Burck Smith describes how accreditation is based primarily on a higher education institution’s inputs rather than its outcomes, and creates an “iron triangle” to maintain high prices, keep out new entrants, and resist change.
To be accredited, a college must meet a variety of criteria, but most of these deal with a college’s inputs rather than its outcomes [emphasis mine]. Furthermore, only providers of entire degree programs (rather than individual courses) can be accredited. And even though they are accredited by the same organizations, colleges have complete discretion over their “articulation” policies—the agreements that stipulate the credits that they will honor or deny when transferred from somewhere else. This inherent conflict of interest between the provision of courses and the certification of other’s courses is a powerful tool to keep competition out. Articulation agreements, like API’s for computer operating systems, are the standards that enable or deny integration. In short, by controlling the flow of funding, accreditation insures a number of things: All colleges look reasonably similar to each other, the college can’t easily be “disaggregated” into individual courses, and coursework provided by those outside of accreditation can’t easily be counted as credible.
Lastly, to further tip the scales toward incumbent providers, accreditation bodies are funded by member colleges, and accreditation reviews are conducted by representatives from the colleges themselves. The “iron triangle” of input-focused accreditation, taxpayer subsidies tied to accreditation, and subjective course articulation ensures that almost all of the taxpayer funds set aside for higher education flows to providers that look the same. And by keeping innovations out, colleges can maintain their pricing structures [emphasis mine].
This explains why most online courses are priced the same or higher than face-to-face courses despite massive cost efficiencies. Such enormous profit margins available to the delivery of accredited online learning explains the quick growth of for-profit colleges, nonprofit colleges offering online degree programs in conjunction with private-sector providers who share in tuition revenue, and colleges running separate online divisions that subsidize face-to-face operations.
A more accurate characterization of today’s higher education is that individual colleges offer online learning as a “feature,” but use their regulatory clout as a group to resist disruption.
Source: Young, J.R., McCormick, T., Smith, B. (Eds.), 2012. Disrupting College: Lessons from iTunes, in: Rebooting the Academy: 12 Tech Innovators Who Are Transforming Campuses. The Chronicle of Higher Education, Washington D.C.
See also: Kaufmann Foundation report, College 2.0: An Entrepreneurial Approach to Reforming Higher Education and Burck Smith’s blog post similar to the quoted article.