In early 2002, when the Board of Regents of the University of Texas (UT) System asked the virtual campus of the System - the UT TeleCampus - about the cost effectiveness of online education compared to traditional face-to-face education, the UT TeleCampus decided that the easiest place to start such a cost analysis was to compare delivery costs as opposed to development costs.

Conducting a reliable cost analysis of online education is a complex endeavor that takes into consideration many variables (see "Looking at the Cost of Online Teaching and Learning in Higher Education from the November 2004 issue of Educational Pathways). A comparison of online and face-to-face development costs, for example, would have to include an analysis of how face-to-face courses evolved over many years, which could be difficult to quantify.

Associate Director of the UT TeleCampus Rob Robinson, who conducted the cost analysis, explains that after deciding to focus on delivery costs only, he took a pathway in which he examined the published budgets of nine institutions and parsed out specific line items related to face-to-face delivery costs that would be analogous to the delivery costs of online courses.

"We tried to capture those things that are associated with delivering the educational portion of the mission of these institutions," Robinson says. That included such things as "buildings, power, water, keeping the air conditioning running and the toilets flushing, as well as the library space and some portions of administration including the registrar’s office."

Overall, the delivery cost categories for face-to-face education were:

• Academic Support Services - Included line items for non-instructional staff and materials.
• Student Support Services - Primarily a salary and wage category.
• Institutional Support Services - Primarily a salary and wage category.
• Operations and Maintenance of Plant - In addition to staffing, this item included a significant materials cost.

In addition, Robinson came up with a method for appropriately allocating the depreciation and amortization costs of face-to-face courses. He captured the ratio of the educational and general expenditures (those that are directly attributable to instruction) to the total university expenditures in the following formula:

Total Operating Expense, Education & General
Total Operating Expense, Investment in Plant

This ratio, ranging from 0.5 to 0.7, was then applied to the depreciation and amortization line item and included the campus’ total cost of delivering instruction. Identified costs were then distributed across each campus’ reported semester credit hours for the year, resulting in a cost per semester credit hour (SCH), which became the unit of comparison for the study.

Another important factor that needs to be taken under consideration with regard to Robinson’s cost analysis is that faculty salary costs were not included. "In the TeleCampus model, faculty teach in load," says Robinson. "That allowed us to net out instructional salaries because the pay is the same whether teaching face-to-face or through the TeleCampus."

The delivery cost categories for TeleCampus online education were:

• Staff Salaries - Those directly involved in the support of faculty and students. Marketing, however, was excluded.
• Infrastructure Costs - Represents both in-house and contracted technology and services (i.e. course management system, hosting, help desk, academic services).
• TeleCampus Digital Library - Database subscription and staff costs. The Digital Library is used to "level" access to resources across all the institutions’ digital holdings.
• Training Costs - For faculty and technical support on the campuses.

After calculating the cost for TeleCampus online course delivery, it was spread across the SCH represented by the total number of courses offered.

Robinson says that before the results of this analysis were calculated, his gut feeling was that the TeleCampus would come out at the high end. "We did not think that we were going to see an order of magnitude or standard deviations on the high or low ends, but we did think we would be toward the top. But, what we found was that we were toward the bottom. In fact, our delivery costs are second to the lowest in both years (FY 02 and FY 03)." The TeleCampus online delivery cost for FY 02 was $91/SCH compared to an average $129/SCH face-to-face delivery cost from eight campuses. The TeleCampus online delivery cost for FY 03 was $88/SCH compared to a $123/SCH average face-to-face delivery cost from eight campuses.

The numbers below show the costs per SCH by category, from 2002:

Average Cost/SCH Face-to-Face Education at Eight Institutions

Academic Services $36.64

Institutional Support $46.23

Depreciation & Amortization $17.91

Student Services $16.35

Operations & Management of Plant $37.99

Infrastructure $37.19

Student Services $15.89

Faculty Support $14.13

Operation $23.71

Robinson believes online courses have lower delivery costs because the infrastructure expenses typically associated with face-to-face courses do not exist in the online mode. "We (UT TeleCampus) do not have to keep buildings humming. Buildings are expensive, and they are not used 100 percent of the time."

Robinson adds that the members of the Board of Regents were, in general, satisfied with the results of the cost analysis. "I would categorize it as the majority were pleasantly surprised, a couple wanted to question the methodology, and a few did not understand it."

Darcy Hardy, assistant vice chancellor and director of the UT TeleCampus, explains that having a governing board that asks these kinds of questions is a positive sign, because it shows that the conversation at UT has moved away from questions about the quality of online teaching and learning to more substantive issues. "We have been through that (questions about quality) and now they (the Board of Regents, whom Hardy refers to as ‘forward thinking’) are actually looking at data that not only will help continue the justification of what we do, but it can help them on other system-wide and state-wide initiatives."

Robinson, R. "Online Education: Is it Cost Effective," 2004.

The UT TeleCampus is a service-driven, central support system for online education initiatives among the 15 universities and health science centers that comprise the UT System. Figures during the Fall of 2004 show UT TeleCampus with 20,000 enrollments, 17 fully online programs (degree and certificate), 200 courses, 220 faculty and instructors from across the System, and a 85% course completion rate for undergraduate students and a 97% course completion rate for graduate students.

www.telecampus.utsystem.edu