Technology is expensive, and web-based learning is no exception. Technology expenditures do not end with the wiring of a school or campus, the purchase of computers, or the establishment of a local area network.

They represent just the beginning.

We must therefore respond to these realities by addressing head-on how best to finance technology-based, student-centered learning environments that will enable success in the digital era.

Total Cost of Ownership

In some ways, school Internet capital expenses are equivalent to the expenditures a district makes in purchasing a fleet of school buses. After the initial cost of the purchase, the school buses require fuel, maintenance, trained drivers, parking lots to house them, insurance, and upgrades to keep the fleet current.

It is the same with technology. The continuing operational costs of maintaining and using the technology dwarf initial purchase and installation costs. These costs include: payments to utility and Internet service providers; technical support; instructional content; renovations to the physical plant; trained educators and administrators; and upgrades as newer equipment comes on line.

Too often educational institutions have focused on startup costs without planning for the substantial and continuing costs of operation. When this occurs, technology, like unused buses, is relegated to the "garage" and has little value to anyone.

Schools and colleges are beginning to adopt "total cost of ownership" (TCO) models that have been used for years by the business community.1 This approach breaks down into component parts each of the expenses involved in using technology so they can be more clearly analyzed. For example, Quality Education Data (QED) reports that K-12 schools spent an average of $122 per student on technology support during the 1998-99 school year. QED broke down the average TCO in the figure shown on the following page.2

Local Budgets Vary, but Patterns are Consistent

The amount that K-12 districts spend on school technology and Internet access varies. A 1998 survey3 of 29 large urban school districts found that technology budgets ranged from $22 per student to $584 per student. The average hovered in the $120 to $130 range per student. Most financing models indicate that the initial costs of hardware purchases and installation, along with retrofitting of old buildings to support an upgraded infrastructure, represent the bulk of costs when amortized over five years. It is assumed that costs then shift to non-capital, or operating expenses. But in reality, K-12 technology expenditures skew heavily on the side of hardware. A survey of 400 district and school level officials found that schools were spending 55 percent of total costs on hardware, 16 percent on networking, 9 percent on software, and only 6 percent on training, with another 6 percent on service and support, 5 percent on supplies, and 1 percent on online services.4

What seems clear is that schools are under-investing in the personnel and support needed to make their technology investments most useful. In some ways this is a result of the way technology is funded in schools and colleges. Technology startup costs have often been funded with capital dollars raised by bond issues and special grants that may be easier to raise than the continuing operating funds required for ongoing costs. Yet it is these continuing service and personnel costs that are often most critical to technology integration in an educational environment.

Patterns of Education Funding

Education for America's elementary and secondary schools is primarily the responsibility of states and localities. The funding follows this pattern.

States provide approximately 44 percent and localities close to 40 percent of the nation's expenditures for elementary and secondary education, while foundations, in-kind activities and others sources provide 10.2 percent of funding. The federal government currently contributes only 6.1 percent of all elementary and secondary education funds.5

The federal share of education funding overall has declined, from 13.9 percent in fiscal 1980 to 6.1 percent in fiscal 1998. This declining federal funding share is also true for higher education, where the federal share was 18 percent in fiscal 1980 and dropped to 12.1 percent in fiscal 1998.6

Nonetheless, there are areas where federal dollars have a major impact.

The federal government has made a large-scale investment in the future through its support of technology at the K-12 level. Estimates place the current federal share of education technology investment at about $1.5 billion, or between 20 percent7 and 35 percent8 of all elementary and secondary technology outlays.
Federal Funding for Technology- Targeted and General9

The $1.5 billion federal funding for education technology comes from both targeted programs for technology as well as via core or "traditional" federal programs. In the former category of direct education technology programs are the Technology Literacy Challenge Fund funded at $425 million in fiscal 2000 as well as the Technology Innovation Challenge Grant program for stimulating technology-supported high performance learning environments, funded at $146 million in fiscal 2000.

Other specialized technology programs include:

· Preparing Tomorrow's Teachers to Use Technology (PT3)-funded at $75 million in fiscal 2000

· Community-based Technology
Programs-$32.5 million

· Stars School Program-$50.5 million

· Learning Anytime, Anywhere Partnerships-$23.3 million

· Technology and Media Services- $36 million

· Assistive Technology for the dis- abled learner-$34 million

An even greater portion of federal education technology funding support comes through core federal programs which have made school hardware and software acquisition, as well as staff development for technology, a greater priority in recent years.

These include:

· Title I grants for basic and advanced skills-Approximately $500 million of this $8 billion annual program is used by schools to support technology investment. Title I provides almost a third of all software and hardware used in basic skills instruction in schools.

· Title VI Innovative Education Strategies-Approximately $125 million to $150 million a year is spent on upgrading technology in schools.

· Title II Eisenhower Professional Development-With total funding in fiscal 2000 of $335 million, this program places a priority on teacher training with technology, and allows low-income schools to use all Eisenhower funds for hardware and software purchases.

