OMDE 606 Cost and Economics of Distance Education

A study of the economics of distance education in the larger context of the economics of education. Various methodological approaches (including cost/benefit and cost/effectiveness analysis) are applied to the distance education context. Costing techniques and economic models are explored and applied to different institutional forms and levels of distance education. (Developed by Thomas Huelsmann of Germany.)
Course Attendance:              Spring Semester 2008 (January -May)
Professor:                               
Thomas Huelsmann
Final Grade:                             A
Papers:            
                         Does the increased availability of ICT amplify the vulnerability of DE institutions?
                                                

Does the increased availability of ICT amplify the vulnerability of DE institutions?  March 21st 2008

Introduction
Rumble (2004a) maintains that Distance Teaching Universities (DTUs) “were set up in a competitor-less environment” (p. 84) serving a market segment that the Campus-based Universities (CBUs) were not interested in: the part-time adult learners market. However Rumble (2004a) argues that shifts in the demographic, social, and economic environments have created a much stronger interest in this market and have resulted in a growth of Dual Mode Universities (DMU).  “DMU’s , unlike DTUs and CBUs, have a mandate to teach both on- and off-campus (external or distance) students” (Rumble, 2004a, p.71). The DMU growth has increased competitive pressure on DTUs and has thus made them increasingly vulnerable. This paper seeks to determine whether further advancements in Information and Communication Technologies (ICT) have reinforced Rumble’s (2004) thesis or rendered it obsolete.


Summary of the Vulnerability Debate
Rumble (2004a) observed that the arguments in favor of DTUs  were based on the academic and organizational benefits of having a separate entity which, unencumbered by the process constraints of established CBUs, have the flexibility to develop effective distance teaching practices to serve the needs of part-time adult students. The establishment of these new practices has given DTUs important technological and pedagogical skills which have enabled DTUs to achieve greater economies of scales over CBUs. “Study after study of the  relative cost per student and cost per graduate concluded that their costs are or could be, assuming high enough numbers of students, lower in DTUs than in CBUs” (Rumble 2004a, p.73).


However the growth in demand for part-time adult education has led to a rapid growth in the number of DMUs. According to Rumble (2004a), DMUs have a number of advantages over DTUs:

1.      By offering both traditional on-campus and distance education, DMUs offer a wider choice of teaching strategies for part-time students.

2.      By leveraging campus-based course curriculum, DTUs could offer a wider spectrum of courses.

3.      Parity in teaching standards could be established between on-campus and distance education classes. 

Furthermore Rumble (2004a) argues that DMUs by turning conventional lectures into basic distance teaching materials at very low costs, and by leveraging their greater flexibility to maximize the economic advantages of different teaching modes for specific requirements, enable DMUs to usurp the economic advantages of DTUs.

Two main points in Rumble’s argument are disputed by other authors. First, that there is little to no productivity gain from turning conventional lectures into quality distance teaching materials (White, 2004; Keegan, 2004). Secondly there is no reason why DTUs cannot develop a full spectrum of courses (Keegan, 2004). 

However despite some disagreements there appears to be consensus that demographic, social and competitive forces are causing the boundaries between DTUs and CBUs are becoming increasingly blurred (Mugridge, 2004) . Rumble (2004c) offers a number of potential strategies for DTUs to counter this threat:

1.      Do nothing

2.      Concentrate on what they do well

3.      Internationalize – seek markets abroad

4.      Subcontract CBU distance education programs

5.      Competitive attack – new product, price cutting

6.      Turn themselves into DMUs

Rumble (2004b) argues that in light of the eroding market advantages it is imperative DTU change in search for improved productivity and favors option 6. Keegan (2004) and White (2004) however, are less certain of the urgency and favor collaboration with CBUs.

Impact of ICT on distance education and higher education
ICT has become a significant driver of change in higher education. ICT advancements have led to three generations of distance education mediums from print-based correspondence education, to “print + broadcasting’ mass communication approach, and now through two-way communications technologies to Web-based learning systems or video conferencing (Bates, 2005).  The Web-based systems are not only transforming the “pedagogy of distance education, but also its organizational structures” (Bates, 2005, p.40) and the cost structure of distance education. “Web-based learning increases quality through stronger interaction between teachers and learners without loosing the flexibility of distance delivery. However, Web-based learning does not have the same economies of scale found with either print or broadcasting” (Bates, 2005, p.173). Peters (2001) list twelve advantages DTUs have over CBUs in using multi-media technologies in a distance education environment. The advantages center on the fact that the teachers, students and administration in DTUs have significant experience in bridging not just the physical distance but also the mental, social and cultural aspects of distance. DTUs demonstrate this leadership through their professional instructional designed pedagogy, comfort with teaching and learning through multi-media, student support systems, and a world of employment curriculum geared to adult part-time learners. However many DMUs are moving to gather this expertise (Bates, 2005).


