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September 21, 2000

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NEWS ANALYSIS

Board Betting on Corporate Vision for Laptop Plan

By EDWARD WYATT

On their face, the numbers released yesterday spelling out the Board of Education's plan to link students to the Internet are so astronomical as to appear preposterous.

How could the board, which regularly says it cannot afford to maintain schools or hire enough qualified teachers, contemplate spending $900 million over 10 years to build an educational Web site and provide portable computers, Internet service and e- mail to most of its students, teachers and administrators?

In fact, the Board of Education expects that it will not have to spend anywhere near that amount. Rather, it is depending on the corporate world — computer makers like I.B.M. and Toshiba, Internet companies like America Online, and network companies like Cisco Systems — to see the potential value of 2.2 million new customers, especially because the people in this group, including parents, are likely to be using computers and Internet services for the rest of their lives.

According to Andersen Consulting, which this week gave board members an analysis of the proposal's feasibility, the group of potential users of the board's Internet site is so valuable that the companies would be willing to lay out a large share of the start-up cost, if not all of it. More important, the site could raise as much as $11 billion in revenues over 10 years, money the board could use over time to buy equipment and keep the system running.

Even at the far lower level of revenues that Andersen predicts is more likely, $4 billion over 10 years, the system would pay for itself several times over, the report says.

Here is one example of how such a system might work: According to the Andersen report, America Online spends more than $280 on marketing for each new customer that signs up for its online service. Therefore, acquiring 2.2 million customers, a group the size of the Board of Education's audience, would cost America Online more than $600 million.

The Board of Education reasons that America Online, or a similar provider of Internet services, may be willing to help the board build its commercial-free educational Web site and a separate customized Internet gateway carrying advertising, in exchange for the right to sell advertising on that gateway.

In addition, the customized Internet gateway — basically a companion to the educational site that would connect users to the Internet — could include pages where a user could buy products from companies that contracted with the board. For each purchase of books or school uniforms, the board would get part of the revenues as a fee from the seller.

The complete system could also be offered for sale to school districts in other large cities, raising more revenues for the board.

Such a deal might be worth the cost to a company like America Online because a student would have to use the Board of Education's system to send and receive e-mail messages, to receive and complete assignments or to communicate with teachers. More important for such a company, a student may be more likely to continue using its service after leaving for college, becoming a paying customer.

"The system could be entirely paid for independent of the traditional government funding structure," and without using any money currently going to the city's schools, said Andrew Rasiej (pronounced rah- SHAY), the founder of Mouse, a nonprofit agency that provides technology support to schools. He is also a member of the Board of Education task force that introduced the technology proposal.

"I can't see how anybody could be a critic," Mr. Rasiej said.

Critics abound, however. Though the Board of Education's plan contemplates keeping the advertising and commercial aspects separate from the commercial-free educational Web site, and allowing parents to control their children's access to the commercial content, critics have contended that the school system would be selling out its students for a dubious goal.

"My greatest concern is that in the rush to put laptops in the hands of every child, we would expand dependency on commercial advertising to fund public education," said State Senator Velmanette Montgomery, a Democrat from Brooklyn who wrote to her constituents this summer to raise questions about the board's plan. "Ultimately, the brands and products being advertised, rather than our children, would reap most of the benefits."

Harold O. Levy, the schools chancellor, said in an interview that he was not worried about the use of advertising to pay for the system. "It's no more troubling than allowing Webster to put its name on the dictionaries we buy," Mr. Levy said.

Clearly, technology companies are eager to participate in the program. Representatives from Cisco, International Business Machines and Toshiba were on the task force that created the technology plan. And Board of Education officials said that the task force was allowed to disband after issuing its recommendations in April in part to allow those companies to eventually bid on providing services to the board.

It is possible that the board will have to lay out some cash upfront, to buy the computers for students and teachers and to build the network needed for using those computers in the classroom and at home.

But the Board of Education is hoping it can pay as little as $200 apiece for the portable computers, which are known as Internet appliances. Unlike fully functional laptops, these computers would work only when connected to the board's network.

"It is a way to make computers available to children who otherwise would not have access to the digital world," Mr. Levy said. If it takes a financial inducement for a company to help the Board of Education do that, he said, so be it.


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