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Online Learning Works Best When Markets Lead, Not Governments. Project Kitty Hawk Shows Why.

Opinion

A woman typing on her laptop.

North Carolina's Project Kitty Hawk, an online program-management system built by the government, has been beset by difficulties and slow to grow despite good intentions.

Getty Images, Igor Suka

North Carolina’s Project Kitty Hawk is a grand experiment. Can a government entity build an online program-management system that competes with private providers? With $97 million in taxpayer funding, the initiative seemed promising. But, despite good intentions, the project has been beset by difficulties and has been slow to grow.

A state-chartered, university-affiliated online program manager may sound visionary, but in practice, it’s expensive, inefficient, and less adaptable than private solutions. In a new report for the James G. Martin Center for Academic Renewal, I examined the experience of Project Kitty Hawk and argued that online education needs less government and more free markets.


In many ways, Project Kitty Hawk mirrors private online program managers (OPMs). However, it differs in two fundamental ways. First, because it’s a public university affiliate, it must follow all the governance rules applicable to state entities. This creates additional complexity not found in the private sector; overlapping boards and bureaucratic layers significantly slowed Project Kitty Hawk’s development. Before PKH could launch a single program, it needed approvals from the PKH board, the UNC System Office, and the partnering campus—all operating on different calendars and according to different priorities.

More importantly, Project Kitty Hawk receives government money. Its $97m in start-up funding was provided by North Carolina taxpayers. Many of these silent “shareholders” will neither enroll in courses nor see any direct monetary return on their “investment.” Why ask taxpayers to foot start-up costs at all when expenses can be resolved through provider partnerships? Creating state-run programs requires taxpayers to assume 100 percent of the downside risk while realizing none of the upside. In contrast, private OPMs bear both risk and cost.

To its credit, going forward, Project Kitty Hawk will succeed or fail based on the value of the services it provides to North Carolina’s universities, which are not required to choose PKH as a vendor. But it has already been forced to reduce its program and revenue projections due to uncertainty about possible new regulations on revenue-sharing.

When Project Kitty Hawk moved from a revenue-sharing to a fee-for-service model in 2024, it decreased its projections for both program offerings (from 100 to 56 by 2028) and enrollments (from 31,000 to 14,800 by 2028). At the time, PKH stated that changing its model necessarily reduced its program pipeline. One university that had planned to use PKH as a partner pulled out because switching to fee-for-service would cause projected revenue losses in the first few years of operation.

Innovation thrives when universities can choose partners and pay only for results. Truly private revenue-sharing and fee-for-service models allow campuses to expand online offerings without building internal bureaucracies or footing the bill for start-up costs. This free-market competition decreases expenditures, improves student outcomes, and fosters a wide variety in program offerings.

Private OPMs are already offering such services. Yes, there have been bad actors, as there are in any market. But, on the whole, these services allow universities to offer affordable, accessible courses and to reach students that they wouldn’t otherwise. Private education-technology firms, such as Risepoint, 2U, and ed2go, have been especially valuable to small colleges and universities that lack the resources to build robust in-house online offerings. Moreover, these firms operate with zero taxpayer startup costs and rapid scalability. Many North Carolina colleges and universities, including UNC-Chapel Hill, UNC Greensboro, NC Central University, Winston-Salem State University, East Carolina University, and Central Carolina Community College, already use public-private partnerships to deliver online courses. A centralized, state-chartered platform can’t offer the same benefits.

But the current regulatory environment slows down even the private sector. Concerns about the possibility of new regulations have threatened providers’ models that provide student acquisition, retention support, technology deployment, and curriculum innovation in return for a share of tuition revenue.

As Workforce Pell is implemented, broadening the universe for short-term and career coursework, adult learners will demand even more online courses. Colleges will need to rapidly address access and the scalability of offerings. Congress should facilitate colleges using public-private partnerships to meet these needs by codifying the 2011 “bundled services” guidance. This reform would give universities certainty about revenue-share agreements going forward.

At the same time, state governments should encourage public institutions to contract with affordable, efficient private providers for online course marketing, recruitment, and instructional design, and allow them to succeed or fail based on student outcomes. This will be especially important for community colleges as they work to meet new demand created by Workforce Pell funding.

Other states should learn from North Carolina’s experiment; don’t gamble with taxpayer capital when private firms already offer scalable solutions. Students, not bureaucracies, should be the beneficiaries of online-education innovation.


Jenna Robinson is president of the James G. Martin Center for Academic Renewal.


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