MOOCs – The revolution has begun, says Moody’s

A new report by Moody’s Investors Service suggests that while MOOCs’ exploitation of expanded collaborative networks and technological innovation will benefit higher education in the United States as a whole, their long-term effect on the for-profit sector and smaller not-for-profit institutions could be damaging.

MOOCs – massive open online courses – have garnered considerable attention since Stanford University’s artificial intelligence course in the autumn 2011 semester attracted nearly 160,000 students. While the course’s completion rate was low (15.6%), the scale of the response excited many in the higher education community – from institutions to venture capital companies.

Indeed, the report notes that MOOCs represent a “pivotal development” in the evolution of higher education and have the potential to revolutionise the way a centuries-old industry has operated.

Online education’s makeover

Moody’s identifies six major credit effects associated with the MOOC movement, ranging from revenue opportunities and competitive pressure within all sectors to improving reputations and establishing niche markets in online higher education.

But, most importantly, the credit ratings company observes that MOOCs have the potential to transform the way distance learning is perceived and delivered. In particular, they will bring a “significant image upgrade for online education”.

It is true that since the mid-1990s, online options in higher education (as a viable alternative to the residential classroom modality) have met with mixed success.

On the one hand, for-profit providers have increasingly come under pressure in terms of the quality of their offerings and student indebtedness, says Moody’s.

On the other hand, non-profit and public institutions have been able to exploit new technologies to transform pedagogical approaches as well as curricular programming and, as such, to advance globalisation initiatives and realise various budgetary benefits.

But the important development associated with MOOCs is that they are able to offer exponentially larger enrolments. And, with these, the potential profits are much larger.

Elite institutions

The report suggests that institutions with the strongest brand identities will experience the most positive credit impacts from the new platform, although it predicts national universities will benefit more than those with a global presence.

A case in point is the recent creation by two Stanford professors of Coursera, a platform of elite international universities – including Princeton, École Polytechnique Fédérale de Lausanne and the University of Toronto – that offers 124 courses across 17 categories, from software engineering to aboriginal worldviews and education.

Coursera has enrolled more than 1.3 million students onto its free courses in the five months since it was launched, and announced last week that has more than doubled – from 16 to 33 – the number of its partner universities and will offer more than 200 MOOCs.

New partners include the universities of Columbia, Brown and Melbourne, Hebrew University of Jerusalem and Hong Kong University of Science and Technology. While most of Coursera’s students are from the US (38.5%), significant numbers hale from Brazil (5.93%), India (5.16%), China (4.11%) and Canada (4.07%).

Similarly, funding from a consortium comprising Harvard University, Massachusetts Institute of Technology and University of California – Berkeley signalled the foundation of edX, a non-profit partnership that is offering seven MOOCs this academic year.

In an attempt to offer secure assessments, edX recently announced that students would take proctored final exams at Pearson VUE’s test centres around the world.

For-profit institutions

Moody’s predicts that regional colleges and universities as well as local residential institutions are less likely to fare well with the MOOC revolution.

They could potentially accrue some benefits, such as the facilitation of operational and pedagogical improvements by outsourcing comprehensive or generic courses. Having done so, they could then focus on developing or enhancing more marketable niche specialties.

These smaller to middle-ranking institutions, however, could lose market share if they fail to broaden their brand recognition or do not expand their geographic draw of students.

The higher education sector most likely to lose in the face of the growing availability of MOOCs is the for-profit sector. In particular, these providers will need to compete more vigorously in areas of the greatest subject matter overlap with the non-profit and public sector, especially in terms of enhanced student services and positive outcomes.

Implications

But, what does all this mean?

The most profound change will undoubtedly be the shifting of costs away from students as long as MOOC providers succeed in keeping courses free – or for minimal fees, if various revenue options like certification are exploited.

In the same way, it remains to be seen whether – or how long it will be until – MOOC credits are integrated into traditional institutional degree programmes.

In the end, elite institutions are positioned to capitalise most effectively on the MOOC platform, by increasing their global presence and deriving greater credit benefits from new markets.

Those institutions with limited brand identities, however, will have to compete more intensively to retain – or develop – a competitive edge.