in M.B.A.
programs from Stanford or the University of Chicago, Wilson argued, are doing so to build networks
of contacts. "There is a real question about whether the 'good old
boys' network' can be created in the
same way it is created in elite business schools," he said.
But International Business Machines, Unext.Com's first customer,
is willing to give the concept a try as
a way to encourage their employees
to learn without losing them to on-campus
business schools. I.B.M. will offer its employees a finance course this year. It is also
a partner in the Unext.com venture; the
courses are being delivered through Lotus
Learning Space, software developed by Lotus, an I.B.M. subsidiary.
Rosenfield admits that Unext.com
does not plan to offer a full M.B.A. online for
years. Until then, the company will focus on
executive training. Unext.com is not being
structured to attempt to compete with what
universities are already offering on campus, Rosenfield said.
In fact, Rosenfield himself calls on-campus education the best way to learn.
"For people who have the ability to attend
facilities-based schools, we recommend it,"
he said. But, he asked, why not also attempt
to create a worthwhile experience for people who cannot attend those schools?
"They will not have direct interaction,"
he continued, "but what they will have is the
wisdom of professors and pieces of their
knowledge that are captured and scalable.
And they will have supporting resources
and mentors who are their guides."
So would Rosenfield take these
courses? "Absolutely," he said. "The days
when you ended your education at college,
or graduate school, are truly over."
Related Sites
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www.unext.com
