University Teaching as E-Business?
Research and Policy Agendas

Meeting Notes

Home | March 2001 Meeting | October 2001 Meeting | Readings | Advisory Group | Case Studies

CSHE > Research > University Teaching as E-Business > March 2001 Meeting > Meeting Notes

Goals of the meeting:

• To begin to establish a common view of the world of e-learning, especially as it relates to research universities.
• To begin to understand some of the forces and dynamics at play in this world in order to be able to describe them to others -- to colleagues who are running universities and e-ventures, and who are faced with some very, very tough decisions.
• To plot the project's future course.

There were a few key suggestions that will inform our future work. The project needs to:

• Articulate a research agenda. Identify the specific critical issues in the social science of higher education--as well as policy studies, business, and law--that arise in the e-learning environment, and develop strategies for addressing those issues through a rigorous research program.
• Provide a conceptual view. The dynamics and shifts of business models are more important than a static snapshot description. A thick description would build specific examples of organizations in the e-learning business, and describe extractable principles that will have some value and a reasonable future.
• Provide a decision tree type of analysis. What are the questions and potential answers that would lead in one direction or another to varying outcomes? A decision tree maps the whole process of thinking through a particular problem. If a certain outcome is assumed, what is the decision tree that is needed in order to obtain those outcomes? For example, if the idea is to enhance undergraduate education through e-learning, that's one decision tree. If the idea is to create a global market for courses and programs, that's a different decision tree. Currently there is no established set of decision trees.
• Provide a component-mapping of the minimum and the variable components that are available in these models (e.g., vendor-centric point of view, curricular point of view, content point of view), and include descriptions of the features necessary for the development and maintenance of a "full delivery" model for online distance education and digital content management.
• Address the importance of standards. The issue of standards is inextricably tied to scalability, hence standards impact both student acceptance of e-learning materials and the economics of creating e-learning ventures.

Main Themes

The main themes that emerged can be categorized as follows:

• Balancing Internal and External Pressures: The tensions between economics, education, and culture. Issues such as autonomy, faculty buy-in, intellectual property, market and non-market cultures, and conflicts among stakeholders.
• Decision-Making: The factors which are important in decision making. How institutions define niche and determine viable structures for e-learning ventures that are 1) balanced with core institutional missions and strengths, while 2) responding to fast changing environments.
• Models and Organization: The placement of e-learning initiatives within the institution. The array of business models currently available to institutions thinking about entering new markets. The role of Extension and continuing education divisions, and their activities' relationship to the core institution.
• Finance and Economics: The costs, benefits, and risks of e-learning ventures to the institution. The variety of models available for courseware production.

Woven throughout the day were "thick" descriptions of how the institutions represented at the table are grappling with this universe. These aspects of the discussion have been extracted and are being written up as case studies, to be reviewed and added to by the principals. They include George Washington University, New York University Online, and the University of California.

Diane Harley and Gary Matkin introduced the meeting.

Diane Harley:
Information and communication technologies (ICTs) are seen as a potential solution to the triad of pressures facing research universities: 1) holding down costs, 2) increasing access to an increasingly diverse demographic, and 3) maintaining quality. It is not clear, however, that any university has a clear strategic plan for tackling all three pressures with ICTs. There is an adage we use in software development when working with "clients." We usually tell them that they can have it 1) good, 2) fast, 3) cheap -- pick any two. The question is whether or not we can use ICTs to simultaneously reduce costs, increase quality, and widen access, all on limited budgets. Or will we need to pick only two?

Gary Matkin:
We have no common view of the world of e-learning, primarily because our ideas of what this world might look like have been changing rapidly over the last few years. Some years ago there was the notion that online education would continue the way university education was going, and had been going a long time: sort of a cottage industry, with localized provisions and a lot of players serving small audiences.

We began calling the opposite scenario the 'Death Star Alliance' view, where one or a few very large players would emerge as the dominant force in online education. And so it looked like the underlying finances and the business impulses were all there to create either one or several or a very few large scale operations that would dominate the field and become almost like the McDonald's of on-line higher education.

As the years have passed, the Death Star Alliance end of the spectrum has not emerged. Although ultimately there may be several large players, there will still be many small players in this field, and the whole notion of a niche market is going to be one that increasingly dominates the strategic thinking of universities.

