NYC Mulls Novel Education Portal

NYC Mulls Novel Education Portal<@VM>The Growing Education Market

Edward Meekins

By William Welsh, Staff Writer

The New York City Board of Education is set to approve a revolutionary plan that would establish an educational Web portal and bring computers and Internet services to the entire school system at no cost to the city.

The self-funding portal could generate revenue of $120 million to $11.5 billion through advertising and transaction fees over 10 years, according to a feasibility study conducted by Chicago-based Andersen Consulting.

The funds would be used to pay for the portal's education services and for the badly needed investment in technology and computers for New York's schools.

"Even if it is only $200 million [that the board receives], that is better than the current situation, which is that they have almost no money for this," said Edward "Russ" Meekins, a partner with Andersen Consulting.

The likelihood that the board of education will request proposals from industry for the project is running high, following the study's Sept. 27 release.

The same day, the board directed the school system's chancellor to develop a plan of action that would include the project framework and timelines, and also draft a policy statement detailing the commercial aspects of the plan, said Victoria Streitfeld, a board of education spokeswoman.

The board is scheduled to meet later this month on the matter, she said.

The study essentially provides an economic model for an education portal that would generate funds for technology initiatives, such as wiring the schools and buying computers and other equipment for classrooms.

The project signals the growing interest by industry in the K-12 education market, valued at $1.4 trillion, according to Andersen Consulting.

"This is the tip of the iceberg of what might be a whole new business opportunity for private industry," said Tom Davies, a senior vice president with Current Analysis of Reston, Va.

The New York board embraced the Andersen concept because it would accelerate the delivery of computers and technology to the schools without using existing funds, and it would generate new sources of income for other needs within the school system, said Andrew Rasiej, an advisory member of the board's technology committee.

"The board of education is deeply constrained by budget pressure that forces them to make difficult choices between existing operational needs and any new initiatives," he said.

The portal project would require a team of vendors to build a portal and provide students and teachers with the computers and other equipment to access the portal. It would create from scratch a new online community of an estimated 4 million Internet users tied to one of the largest school systems in the nation.

This community would be served by an Internet service provider and other technology companies that would generate income through a combination of controlled advertising and transaction fees. The team likely would include an ISP, computer manufacturers and application service providers, said board members and advisers.

Following the advice of Andersen, the board will ask vendors to divide the portal into two zones that would effectively separate the world of education from the commercial world. A commercial-free internal or "education" zone would focus on content and applications that facilitate learning and the integration of technology into the learning process.

The portal's education zone, for example, could provide a place for information sharing among teachers, students, parents and administrators, provide training for teachers and administer assessment tests to students.

An external "partner" zone operated by technology companies partnering with the board would allow advertising and provide Internet access. Parents would be responsible for controlling students' access to the external zone and to the Internet.

It is through the partner zone that the industry team could cash in on revenue from advertising and sales. The 4 million estimated users would be of enormous value to the ISP as an advertising audience and as purchasers, according to the study.

Board members have not worked out the details of what actually would be bought and sold on the Web site, but it might go beyond school supplies to include the full range of retail shopping available on the Internet.

The portal audience likely would catapult the ISP into the top 100 Web portals, according to Andersen. Further, the concept could be reproduced for other school systems in major cities such as Chicago and Los Angeles.

The dollar amounts reported in the study reflect only the range of possible value that could be created through the concept of an exclusive ISP contract for the New York City public schools and are not guaranteed, said Meekins.

"We told the board that we aren't guaranteeing anything," he said. "It depends whether the firms that might bid on it are willing to take the risk. ... But it seems like it is worth testing the market."

Andersen Consulting used four factors to estimate the value of the Web portal to the ISP.

? First, it measured the potential "lifetime" revenue of customers.

? Second, it measured future revenue streams, including advertising, retail electronic commerce and licensing agreements.

? Third, it measured potential for resale if sold to other school districts.

? Last, it calculated market capitalization by comparing the board's portal to various other portals.

While the portal undoubtedly will bring in revenue from advertising, Meekins said the board and technology companies might also expect to receive a small percentage of each transaction generated through the partner-portal zone.

If the payoff is really huge, then it might give vendors an incentive to step into this market and make the investment, he said.

Many details are yet to be determined. One of the most important details is how much money the ISP would be willing to pass along to the school board. For this and other reasons, it is highly unlikely that the board would ever receive billions of dollars of revenue, said Meekins.

But even if the portal generated only enough cash to pay for the service, it would still be advantageous to the board because it would not have to use money from its tight budget for the technology initiative, said Rasiej.

The board's portal community is a wide audience that includes students, teachers, parents, administrators and alumni, according to Andersen. The extended board of education community includes community organizations, volunteers, and for that matter, anyone in New York City.

A board of education portal could bring many people online who have never been online before, said Rasiej.

"There is nothing to prohibit bringing the audience or portal to a larger New York City audience that would want to have its activity go through the board's portal with some of the revenue flowing back to the board," he said, adding that some individuals might purchase goods and services through the portal specifically to support the board.

"People might design their online activity in a way to generate some financing for the board," Rasiej said.

Although the project would definitely require an ISP, Davies said that it is entirely possible that large systems integrators might work with Internet advertising firms on such projects.

If the plan is successful, "it would fundamentally change the pace at which government would deliver electronic education and services," said Davies.Education is emerging as a for-profit opportunity by companies seeking a share of the $1.4 trillion spent on K-12 education annually.

Four primary industry sectors are:

? Schools: Traditional learning
environments, including child care,
K-12 and post-secondary
institutions.

? Products: Publishing and school
supplies.

? Services: Training, tutoring/testing, supplementary services and
education for at-risk populations.

? E-services: Evolution of new
markets, service offerings and
education channels made possible by the Internet, including portals,
e-commerce and network platforms.

Source: Andersen Consulting 2000

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