University Competition with Private Enterprise

, John Palatiello, Leave a comment

Recently, I was a guest on a radio program and the host opened the interview by citing a University of Connecticut alumni publication marketing the Nathan Hale Inn, a hotel on the UCONN campus in Storrs, CT that offers a venue for corporate conferences, weddings and other events. The host wanted my reaction to this form of unfair government competition, namely whether a state-run, taxpayer supported public university, or a private, not-for-profit, tax exempt post-secondary school, academic institutions are venturing far from their core missions to engage in activities that unfairly compete with private, for-profit businesses, especially small businesses.

The Nathan Hale Inn, for example, competes with the Marriott, a bed and breakfast and the nearby catering hall.  What makes the Inn different is its affiliation with the university, its tax-free status, and its access to taxpayer funds – all considerable competitive advantages over local businesses.

The UCONN example is not an isolated incident.

Towson University, a Maryland state University in the Baltimore suburbs, recently purchased air time on  Washington, DC  radio stations advertising a nursery school program for children 2, 3, and 4 years of age and a summer camp programs for pre-teens.  Elon University in North Carolina has started Live Oak Communications, a communications agency that provides public relations, advertising, special event marketing, viral marketing, media relations, website development, video creation and graphic design services for businesses and not-for-profit organizations in the North Carolina region.  The University of Houston operates the National Center for Airborne Laser Mapping (NCALM), mapping services utilizing aircraft equipped with Light Detection And Ranging (LIDAR), a technology commercialized by NASA in the 1990s.  Towson also runs a mapping program that has purchased television ads touting a software system that is otherwise commercially available.

Thousands of commercial programs are being run by state and private non-profit universities, engaging in unfair competition with for-profit companies, including small businesses.  The programs offer little education for students or research for science.  Rather, tuition, endowments, or state and Federal funds are used to operate business units inside institutions of higher learning. With 2011 tuition at America’s 4-year colleges and universities, both public and private, rising approximately 5 percent in the past year, according to the College Board, schools can little afford the risk of operating enterprises that have little nexus to their core academic mission.

University engagement in commercial activities could be called the “Gatorade Syndrome”.  Ever since professors at the University of Florida invented the popular sports drink to hydrate football players practicing in the heat, academicians have been trying to find the next big discovery.  Most simply consume tax dollars, divert scarce resources including tuition, and fail to turn profits.  These university-sponsored enterprises have cost their schools millions, exacerbating an unaffordable tuition system that has made a college education a financial burden, if not impossibility, for most students and their parents.

Some states, and individual schools, have begun to tackle the issue.  Colorado Revised Statute Title 24, Article 113 regulates competition by State agencies, including institutions of higher education, with private enterprise. The Colorado Commission on Higher Education, the State Board of Agriculture and the University are, by law, required to develop and implement procedures for reviewing unfair competition complaints from privately-owned businesses. Arizona State University has promulgated policy # 1-105, regulating competition with private enterprise.

American academia should get back to its roots – teaching students.  Spending tax dollars, tuition income, or endowment funds on what amount to risky get-rich-quick schemes has no place in universities.  Professors spending other people’s money, rather than joining the private sector as entrepreneurs with private capital, is not wise, appropriate or sustainable.

Internships, work-study programs, and other on-the-job training activities that partner with business can supplement classroom instruction and provide students the practical experience necessary for today’s workforce.  Universities should be cooperators, not competitors, to private enterprise.

With the Higher Education Act set to expire, a Congress facing a $14 trillion national debt and a $1.4 trillion annual deficit should take a hard look at how Federally-supported colleges and universities are venturing into non-core lines of business that compete with and duplicate the for-profit business sector.


John Palatiello president of the firm of John M. Palatiello & Associates, Inc., a public affairs consulting firm located in Reston, Virginia, providing association management and public affairs services to firms and organizations. He has been Executive Director of MAPPS, a national association of private geospatial firms since 1987, and is President of the Business Coalition for Fair Competition, a coalition of firms, organizations and individuals fighting unfair government-sponsored competition with private enterprise.