The other trend that I see, that the title of this panel ("The Pressure of Markets and Identifying Niche: The Industry View") evokes, is the implication that there is an industry view, as well as a university view. Right from the beginning, it was clear that for-profit corporations of all kinds were going to have a major role in online learning, even that online learning offered by the universities. So those for-profit organizations, which formed part of the industry, were always an important part of university online education. And, of course, many universities began to operate either actually as for-profit organizations, or very much like for-profit organizations.

The question was raised of why universities are entering this market, and why it is necessary for universities to get involved. Michael Goldstein suggested that for many, the reason is money, plain and simple. Particularly in graduate professional education, there are new opportunities to build a market, and this economic opportunity may then subsidize the university's other activities.

Balancing Internal and External Pressures

An Industry View

Gordon Macomber began the discussion by describing NYU Online, and some of the challenges he faces as its head. Three drivers were identified in the on-line learning arena: economic, cultural, and educational. The traditional mindset within research universities has been geared towards education and towards a specific academic culture through which to provide that education. Much of our discussion focused on the tension between the traditional role of research universities and the new pressure of market forces, which have the potential to commercialize teaching.

The economic perspective on teaching is not one that traditional academics has easily adopted; the teaching culture has not had to address the potential commercialization of teaching that appears to have become possible with ICTs. From the perspective of those involved in creating viable on-line programs, the lack of a culture or staff attuned to the economic realities is a real problem. Whether going outside and set up a for-profit, or hiring people to come in and work within the institution, an institution needs business-minded people, who understand academic culture, to handle the economic and finance issues involved.

Julius Zelmanowitz captured much of the tension between economics, education, and culture when he described how many constituencies really have a stake in the potential evolution of the university and e-commerce instructional world.

1. One is the Board of Governors or the Board of Regents. Often successful entrepreneurs or venture capitalists, they have opinions about what the university ought to be doing.
2. There is also the campus administration, and a system-wide administration. The predispositions may be different at the system and campus level.
3. Commercial or venture arms of the university may exist, executive programs and extension divisions. These can be for-profit or non-profit; they can be self supporting.
4. There is the letters and science or arts and science core of the university. Generally, the faculty are primarily interested in research, instruction, and public service; they also provide instruction for already matriculated students.
5. Then there are the student expectations. Students are doing more and more of their transactions with the university in a digital way.
6. Universities worry about what other universities are doing, so there is peer pressure at the university level; you don't want to be last in the queue.

An Institutional View

Martin Trow pointed out that most universities have been very much concerned with the development and maintenance of autonomy, the capacity to work towards their own ends, rather than just being the means to the ends of other institutions. What was formerly economics in the service of the educator has the potential to be turned around to become education in the service of economics.

A fundamental issue is the continuing tension between market and non-market forces. Adjustments to the new environment may have a large cumulative effect down the line, very hard to predict in themselves, but having quite unintended consequences. For example, the commercialization of both teaching and research greatly increases, even exaggerates, the internal differentiation in the reward structure in the university. And that has considerable consequences for recruitment of faculty to different disciplines.

The professional schools have always had a more sensitive response to market considerations. ICT greatly strengthens the power of the user - in this case, the market - as opposed to the producer. That may have subtle consequences for the character and the culture of the professional school.

It is difficult to build these speculations into any kind of coherent policy. It may be possible to see trends, and to identify them, and to respond to them. For example, if attempting to strengthen the response to market forces, is it possible to create policy that develops stronger counter-market forces in the university? What could those forces be? Perhaps some types of subsidies could be developed for parts of the university that are not quite so responsive to the market. We should think seriously about how these non-market parts of the university can be strengthened in the face of the enormous pressures that are described by these new ventures. That seems to be one of the few areas that we can actually plan for.

David Ward suggested that profit and non-profit may not be the two cultures we should be talking about. Institutions have always done things to some degree outside of the market process. There are certain non-market necessities, in addition to the marketplace, that make universities work. It may be problematic if e-learning really can create market penetration into university structures, which may be different from the way the market has penetrated research. The success of higher education will always be that there is a piece of the enterprise which remains outside of the marketplace. What proportion that is, whether it's a quarter of the enterprise or three-quarters of the enterprise, is negotiable. Most institutions work that out in some way, albeit differently.

