The internet may shake up the traditional collegiate business model beyond creating online degree and certification programs.

Via Instapundit
: In Technology Review, Michael Fitzgerald reports on an innovate approach to make digital versions of expensive textbooks available to cost-conscious students.

Ask Ariel Diaz why he’s taking on the college textbook industry and he’ll tell you, “Quaternions.”

Quaternions are a number system used for calculating three-dimensional motion, popular in computer graphics. And Diaz needed a crash course to help him with a consulting gig after his online video platform startup, Youcastr, had failed. He started with Wikipedia and found it was surprisingly good at explaining this complicated mathematics.

Diaz, who still resents how much he’d paid for textbooks in college and graduate school, realized he’d hit on his next business idea. In 2011, he started Boundless Learning, a Boston company that has begun giving away free electronic textbooks covering college subjects like American history, anatomy and physiology, economics, and psychology.

What’s controversial is how Boundless creates these texts. The company trawls for public material on sites like Wikipedia and then crafts it into online books whose chapters track closely to those of top-selling college titles. In April, Boundless was sued by several large publishers who accused the startup of engaging in “the business model of theft.”

Theft or not, the college textbook industry is ripe for a disruptive shock from the Internet. Publishers today operate using what Mark Perry, a professor at the University of Michigan, calls a “cartel-style” model: students are required to buy specific texts at high prices. Perry has calculated that prices for textbooks have been rising at three times the rate of inflation since the 1980s.

On average, college students spend around $1,200 each year on books and supplies. Those costs, which sometimes exceed the tuition at a community college, are prompting a wider rebellion against commercial publishers. In February, California legislators passed a law directing the state to produce free versions of texts used in the state’s 50 most popular college courses. In October, Secretary of Education Arne Duncan said printed textbooks, a $6 billion industry in the United States (when sales of both used and new books are tallied), should be made “obsolete.”

Unlike publishers, who market their books to professors, Diaz’s company is aiming directly at students. Starting in the summer of 2011, Boundless sent marketers to hand out flyers on four campuses, including Boston University and Florida State University. Diaz says that within weeks the company had students signing up from 1,000 campuses, although he declines to say how many students have downloaded Boundless textbooks.

In their lawsuit, filed in March, publishers Cengage Learning, Pearson Education, and MacMillan Higher Education accused Boundless of copyright infringement, false advertising, and unfair competition. Diaz denies all the charges. He says his company uses only public information and doesn’t actually make or sell textbooks. “We don’t look at ourselves as an e-book or an online textbook or even textbook 2.0,” he says. “We see it as how do you create the next-generation content platform, which is much more than a textbook.”

In the case of Mankiw’s Principles, Boundless offers a stripped-down text covering the same core economic concepts. Mankiw is a snappy writer who starts off his chapter on taxes with an anecdote about Al Capone. Boundless’s version reads more like a reference text, but its organization closely apes that of Mankiw’s. Both have 36 chapters and even share the same first sentence: “The word economy comes from the Greek word oikonomos, which means one who manages a household.”

Boundless’s replacement books are appealing to students like Heather Haygood, in her third year at Pikes Peak Community College in Colorado Springs, Colorado. She is using the Boundless version of Biology, which her school sells for $178. “I just refuse to spend that much on a book,” Haygood said in an e-mail interview. “It’s a known fact that college kids are generally poor/broke so why are you charging us so much for books??? … lucky me i found it for free!!” She calls the Boundless edition a “pretty dead-on” copy.