On Wednesday, March 13, 2013, California Senate President pro Tem Darrell Steinberg introduced Senate Bill 520, a piece of legislation that would enable students enrolled in the state’s UCs, CSUs and community colleges to take faculty-approved online courses in gateway and introductory courses that are currently oversubscribed on their campuses. This bill seeks to help the thousands of students who cannot secure seats in classrooms that would enable them to complete requirements for their majors, for transfer, or for their degrees in general.

In his press conference, Sen. Steinberg was very careful to allude consistently to the limitation of the scope of such reliance on online education. The bill recommends that a nine-member faculty committee take the lead in assessing quality and deciding which online providers might be certified for a maximum of 50 credit-bearing courses across the three higher education systems in California. Steinberg and his colleagues also insisted that the bill was meant as a technology tool or adjunct to teaching and not a replacement of faculty or higher education resources.

This bold move by the Senator, as he puts it, to “get out in front” of the wave of technology advancements brings to the fore the intense pressures that seem to be coming to a head in ways never before imaginable for institutions of higher education. There are some industries, such as higher education, where disruption has been impossible because up until this point there has not been upwardly scalable technology driver.

Now, however, the dominance of traditional universities cannot hold as tuition rates rise beyond the normal inflation rate. Moody’s 2013 higher education outlook was negative across the board, citing that “alarm over a potential student loan bubble and diminishing affordability of higher education has reached a fever pitch in the last two years.” Such intense financial pressures on government, states, lawmakers, and families have led to a harsh scrutiny of the underlying value of a college degree. This current context brings online learning to the fore as the much needed, upwardly scalable technology driver capable of disruptively carrying the business model of low-cost universities up-market.

When California’s community colleges experienced budget woes and ran up against capacity constraints, they effectively went up-market, limiting who can attend and ceasing to be open-access institutions. UNow’s Initiative California therefore emerged, offering the 470,000 students on community college waitlists places in their school at a price of $46 a month for unlimited courses, roughly equal to the operating costs of UNow’s Patten University. Initiative California and WGU’s competency-based programs offer much shorter paths to degree completion, effectively diminishing the opportunity costs of not joining the workforce in order to earn a B.A.

The complication that will arise for California’s state universities and colleges will be how exactly to partner with for-profits, MOOCs, and other online providers, such as Pearson. One of the major vulnerabilities of the state’s colleges is that they have no competitive edge when it comes to general education or gateway courses. Companies such as StraighterLine target specifically courses common to the first two years of general education. The twisted logic of all of this is that most professors prefer to teach more specialized courses versus the remedial and introductory courses in their fields. For university administrators, however, these courses often represent the profit centers for certain universities—large classes, few teachers. Although this is not the case at most community colleges where many of these gateway courses are capped, it seems unlikely that the CSUs and UCs will want to relinquish too much control in this area.

In fact, during his press conference, Steinberg acknowledged the wariness and trepidation on the part of institutions and faculty members but tried to frame his proposal as a well-intentioned bill that would set up the state’s colleges to serve the public better. It does, however, seem inevitable that these partnerships could also inadvertently lead to a slow disruption of California’s master plan of higher education. When people talk about higher education begin ripe for disruption, that disruptive threat could assume a much more gradual form, as these “partners” gradually take over universities one course at a time. The story of the disruption of Compaq Computers by Flextronics provides some insight into how this might occur. Flextronics first suggested to Compaq that it outsource the manufacturing of the small circuit boards in its computers. This made a lot of sense to Compaq because Flextronics could manufacture these circuit boards at 20 percent lower cost, which would mean that Compaq could continue to charge consumers the same prices for its computers but be more profitable. A couple of years later, Flextronics returned and suggested that it manufacture the motherboards for, once again, 20 percent lower cost. Compaq happily complied. Flextronics returned a few years later to tell Compaq that its true core competency wasn’t in assembling computers and that Flextronics could do it at 20 percent lower cost, so they should turn computer assembly over to them as well. Compaq gladly did, and both companies thrived. A few years later, Flextronics returned and suggested that it manage Compaq’s supply chain so that it could focus on its true core competencies of design and marketing. Once again, Flextronics made more money, and Compaq’s profitability also improved; it had almost no assets on its balance sheet anymore with the same revenue. Soon Flextronics returned, and this time it offered to design the computers for Compaq. Once again, this worked well for both parties. The final time, however, that Flextronics returned with an added value proposition, it didn’t return to Compaq. It went directly to Best Buy and proposed that it could build new, inexpensive personal computers for them at 20 percent lower cost without Compaq’s brand. Best Buy leapt at the opportunity, and Compaq was disrupted.

The early scenes of a similar story may be playing out in higher education. MOOCs have begun to approach various colleges and universities with an offer to provide certain classes. The CSU system has already been exploring partnerships such as these. In an effort to attend to the more than 50 percent of entering students who do not meet basic requirements, San Jose State University (SJSU) is partnering with Udacity to offer introductory and remedial three-credits courses for a discounted tuition rate of $150/course. The topics include remedial algebra, college-level algebra course, and introductory statistics. The pilot program is limited to 300 students—half from SJSU and the other half from other community colleges and high schools.

Particularly at schools where the range of subjects might be more limited, leveraging existing courses from MOOCs or for-profits would enable departments to teach a wider range of courses. As Duke Provost Peter Lange explained about their partnership with Coursera: “No university can deliver the full range of courses that both might be interesting and useful and enlightening to our students.” Will these institutions, however, be unwittingly handing over their value propositions over to these online providers?

Senator Steinberg insists that faculty participation and oversight of this limited certification process (only 50 classes max.) would ensure that the colleges would be able to balance the pressure to innovate while maintaining high-quality outcomes for students. Once certain online classes are deemed credit-bearing for California’s state college students, however, the institutions will simultaneously be vetting more generally the quality of those specific providers—not only MOOCs. In the long run, what’s to stop those mostly for-profit providers from going directly to the consumers once their brand has been certified by these respected institutions? And is that necessarily a bad thing?


  • Michelle R. Weise, PhD
    Michelle R. Weise, PhD