The challenge that we face is perhaps to recognize fully the culture which e-learning is either being drafted onto or is transforming. The genius of the academic system is that both the faculty government and the administration allow white space or neutral space for experiments to occur. It should be possible to think of a variety of experiments by which e-learning could occur, without completely changing the institution.

Decision-Making, Models and Organization

Where should ventures be placed in the organization? What should their relationship to core campus activities be? The greatest difficulties arise when the organizational culture, the multicultural organization, has not been able to capture and balance the mixture of public and private. When we have captured it and allowed it, it's manageable; it's when it's completely beyond our control that we have an actual crisis. What the emergence of e-learning markets has done is to force us to look at this mixture within the teaching enterprise for the first time.

The compatibility of e-learning ventures with existing enterprises is an important issue for decision makers in higher education. It has been generally acknowledged that the major reason for creating new structures and organizations for e-learning ventures has been to create something that could do things under the wing of the university, but separate from it, so as not to disrupt the internal operations of the institution. Reflecting on his work with NYU Online and e-Cornell, both of which are self-funded, for-profit spin-outs, Michael Goldstein pointed out that the intellectual property policies, the development policies, as well as the operations of e-Cornell and NYU Online, could not have been readily done within the construct of the traditional academic setting. To do so would have required substantial change, which, in the terms of e-learning, would take geological time. An important reason these activities are kept separate from the core institution, even if it's internally segregated, is because it's a risky operation, and problems to the core of the institution must be minimized.

Julius Zelmanowitz suggested that the biggest decision that academic administrators, whether at the system-wide or campus level, have to make is dealing with the potential disconnect of the e-commercial enterprises from the core of the university. Reasons for setting up "offshore enterprises" include removing constraints of some university policies that are either archaic or, while appropriate for much of what the university does, are inappropriate for e-learning enterprises, which are operating in the fast-moving world of e-commerce, where you want flexibility and the ability to make quick decisions. But any total disconnect from the core comes at a real price. It also runs the risk of really not capturing that which is most valuable and most unique within the university. The predilection of some of our panelists (David Ward, Mike Heyman, Julius Zelmanowitz) is that developments that occur in our actual core classrooms should fertilize e-enterprises, and that should be the unique niche that research universities occupy.

In the University of California system, it was pointed out that there is a panoply of policies concerning continuing education, part-time education, and degree granting. Gary Brewer, Dean of UCB Extension, spent some time discussing the challenges of operating an on-line continuing education program, given current policies. Mike Heyman pointed out the past problems at UC in the relationship between some programs in professional schools and engineering, for instance, and between the potential for executive courses or for continuing education. Who's really responsible for those? Should it be UC Extension, or should it be the schools themselves? UC Extension perhaps ended up with a form of organization that works fairly well, but needs some help and redefinition in the e-commerce world. The Extension division can be relied on to carry out most of the distance learning activities that occur, and to cope with the kind of problems we're talking about here, leaving the balance of the academic enterprise to be carried out as it is, within the core institution. But in order to do that well, we could rearrange that set of relations in a way that would provide Extension considerably more flexibility with regard to the courses that it offers. It ought to have the opportunity to get into the degree world in some appropriate way, rather than to rely solely on either the interest of individuals in informal education, or certificates and the like.

Niche

The importance of "niche" identification permeated our discussions. As pointed out by Michael Goldstein, higher education is the ultimate niche marketplace. There are roughly 3,000 institutions, depending on how you count it. Every institution has its own niche. It is probable that the e-learning institutions that will have a chance of success are looking very carefully at what their particular niche is.

For example, at Cornell, the approach is not to roll out the university, but rather to identify areas where the institution can build on particular capabilities. Penn State is focusing a good deal on continuing and extension education. The bulk of what they're offering is associate degree programs, which is a niche that has a captive market. Penn State's niche has also been the global reach. In fact, as you build an infrastructure with enormous reach, and then build on that infrastructure, you already have the capacity to operate pretty much throughout the world, whereas most institutions would have to spend an immense amount of money to be able to do that. So the universities with that infrastructure in place have already carved out a geographic niche.

Louis Katz pointed out that the strategy at George Washington University is to spin off a new company, a for-profit, regional learning solutions company that will focus on GW's core markets (government and the regional corporations in the Washington DC metropolitan area). They also have an international focus, to some extent, because there are some markets that do very well internationally. By building off of those market niches that already exist, the need for large sums of new capital is not as crucial. So what they are doing, at least initially, is viewing these as programmatic investments.

