“A largely unnoticed assault upon the nation’s vibrant market in online learning” is how Rick Hess, writing for the National Review Online, characterizes the Obama Administration’s proposal to spend $500 million over ten years to develop online high school and college courses. Hess argues that there is already a robust private market and invokes the standard “government take-over” bogeyman:

It is not clear what problem the administration is seeking to solve. The kinds of online courses that the administration is calling for already exist, and are offered by an array of publishers and public and private institutions…. However, once the Department of Education is sponsoring a freely available course financed with taxpayer funds, it will be difficult for any but the most expensive or distinctive institutions or providers to justify paying for an alternative offering.

Hess first argues that the market is robust and well-functioning, then describes serious problems with the structure of the market that protect incumbents and reduce competition:

If the administration is concerned about tuition, cost-cutting new providers like StraighterLine have made clear that the chokepoint today is not a lack of online materials but the fact that colleges offer them at prices approximating those charged to students enrolled in bricks-and-mortar instruction. Among the causes of price stickiness are credentialing and regulatory practices that impede the emergence of low-cost entrants; state-funded institutions that use new e-learning students to cross-subsidize other units; and proprietary operators that have happily responded to this cozy arrangement by competing on convenience rather than price.

While I share some of Rick’s concerns, his analysis is incomplete. If it’s done well, the $500 million courseware project could actually be used to address many of the market failures that Hess outlines. In fact, given the rigidity of the higher education market, the only way to open up the sector may be for a new entrant to create an entirely different frame of competition.

The right analogy here is open source software, where many, many creative individuals and companies can find ways to add value, extend, and tailor a variety of solutions. Not necessarily good for the current market leaders, but not a government take-over either. A smart program could not only help to open up the market, but also help to create extraordinary learning materials.

• Adaptable, sharable, and modifiable should be standard copyright provisions on all federal-funded materials. This would allow much easier sharing of materials and content across schools, districts, and states. It would allow for small innovations to existing materials. And, while these new economic models might be disruptive, they actually help to create more open and innovative markets. If innovations or processes around the materials, such as online tutoring, a la Straighterline, help improve teaching and learning, then I’m all for an enterprising teacher, university, or commercial firm benefiting from those efforts. The federal government should not create it’s own university or monolithic offerings, but develop either full courses or components of courses that a variety of public and private providers could access, augment, and build around. While some folks might take the plain vanilla government version of the course, most would purchase from other providers that competed on support services, value-added instruction, partnerships with other higher ed providers to facilitate credential attainment, etc.
• And, if the government’s investment, by investing in very high quality, technology-driven learning assessment tools for these courses, allowed the quality of learning to become more transparent, then providers could also compete on actual learning objectives. (To be clear, assessment tools do not have to be a single “test,” but could be a variety of tools or protocols that could be built upon. To make this possible, my assumption is that these would be the standard, entry-level courses, such as Calculus, taught at almost every college and university and also in high schools.) This type of external benchmark would actually make it easier for private providers like StraighterLine to compete. As my colleague Kevin Carey wrote about StraighterLine in his great Washington Monthly College for $99/month article, the real barrier is that there is no objective way, outside of accreditation–which is controlled by the current higher education providers–to prove that a course is “good enough.”
• Related, the open courseware program also has the potential to help set a variety of standards–both around credentialing, as above, and also by creating technical specifications for interoperability of learning data. If designed well, the program would create a de facto reference standard that any provider would have to “talk to” to exchange data. This standard would then become the one by which everybody could utilize. And, opening up the data flows across learning management, transcript, and a variety of various other systems could all increase market fluidity.
• Also, there are some investments or roles that private providers just will not or cannot play. Assessment is one. Others are major, multi-million investments around next generation online learning experiences or a variety of infrastructure-related investments.
• Finally, while Hess is scared of crowding out private investment, I’m most concerned that whatever is created ends up stuck on some poorly marketed, never-used Web site.

Bottom line, that I think both Hess and I can agree on, is that these investments must be smart and consider the business models and market structures into which they are entering. There’s a role for this investment to improve the current market, one which Louis Caldera helps explain further in a recent Center for American Progress brief.

PS – I don’t hear anybody in K-12 talking about it, but the $500 million is meant to cross community college and high school. If we used that money to develop really top notch, digital assessments in an open and sharable way, it could help both the remediation issues (by specifying clear expectations for college level work) and provide an externally validated benchmark for all sorts of schools and learning providers to assess learning.

PPS – Secretary of Education Duncan provides a few additional details on the proposal in Politico.