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3. Reducing Facilities Costs
Compared with traditional brick-and-mortar education, online learning can reduce the need
for physical space (e.g., when students take courses at home). Although online schools
typically have few or no costs associated with physical infrastructure (e.g., instructional
facilities, student transportation, meals), they have higher costs for technology and
instructional development. (Technology infrastructure costs may decrease with emerging
information technology solutions such as cloud computing, but development and
management costs constitute nontrivial expenses that are expected to persist.) In addition to
the costs of hardware, software, program development and maintenance/support for central
technology services, state and district programs must ensure that all students have equitable
access to the hardware and software needed to participate (Anderson et al. 2006).
Physical space costs are an important cost driver of traditional schooling. By substituting
classroom instruction with online instruction, the need for physical space can be reduced. In
fact, the University of Central Florida that implemented course redesign with the National
Center for Academic Transformation reported cost savings from delivering portions of
American government course online, reducing the amount of physical space required for the
course (Twigg 2003a). 15,16
4. Realizing Economies of Scale
A few studies in postsecondary education have found online learning to be an expensive
alternative because of the initial development costs and the personnel costs for delivering
instruction, especially when the online learning program is designed to equal or exceed the
quality of face-to-face instruction (Jones 2001; Ramage 2005; Smith and Mitry 2008).
Establishing an infrastructure that can support scale can incur significant costs as well.
To achieve overall productivity gains in these situations, it is important that some of the
financial investments associated with online learning are leveraged across many students by
reusing digital course materials. Once an online course is developed, digital resources can be
reused at a relatively low marginal cost, the term economists use to refer to the change in
total cost when the quantity produced changes by one unit—in this case, the cost of adding
15 Additional empirical analyses are required to understand better the trade-offs associated with reductions in facilities costs
and costs associated with the research and development of online programs, particularly in institutions creating homegrown
content.
16 Although this is not online learning per se, a recent estimate shows that by providing a laptop computer to each student,
schools across the country can potentially save $825 million (or $15 saving per student per year) in physical space costs
because fewer dedicated computer labs and physical space at the back of the regular classroom would be necessary in a
one-to-one mobile computing model (Greaves et al. 2010).
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