As pointed out by Gary Matkin, the quick shifts in business models that can be observed in e-learning ventures suggest that identification of niche is not always easy. Inside the niche market for universities, the decision may be to go after degrees, e.g. the MBA, the "low hanging fruit." Suddenly the competition gets intense, and it turns out not to be so easy, so instead the corporate market will be the next target. This is what NYU is doing. It means creating shorter types of programs with a faster development turnaround, because that appears to be what the market wants today. The uncertainty, of course, is what the market will want tomorrow.

For David Ward and others, the question is how to translate the richness of the university experience at a distance. The ideal niche might be where there is some overlap between the traditional product and the new product. On this list would be freshman courses. This is a case in which our style of education is not necessarily ideal. We may create a new product that serves our own needs, and then it will accidentally serve other needs and populations. Another area is advanced knowledge. It ought to be possible to rethink the Master's degree, so that it would now be possible for people with a Masters or Ph.D. in one field to get a Master's degree in another field. It may well be that we have the monopoly on knowledge to create effective at-a-distance graduate short courses for adult professionals.

It also may be that there will be some other species of product other than a degree. Can the university, in its complex culture, create some space where neither classroom nor credit is the currency? This might mean modules that are in a sense "just in time," modules that are highly customized to specific cohorts of learners. The challenge, obviously, is whether our academic culture is capable of transforming in order to create a product that we currently don't deliver. Our culture, or some segment of our culture, will now have to decide how we might do that.

What is the comparative advantage for universities over the other actors in this marketplace? What are universities trying to accomplish by being involved in the e-learning marketplace? One goal of a university might be to generate revenues. Another purpose is to simply improve the delivery of intellectual resources on campus.

Roger Geiger pointed out that there are paradoxes, or inherent limitations that universities confront when assessing their roles in e-learning ventures. It appears that the university is largely aiming for the high quality tier in this market. The universities have enormous intellectual capital, which can be converted into content. Here is where Geiger finds the first limitation or paradox. It's clear that this may be the most valuable role that universities have to play, but it's clearly not the one that's going to be the most lucrative. The things that the university is best at, that they are clearly superior at, are the things that are least lucrative in the marketplace (e.g., Charles Faulhaber's Catalan language course). The things that are most lucrative in the marketplace are places where the university probably has no comparative advantage at all, such as business training.

The second limitation is related to prestige. The advantage that universities may have in an e-learning marketplace in terms of brand name has already come up in discussion. But there's no evidence that there is or will be a differential value in the marketplace. On the other hand, there is evidence that traditional degrees from our elite universities make a big difference in the marketplace.

Another complication involving prestige is, of course, that prestige depends on scarcity. And what makes economic sense is scaleability, how to scale up to the delivery of services. So the whole process of e-learning is to produce high scale delivery, whereas prestige depends quite heavily on scarcity. This limitation concerns faculty, because ultimately the intellectual capital, the prestige of the institution, depends very heavily upon the quality of the faculty. It is very difficult to provide faculty with incentives for their participation in e-learning. The fact of the matter is, the faculty in the universities are overloaded, and have become increasingly overloaded in recent times. The kinds of structures that we're talking about today have clearly developed primarily on the periphery of the university, and tend to bypass the regular faculty.

Finance and Economics

Michael Goldstein pointed out that the economics of e-learning has forced us to look at different finance models. Because e-learning goes beyond the traditional confines of the institution, and brings into it the powerful concept of marketing to different constituencies, we need to accommodate a different set of financial and cultural and economic realities. Ultimately, it comes back to how we pay for it, and how we can make it pay. Since it is e-commerce, e-learning, it's a different way of life. This is a big piece of the struggle, because there is definitely no one-size-fits-all approach. We're in the process of learning what sizes fit what kinds of institutions.

Starting with the economics of the traditional model, once the campus is built, there's a revenue stream. The nice thing about traditional face to face education is that when we put a teacher in front of the class, the moment he or she starts teaching, we can begin to collect revenue. E-learning has dramatically changed that. We start with the high cost of creating courseware, and then over a relatively short period of time we have to reinvest in it, upgrade it, and have it meet the changing technical environment. And we don't collect a dime until we've built the courseware, so our revenue stream starts long after we have invested in the product. This means we have a working capital gap, and there's the potential for a huge gap. We have to pay for that course in advance, and our institutional systems are not built for that.