· Goals 2000 Educate America Act-Fiscal 2000 funding is $491 million. A large portion of these funds is spent by states and school districts on
technology planning.

· Vocational and Adult Education-School districts use approximately $250 million for technological capacity building.

In addition to the federal investment in education technology, states and school districts contribute another $5.4 billion for instructional technology via a myriad of district-wide programs and competitive grants.10

Telecommunications Funding: Intersecting State and Federal Responsibility

Missing from these amounts, however, is funding for telecommunications access made possible through the E-rate program.

Enacted as a part of the Universal Service Program of the Telecommunications Act of 1996, the E-rate program provides discounts to public and private schools, libraries, and consortia on the costs of telecommunications services, internal access, and internal networking. In the program's first two years, tens of thousands of public and private elementary and secondary schools, and thousands more libraries received a total of $3.66 billion in discounts on connectivity and telecommunications services.11 In the Spring of 2000, the Federal Communications Commission announced that the third year of the program would be funded at $2.25 billion, the maximum allowed, based on requests submitted by schools and libraries around the country.

Telecommunications and education policy present an intersection of state and federal responsibility. The federal telecommunications funding mechanism that provides universal service offers a basic level of service to individuals regardless of where they live. This subsidy is in effect an "equal opportunity access guarantee" that applies equally to individuals wherever they live.

The E-rate sits at the intersection of this juncture, as it was developed on the belief that the Internet should provide a place where all learners can find information and opportunities for anytime, anyplace learning. The funding subsidy it provides is leveling the Internet playing field for education.

Technology Investments Can Lead to Economies of Scale and Real Productivity Gains

In this new environment, two things are clear: funding must be sustained, and new approaches must be considered. Old models do not meet new realities. It makes little sense to use 30-year bonds to purchase equipment that should be replaced in 3 years.

Schools should examine how technology costs in one area can be offset by efficiencies in other areas. The productivity gains found in business through investments in technology took 3 decades to emerge. Today these investments are considered a foundation of the U.S. economy, accounting for a third of our growth.12

Similar growth in educational productivity might be derived through technology, but only if other changes are adopted that support more productive educational environments. Streamlining administrative procedures is an obvious example. Web-based test administration could bring significant cost savings in assessment expenditures.13 Likewise, savings in textbook and instructional materials budgets may be achieved if the licensing, distribution, and updating of these are made less expensive online. Teacher training online may be a more efficient use of time and resources than paying for substitutes when teachers are pulled away from their classrooms.

But if technology is used as an add-on to existing activities, rather than as a means to reshape education, then it will simply add to the total cost of operations and few savings will be realized. Business has learned that productivity gains and cost savings come only when old ways of doing business are abandoned and technological solutions replace them. For example, when universities can reach students through online courses, they can reevaluate their budgets for building more "bricks and mortar" campuses.

There is nothing magical about traditional classroom practice. Educationally, students require a mix of pedagogical support, guidance, and supervision, which can be provided in a myriad of ways. The U.S. classroom is a 150 year-old, relatively low-cost technology, worn out by time and changed conditions for meeting these requirements.14

Perhaps the much sought after Internet "killer" application for education is not an application at all, but the potential for reorganizing education and for connecting communities of students, teachers, parents, and highly qualified volunteer experts.15

While we do not suggest replacing the classroom teacher with technology, we should consider how we could do more with the teachers we have. Investing in the development and support of skilled teachers, and supplementing the expertise of a given teacher with the distributed expertise of the broader education community, offers great promise. The possibility of making "the best and the brightest" of the teaching profession available to learners in places where accidents of geography and economics have led to lower quality educational experiences suggests that the Internet can impact the economics of education in ways we have only just begun to imagine.

A number of witnesses16 offered a range of funding model proposals that might address the continuing technology requirements of the education sector. These suggestions fall into the following categories:

· Tax incentives to encourage educational investments in areas of high cost and high need

· User taxes on corporate technology purchases

· Public and private partnerships in building and renovating schools to provide high tech centers an entire community can use during non-school hours, supported through user fees

· Increased federal and state appropriations for technology and web-based learning opportunities

· A learning technology trust fund that could combine these models to help sustain long-term school technology investment momentum

Good Education is Good Business

Business should play a much larger role in helping schools make technology support their educational needs. Business depends upon the graduates of our nation's educational system. We should not have to rely so strongly on annual increases in the number of visas granted to highly skilled technology workers to supply the U.S. workforce. All businesses-not just high tech companies-have a substantial stake in this area. Banks and retailers, food and beverage companies, and clothing manufacturers all need employees with greater technical capabilities than our schools are currently providing to fill the high-skilled jobs necessary in today's economy. Isolated donations of hardware or software, while potentially helpful, are simply not enough.

