By Michael Barker
(Page 1 of 4)
In the 17 years since the publication of "A Nation at Risk" (National Commission on Excellence in Education, 1983), Americans have grown steadily more anxious about the quality of their public schools. Business leaders have complained that high school graduates are often unable to perform even rudimentary tasks, and parents have clamored in ever greater numbers for reform - longer school days, stricter disciplinary standards and a greater emphasis on traditional skills such as reading, writing and mathematics.
Fortunately, as the late economist Herbert Stein famously observed, things that can't go on forever tend not to. And that is just about to be proven again with education in America.
In the last few years, hundreds of companies have sprung up to compete for their piece of the $740 billion Americans spend annually on education and training. Some companies are using Internet technology to overhaul the way schools procure books and manage their financial records. Others are trying to build nationwide chains of private, for-profit branded schools. Still others are niche players, focusing on some small segment of the education industry (such as I.T. training), or devising new applications they hope to see embedded in the technologies of other companies' products (such as adaptive learning technologies).
But the most ambitious of these companies are the ones that want to create via the Internet a learning environment that might actually dispense with the teacher - at least in the conventional, classroom sense of the word. The education industry provides a perfect example of how the Internet is transforming the United States economy by enabling the birth and development of new companies that could never exist without it.
No one yet envisions a world where children or young adults are effectively taught by intelligent machines, but it is easy to imagine how computers, audiovisual technology and the Internet will reshape the classroom experience. Think of how cellular phone technology revolutionized telecommunications access in many third world countries, eliminating the financial burden of extensive investments in wiring, stations, etc. In much the same way, Web-based content and technology are destroying the barriers - fiscal and structural - to the reform of education and training at every level: K-12, college, post-graduate and professional. Some of this reform will entail futuristic, gee-whiz technology still on the drawing board. And much of it is awaiting a further drop in the cost of computing power and an expansion of available bandwidth. But a big part of that future learning technology is already available in the most advanced tools and applications used to train I.T. professionals.
There is certainly ample financial incentive for these developments. Eduventures.com L.L.C., a Boston-based consulting firm, puts total 1998 revenue for the for-profit education industry at roughly $82 billion ($24 billion for products, $30 billion for services and $28 billion for schools of various types). Even so, Merrill Lynch & Company estimates that whereas education and training accounts for perhaps 10 percent of the nation's G.D.P. ($700 billion-plus), the stock market value of education industry firms is just $16 billion. That figure is less than two-tenths of 1 percent of the $10 trillion domestic stock market. Health care, by contrast, accounts for roughly 15 percent of both the stock market and the G.D.P. - a fact that education industry entrepreneurs seldom fail to point out.
As
John T. Chambers, C.E.O. of Cisco Systems Inc., a network hardware
manufacturer, recently observed, "the next big killer application
for the Internet is going to be education. Education over the Internet
is going to be so big it is going to make e-mail usage look like
a rounding error."
INTERNET PORTALS
Several education companies now use Internet portals to sell conventional products and services - desks and chairs, office and classroom supplies, even payroll services. Cash-strapped schools with relatively fixed resources are increasingly outsourcing non-educational services in order to retain dollars for the classroom. By using the Web to put the product squarely before the customer, companies are able to compete nationally in an area that was previously balkanized along local or regional lines. A school shopping for desks in California was once limited to four or five familiar furniture makers; soon, it will be able to choose among a vast network of suppliers across the country.
A typical example is the Epylon.com Corporation, which is launching a "business-to-education" Web site to link buyers and sellers of products and services in the K-12 market (textbooks, school furniture, food, etc.). The company will make its money by charging the seller a transaction fee ranging from 2 percent to 15 percent, depending on the size of the purchase. Epylon.com, which has financial backing from the Intel Corporation, is beta-testing its portal with 25 California school districts, and hopes to extend its reach to the rest of the state's school districts - and perhaps others nationwide - within a year. If that works, the company hopes to use the same approach to break into the market for state and local government purchasing.
A more modest example of how education is being transformed by the Internet is Ecampus.com Inc., a discount bookstore for college texts launched by former Kentucky governor Wallace Wilkinson, who had already founded a successful chain of bookstores. If Ecampus.com can gain access to lists of required books at a sufficient number of colleges - a very big "if" - it could provide ferocious competition for conventional college bookstores, 70 percent of which are owned by the schools themselves.
Internet technology is also being used to market educational content produced by schools, individual instructors and private firms. One company - ZapMe Corporation - actually provides schools with free computers and high-speed Internet access in exchange for a school's agreement to place its students before an ad-laden portal for a certain number of hours each day. ZapMe uses its own network and interface to provide access to thousands of pre-selected, indexed educational sites, applications and services for students aged 13 to 19. The arrangement enables participating schools to increase their educational offerings at a relatively low cost, while ZapMe collects a fee for delivering a generation of young consumers to its advertisers.
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