What this situation has done is driven us to look at the economics of the situation in a different way. There are essentially two different kinds of models, internal and external financing. Generally, the usual internal financing model is reallocation. Reallocation in this kind of a setting is very difficult, although many institutions are relying on such a model.

In addition to the internal model that relies on reallocation, there is a new money model, which is what Cornell University has done. The Board said, 'Let's take x million dollars from our investment portfolio, and instead of investing it in Firestone, we're going to invest it in e-Cornell, a for-profit, wholly-owned subsidiary." It doesn't change the money available for other programs; there's no reallocation. It's simply an issue of investing it internally, to ourselves, rather than investing it externally.

The external model is what, for example, Maryland and other public institutions are more likely to do. Maryland, without large endowment resources, has gone the venture capital route. Another external financing route is a strategic partner. The venture capitalist is looking for a return within a finite period; the strategic partner potentially, at least, is looking to be there for the long-term.

James Hyatt described some of the many opportunities that UC Berkeley is considering. The problem is addressing how the initiative will be financed, particularly the infrastructure that supports on- and off-campus activities, and whether or not these opportunities will result in a positive gain for the institution. Until recently, UCB has been handling these choices somewhat ad hoc. A new effort is being made to centralize decision-making processes because the expensive infrastructures that undergird e-learning also have to support e-commerce, e-business, and all the other things in the campus e-environment. When the campus is approached by outside ventures, a variety of issues must be addressed:

• the degree to which partnering with an external entity might provide an added value versus going it alone.
• protecting the brand name of the university.
• developing a business plan that maps revenues and expenditures and looks at the full cost of participation. There are start-up costs, which are not insignificant; ongoing maintenance and support costs; and site licenses.
• the trade-off between investment in e-learning versus other institutional priorities.
• potential conflicts between what the campus wants to do versus what the system wants to do, as Berkeley is part of the 10 campus University of California system.
• taking into consideration the public versus private nature of the university; for example, engaging in competition as a public university has many legal ramifications.
• the many risks in this enterprise, including those shared with the partners, as well as risks to institutional reputation and credibility (the risk to the institution in being affiliated with failed ventures).

Course Development Costs

Course development costs were discussed throughout the day. Besides the question of demand, there is the issue of prestige as it relates to a demand for something special. The cost functions of the traditional elite institutional program compared to the advanced e-learning programs are diametrically opposed. In the traditional elite program, there is a low set-up cost for each course and quite a high marketing cost. If you get more than 15 or 20 students in a seminar course, it begins to deteriorate. To develop quality on-line learning environments, the set-up cost is very high, approaching $1 million a course in some cases; or in the case of infrastructure, a huge investment in broadband technology is necessary. So the set-up cost is very high and the marginal cost, once you get things underway, is of course zero.

There is a very wide range of models/possibilities for course development. In the high level courses, for instance the half-million dollar course, the faculty member, who is typically a distinguished research faculty member, is supported very extensively by a structural design team. He or she will be providing content, which is then built into a learning environment. The individual may show up in streaming video or in audio. You're buying, partly, his brand name. The faculty member becomes almost like a scriptwriter, who delivers the script which then becomes the movie; it is in between delivering the script and the movie that this transformation occurs.

The Phoenix model is an institutionally designed course. They started out by saying, "We want an MBA Program. And we'll assemble experts from employers, and we'll figure out what the learning objective should be, and we'll parse that into courses, and we'll design this thing, square one, from the institutional standpoint."

Then you drop down into the individual and structured design, where there is a curious set of models. On the one hand we have something like online learning at UCLA, where a content expert instructor, often a work-for-hire instructor, sits down with a technologist, and together they put up some pages on the web that serve as the online course and part of the instruction. This costs about $1,000 and maybe five or six hours from the instructor.

As at NYU, another model involves the faculty spending 8 to 10 hours in primarily a reviewer's role. He or she is probably supported by non-faculty content experts and a technical team. The faculty member may make minor suggestions such as the sequence of lessons, or corrections to content.

Then there is the UC model, maybe 140 hours of faculty time at Berkeley, or 140 or 150 hours at Irvine, where the faculty are really doing the writing themselves, assisted by a technology team.