Aggregating the e-learning Market17

Content, equipment, and services costs associated with web-based technologies can be brought down in several ways. Aggregated purchasing would enable suppliers to lower their per unit prices. Many states already purchase technology by aggregating demand, and some state and district education systems are joining in. (See, for example, the Digital Dakota network described earlier in this report.) But more could be done to capture potential economies of scale throughout the education sector.

The development of standardized education technology packages (e.g., hardware, software, training, service support, online content, and Internet services) helps build significant volume to purchases. By making these packages modular and scalable, schools could select appropriate technology and network components at the lowest cost and most effective price point.

Other costs include time spent in planning, installing, managing, and upgrading systems. Some institutions have found that hardware, software, and services integrated into packages suitable for different needs and circumstances takes much of the complexity out of planning multimedia network computing installations. Remote management of local school networks can ultimately remove the need for expensive onsite technical personnel, as well as provide higher quality service.

The use of existing internationally recognized standards such as Internet protocols, and the development of additional standards, have the potential of creating packages with enormous market demand, attracting suppliers to the education market, and promoting competition in price and capabilities. This type of standardization, quite common in other areas served by technology, could help lower prices and improve performance in education as well.

The development of an efficient network architecture can also help build economies of scale. Designing multi-user/use platforms means that more value can be obtained from hardware and service configurations. Careful network and communications backbone architecture is critical to lowering communications costs. The backbone architecture issues go beyond the design and management capabilities of any school district, but collaborations could be as cost-effective for education as such networks are in other areas. State networks that are in place and ready to link to the Internet2 backbone could offer the most technology access for the dollar.

Meeting the Challenge

In many cases, the use of networked computing will enable schools to significantly revamp and modernize their educational programs. Opportunities to expand individualized learning, provide access to a much broader and richer set of educational materials and human resources, and promote "learning-to-learn" skills will often require changes in how our educational institutions are organized and funded. If schools and universities are to be held accountable for improving educational outcomes based on the investments made using technology, they will need help from government, business, and public sector partners at all levels.

There are no technical reasons why we cannot make the benefits of web-based education available to everyone; it is simply a matter of our will. The choices we make in terms of organizing and funding will determine who benefits and how quickly. As a nation, we must set goals of making web-based education networks quickly and universally available, affordable, practical, and effective in improving educational outcomes.

ENDNOTES

1. Consortium for School Networking. Taking TCO to the Classroom: A School Administrators Guide to Planning or the Total Cost of New Technology. Washington, D.C. 1999. http://www.cosn.org/tco

2. Ibid., p. 10.

3. Ibid.

4. International Data Corporation. Understanding the Total Cost and Value of Integrating Technology in Schools: an IDC White Paper Sponsored by Apple Computer, Inc.. 1997. http://www.apple.com/education/k12/leadership/LSWTF/IDC1.html

5. Committee for Education Funding. Education Budget Alert for Fiscal Year 2000. Pons, Michael ed. p.9.
Washington, D.C. 1999.

6. Ibid, p. 9.

7. Ibid, p. 152. This report states: "At present, federal education funding accounts for roughly 20 percent of school
technology funding, or approximately 5 billion a year."

8. This report uses an estimate of "between 25 percent and 35 percent." Software and Information Industry Association. 1999 Education Market Report: K-12. p. 84. Washington, DC. 1999.

9. United States. Department of Education. Fiscal Year 2000 Budget. 2000. http://www.ed.gov/offices/OUS/budget.html

10. Committee for Education Funding. op. cit. endnote 5, p. 152.

11. Education and Libraries Network Coalition. E-rate: Keeping the Promise to Connect Kids and Communities to the Future. 2000.

12. United States. Department of Commerce (1999). The Emerging Digital Economy II. By Henry, David, Patricia Buckley, Gurmukh Gill, Sandra Cooke, Jess Dumagan, Dennis Pastore, and Susan LaPorte. Washington, D.C. 1999.
http://www.ecommerce.gov/ede/ede2.pdf

13. Bennett, Randy. e-testimony to the Web-based Education Commission. July 24, 2000. http://www.webcommission.org/directory

14. Melmed, Arthur e-testimony to the Web-based Education Commission. August 21, 2000.
http://www.webcommission.org/directory

15. Ibid.

16. See, for example, Roberts, Linda. Testimony to the Web-based Education Commission. United States. Department of Education. September 14, 2000; Gary Beach, CIO Magazine. September 14, 2000; L. Dennis Smith, University of Nebraska. July 19, 2000; Nitza Hernandez-Lopez, Hispanic Educational Telecommunications System. July 19, 2000; Brian Hawkins, EDUCAUSE. July 20, 2000; and Gerald Odening, Chase H&Q. July 20, 2000; see also e-testimony of Frank Withrow. August 18, 2000; Georgia Tech Research Institute. August 14, 2000; Software & Information Industry Association. September 7, 2000; Sun Microcsystems, Inc. August 25, 2000. All found at
http://www.webcommission.org/directory

17. Buhler, Warren. CEO, EdNetSat. Personal communication. November 2, 2000.