Impact of ICT on the vulnerability debate
As the advancements in ICT continue DTUs are well positioned to exploit their advantages over CBUs in terms of distance education pedagogy, technological capability, student support and administrative services. However, the new technologies which foster interactive teacher-student communication will by their very nature increase the cost of student support and thus erode DTU’s cost-efficiency advantages from economies of scale. Thus advancements in ICT technologies add further fuel to the vulnerability debate.


The DTU’s distance education pedagogical and technological advantages are without doubt formidable and suggest that DTUs should adopt Rumble’s (2004c) option 2 strategy of “concentrating on what they do well …..and focus on quality” (p.109). However the expertise of DTUs is not so unique that it cannot be acquired by CBUs and thus the continued establishment of DMUs to serve the growing distance education market is, in this author’s opinion, inevitable.  The pedagogical flexibility that DMUs offer will enable these institutions to serve different students needs and preferences and, as such, will erode the DTU’s distance education market share.

ConclusionThe increased availability of ICT has a positive and negative impact on DTUs. It has a positive impact in that enables DTU to lever their pedagogical and technological advantages in providing quality distance education. However, the interactive capability provided by ICTs increases the cost of student support and is not conducive to the economies of scale cost structure previous enjoyed by DTUs.  A positive impact to higher education is that the increased interactive multimedia capability has the potential to further increase the market of distance learners. This growth in market forces will inevitably cause CBUs to increase their focus on distance education through the formation of DMUs, and in doing so will erode the DTUs market share. The question from a DTU and DMU’s perspective is will the increase in distance education provide a big enough market such that both can survive or will a consolidation need to occur? In the author’s view the market will be big enough for both.

References

Bates, A.W. (2005). Technology, E-Learning and Distance Education 2nd edition. New York NY: Routledge.
Keegan, D.(2004). The competitive advantages of distance teaching universities (1994). In G. Rumble (Ed.), Papers and debates on the costs and economics of distance education and online learning (Vol. 7, pp. 97-102). Oldenburg: Bibliotheks- und Informationssytem der Universitat Oldenburg.
Mugridge, I. (2004). Responses to Greville Rumble's article 'The competitive vulnerability of distance teaching universities' (1992). In G. Rumble (Ed.), Papers and debates on the costs and economics of distance education and online learning (Vol. 7, pp. 93-96). Oldenburg: Bibliotheks- und Informationssytem der Universitat Oldenburg.
Rumble, G. (Ed). (2004). Papers and debates on the costs and economics of distance education and online learning. Oldenburg: Bibliotheks- und Informationssytem der Universitat Oldenburg.
Rumble, G. (2004a). The Competitive Vulnerabilities of Distance Teaching Universities . In G. Rumble (Ed.), Papers and debates on the costs and economics of distance education and online learning (Vol. 7, pp. 67-88). Oldenburg: Bibliotheks- und Informationssytem der Universitat Oldenburg.
Rumble, G. (2004b). The competitive vulnerability of distance teaching universities: a reply. In G. Rumble (Ed.), Papers and debates on the costs and economics of distance education and online learning (Vol. 7, pp. 103-106). Oldenburg: Bibliotheks- und Informationssytem der Universitat Oldenburg.
Rumble, G. (2004c). Competitive vulnerability: an addentum to the debate (1998). In G. Rumble (Ed.), Papers and debates on the costs and economics of distance education and online learning (Vol. 7, pp. 107-117). Oldenburg: Bibliotheks- und Informationssytem der Universitat Oldenburg.
Peters, O. (2001 February). Learning with new media in distance education. Fernuniversität-Gesamthochschule in Hagen. Fachbereich Erziehungs-, Sozial- und Geisteswissenschaft, Institut für Erziehungswissenschaft und Bildungsforschung. Retrieved March 16th 2008, from the World Wide Web: http://www.uni-oldenburg.de/zef/cde/found/lnm.htm
White, V.(2004). Responses to Greville Rumble's article 'The competitive vulnerability of distance teaching universities'. In G. Rumble (Ed.), Papers and debates on the costs and economics of distance education and online learning (Vol. 7, pp. 89-92). Oldenburg: Bibliotheks- und Informationssytem der Universitat Oldenburg.