Someone like Don Norman will argue strenuously that by investing what Unext does in a course (>$500,000), they are creating a vastly superior learning environment. That is absolutely not supported by any kind of decent data, but that's the script. They're not investing that kind of money in the course because they think it's a nice thing to do; they're investing in it because they believe that ultimately the market will reward that kind of capital investment.

This brings up the marketing aspect of e-learning: you could be enormously successful if it pays off, so to speak. The University of Phoenix' audience is primarily business, so their success depends upon the degree to which a business customer will view what they are selling as, in fact, adding value to their environment. So they are betting that this is in fact the case. Nobody cares how much it costs, but they're erring on the consumer side because they have an expensive product.

In addition to course content, the design and maintenance are important. What is the quality of instructional design? How much should be spent on the instructional design? How much should be spent on media, enriching the range of stuff being put into the course? And what kind of content is actually purchased? Is it worth it to shoot video and so forth? That's what really adds up the cost. There's a very wide range, and there are probably no real data that say that spending a million dollars to create a course is more effective for the learner than spending $30,000.

There is still the cost of maintaining an e-course. There's a faculty component and a student services component, which is relatively costly. The weak spot in almost all the learning courses programs, so far, is in student services. That's where the learning management systems, which are very expensive, begin to come into play.

Policy / Research Questions

Sheldon Rothblatt emphasized that there are many different kinds of institutions and different kinds of academic cultures. Of course we want to know what the future's going to be like, but we also need research projects that assess what impacts we have already been able to measure in our current environment. What cultures have been changed? What cultures have been modified? What has not been modified? What has shifted in our academic culture? What has not shifted? There is the question of learning for these different audiences in their different environments, which is really a clue to some other issues about what learning is and where it takes place.

David Breneman has been looking at why Wall Street is investing in private on-line education. Why are students attending? What are they getting? There is great interest in the new degree-granting entities, many of which have issued stock. Right now, or at least as of a year ago, the data sets aren't out there that identify the institutions well enough to allow you to examine rates of return for these non-traditional entities. His group has also become very interested in the continuing education units of the major universities, a great unexplored part of this whole terrain.

We wouldn't want to write off e-ventures that don't work out as necessarily being irrational exuberance, but we do want some kind of model to understand why it is that these things were done in the first place, suggests Saul Fisher. In addition to the research questions of demand and supply behavior among institutions, issues of financial aid, revenue dynamics, rates of return on education, and demand behavior among students, there is also the question of who might be conducting this research.

Another set of issues, not in economics per se, but more in terms of finance, concerns investment strategies. The discussion today has centered on the range of successes and failures and different case studies, but what kinds of patterns might we start to see with respect to investment strategies? What sort of precedents are there with respect to investment strategies in the non-profit sector, venturing into any sorts of business-type endeavors?

Martin Trow points out the continuing necessity for research, especially given the continual and rapid obsolescence of the technologies whose effects are being studied. So one question that any research plan might address is how robust, or how stable, or how persistent the research findings can be in the face of the rapidity of technological change. That, in turn, calls for the kind of research that is highly reflexive, subcritical in that area.

Secondly, it seems that a reasonable hypothesis is to see ICTs as an enhancer of student qualities that are already present to some degree. Therefore student motivation may be a particularly crucial characteristic to study in connection with the effectiveness of ICT. To what extent do new technologies work to generate motivation, and not just serve those already highly motivated?

Intellectual Property

Michael Goldstein began the discussion by bringing up an important issue that has little to do with economics, i.e., the culture issue. The culture issue really ends up being the question of intellectual property. Who owns it? This was never really a problem when we were talking about someone standing in front of a class. The faculty member clearly owned what he or she was giving to the class. So now there is a strong precedent for the course as property owned by the faculty member. But if we use the word 'courseware,' suddenly that's a very different question. The faculty member is contributing to a defined product; that product is developed by a team, is then sold, and has value. New models are being created, which don't adapt themselves very well to the traditional internal workings of the institution.

