Upstarts: Virtual Campuses
Bringing college home by TV and Internet
A company cofounded by boyhood pals enlists universities and PBS as partners in a distance-learning venture
By day, Caroline Smith, 26, works as a researcher at Glaxo Wellcome in Research Triangle Park, N.C. Last spring, to get a head start on an M.B.A. that she hoped to pursue, she paid $395 to enroll in a microeconomics course through the University of North Carolina, which is three miles from her house. She earned an A even though she entered a classroom only to take exams. That's because she received all her instruction over the Internet and from broadcasts by a local TV station.
That's an advantage, says Smith, who likes to stay home with her three weimaraners. In the comfort of her house, she has had a "virtual campus" at her fingertips. And, she adds, "I didn't have to buy a parking pass."
If off-site education is hardly new--distance learning is at least as old as the first correspondence course hawked on a matchbook cover--conveying it through a mix of television and the Internet is. That's what Smith's course does. It was produced by Los Angeles-based University Access, one of a batch of start-ups that use such things as the Internet, television, videoconferencing, and CD-ROMs to create sophisticated yet inexpensive distance-learning curricula for universities and corporations. The advances have "created a lot of business opportunities" for entrepreneurs, says Bernie Luskin, a distance-learning consultant in Los Angeles.
Smith's microeconomics course included 12 one-hour lectures by University of North Carolina professor Robert Connolly that were broadcast several times a week by WUNC, the PBS affiliate in Chapel Hill. Smith watched Connolly's lectures on Wednesday nights and then logged on to University Access's Web site for two hours. In a live interactive classroom, an instructor elaborated on the lectures, offering students a chance to ask questions and exchange ideas.
The course that Smith took is one of four that University Access has developed. All are business related, says University Access CEO Alec Hudnut, because "there aren't a lot of great business courses out there."
Hudnut, a Harvard M.B.A. and former consultant at McKinsey & Co., cofounded University Access two and a half years ago with a boyhood pal, Tom Geniesse, who had worked as a TV development executive. It was Geniesse, whose credits include developing Homicide for NBC, who came up with the idea of "marrying" television's power and the Internet's interactivity to create a "great educational tool," as he puts it.
Hudnut and Geniesse, both now 35, set out to accomplish three tasks. First, they raised most of University Access's $400,000 in seed capital from friends and family and from Hudnut's former colleagues at McKinsey. (The two have since raised more than $6.5 million in additional funds, from venture firms and individual investors.) Second, in July 1997, through what Hudnut calls "sheer force of will," they landed California State University, Hayward, as their first customer. The company now has deals with 35 colleges and universities that offer University Access courses. Third, a year ago University Access signed on a major distributor, PBS's Adult Learning Service. It offers the company's courses to its 390 affiliates nationwide, and two-thirds of those stations broadcast the programs in cooperation with a university. PBS collects a fee for each University Access course sold through the network's catalog.
While the PBS alliance carries marketing clout, University Access certainly doesn't have the field to itself. The $3-billion distance-learning market abounds with competitors, such as the fast-growing University of Phoenix and software giant Oracle of Redwood Shores, Calif., which offers information-technology training over the Net and by CD-ROM.
Moreover, the strategy of 31-employee University Access, which projects a $2-million loss in 1999 on revenues of a like amount, has yet to be proved, according to two education-services analysts. Scott Soffen of Legg Mason Wood Walker Inc., based in Baltimore, says he's skeptical that there is "enough demand out there to justify production costs," which run $1 million per course. Howard Block of NationsBanc Montgomery Securities, based in San Francisco, asks whether students will embrace a system that requires bouncing back and forth between computer and TV screens.
Still, Hudnut insists that University Access is here to stay. In fact, when he looks at his newborn daughter, Calaya, he sees a future University Access customer. But he adds, "Of course, I'd expect her to pay."
Capella University has no football team, no bookstore, no student union, no dormitories, no classrooms. Nor does it have any ivy.
Fully accredited, it has 750 students who not only are from 48 states and 15 countries but remain in them while they work toward master's degrees and doctorates in fields such as business management, psychology, and education. The students can remain at home because they conduct their studies almost entirely on-line.
In sum, CU--or, as it's called, www.capellauniversity.edu--is a campus that's about as virtual as it gets.
Formerly known as the Graduate School of America, the university is the principal enterprise of the for-profit Capella Education Co., based in Minneapolis. The only part of the university that's not in cyberspace occupies one floor of a glass-and-steel building, where 70 employees work among dozens of computers. Every CU class enrolls an average of 15 students. On Web pages devoted to each class, instructors (many of them professors at other universities) post questions. Students log on and engage in a sort of round-robin discussion with their professors and classmates.
Also on-line, students can register, order books, submit papers, and pay tuition. (An M.B.A. costs $18,400.) Professors do accept telephone calls during office hours--provided students pay the long-distance tab.
Corporate distance learning: the future is now
An authority on distance-learning products and services sold to corporations, Brandon Hall is himself among the entrepreneurs benefiting from that burgeoning market. He is the founder of Brandon-hall.com, which since 1994 has published the Multimedia & Internet Training Newsletter, based in Sunnyvale, Calif. He's also the author of Web-Based Training Cookbook. Hall recently spoke with Inc. staff writer Marc Ballon.
Q: What's the appeal of distance learning?
A: With distance learning, corporations enjoy substantial savings in travel costs and accommodations, because they don't have to fly people around the country to train them. And through computer-based learning, students can learn in about half the time, compared with live instruction.
Q: Is this a market in which small companies can compete?
A: I'd say 40% of the companies I track have appeared only in the past two years. Some of those companies are content providers. They are making courses heavy on text and graphics, sometimes with audio and less frequently with video. The other category is tool providers. These firms are creating the tools and architecture that make Internet-based training possible.
Q: What kind of training is commonly offered?
A: Especially information-technology, or computer, skills. Then there are people skills, including sales and management training.
Universities and distance learning: A statistical snapshot
Among more than 1,000 colleges and universities recently surveyed:
Number offering distance-learning courses in 1996: 762
Number offering distance-learning courses in 1998: 860
Proportion using CD-ROMs to deliver the courses in 1998: 15%
Proportion using videocassettes to deliver the courses in 1998: 67%
Proportion using the Internet to deliver the courses in 1998: 68%
Source: Peterson's Guide to Distance Learning Programs, Princeton, N.J., 1998.