A driving force for both Cornell and NYU was to be able to establish an e-learning structure that would not require turning the university on its head. In the working agreement between Cornell University and e-Cornell, one provision stipulated that the materials provided by the faculty member were his/her works made for hire. The faculty heard about this in about two milliseconds, and this was a life-threatening experience for them. First of all the response was, 'Guys, get over it. This is not the vehicle for changing the university's relationship with its faculty.' Ultimately, a three-cornered agreement was worked out, where the faculty member is licensing the intellectual content of the course, then this licensing is the business learning product, and the distance-learning product is jointly owned by the university and by e-Cornell. E-Cornell produces the business-learning product and markets it, and what Cornell contributes, which gives them co-ownership, is the name. The faculty has the right to keep the intellectual content, and use it any way he or she wants, even if they go to another institution, with the condition that they sign a non-competition agreement not to use that same intellectual content to create a competing business learning product. There is nothing here that speaks about the relationship between the university and the faculty, in terms of the faculty's rights and prerogatives; that issue has been completely separated.

It was agreed that intellectual property rights are a big issue in terms of new media and education, and there's a consensus actually developing within the university that's interesting. Nationally, the mainstream is to move more towards the textbook model than the patent model. The directive seems to be that, at this stage of courseware development, it's really important to give the faculty incentives to be innovative and creative, rather than giving them disincentives. Of course, where the university makes an obvious contribution, there will be an effort for some recapture.

In terms of moving toward the textbook models, rather than a patent policy model, particularly given the accepted course with significant university involvement, Michael Goldstein comments that Pandora's box is probably a more apt analogy than Sisyphus. The reason is that most institutions are moving in the direction of a bipolar model, but everybody is terrified of the middle. The question is courseware: how is it defined? It is compared to textbooks because of the intellectual content. Ownership with regard to courseware is an important issue; whether it's an economic issue or not, it's an enormous emotional issue. It seems that treating the issue not only in terms of getting maximum economic value, but also in terms of encouraging people to be creative, is a major challenge.

Gary Matkin argues that the issue of a patent vs. textbook model is a false dichotomy. Universities start out by saying either that the faculty members own this copyright or the university owns the copyright, but these come right down to the same place, unless there is an agreement that specifies how this thing should be owned, or a third party agreement requires that something else happen, or substantial university resources are being used. The latter becomes an issue when some faculty member has been using substantial resources without an agreement, and it sort of pops up, and somebody says, 'Oops, we've got this very valuable stuff that we can sell and now we've got this dispute.' It turns out to be a relatively small subset of possibilities here, because the university extension would never start an online course development without an agreement with the faculty.

David Ward also comments on the patent analogy. The difference with patents, he suggests, is that there are significant up front costs, legally and otherwise. If the university is providing very good service in that respect, and there is a track record of success for tackling these problems in the patent arena, then individuals see the advantages of having the university negotiate this terrain, and they don't mind sharing the profits. The challenge with the courseware is that the probability of payoff is significantly less. This represents a significant difference, which is a challenge.

Ward sees the crisis beginning to develop at Wisconsin as stemming from people asking for accountings of all supplementary revenue. Consequently, other issues are being raised that traditionally have not been an issue, because, unlike patents, they're amorphous and unexplored. The whole question of what might be described as consulting has become very visible. This even includes consulting for the public sector: there have been several serious problems with pay for engineers and lawyers consulting for the public sector, and they're in public employ; or even worse, in court action, pay for individuals who are seen as not working in the "interests of the state." In the past, these things were very quietly handled by somebody who would have had enough common sense not to give testimony in that particular case because it would embarrass the university.

So the whole issue of intellectual property is now being raised in other areas, which is perhaps why, even though we're coming to a middle point between the patent and the textbook model, that ultimately e-commerce will force us to have a more specific policy. This could be good or bad. Universities like the idea of not having too strict a policy, and then simply dealing with the exceptions. But the challenge is that when there are too many exceptions, there needs to be a policy, and working out this policy can be very difficult.

As to the future in the intellectual property area, one lesson (perhaps Intellectual Property 1A, as taught by the entertainment industry) is that the question is not who owns the property, but what is the deal. In the last seven years, the entertainment industry has really worked out the business of how much the studio owns and what the individual writer owns. In our case, the faculty may own the content, but the university has a real say in setting the parameters of allowable deals. One thing to avoid, which has come up in journal publishing, is faculty having to go outside the university to pay to buy that intellectual property back. Presumably, if faculty develop some courseware here at Berkeley, they will be able to use it, but Irvine might have to pay for it. Again, the big consideration is what the deal looks like. Berkeley and/or the faculty member may own the courseware, but that's not where the university's stake lies; the university's stake may be in what the deal is. What are the policies for faculty using the stuff that they own, at least with regard to the university's future?