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Scaled-Back Edison Plan Focuses on Managing Schools

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Falling short in its efforts to raise new capital to finance a proposed national chain of private, for-profit schools, the Edison Project has announced a scaled-back plan that will focus initially on managing public schools.

But project officials maintain that the bold plan for an alternative educational system has not been sidetracked by the failure to attract major new equity investors to fulfill the original vision of the project's founder, Christopher Whittle. The publisher and entrepreneur's initial plan called for a $2.5 billion investment to open as many as 1,000 private schools that would serve as models for reforming public education.

Edison officials announced last month that they had secured funding for the next phase of the initiative: a limited plan to have as many as 20 Edison public school campuses by the fall of 1995, one year ahead of the original target date for opening as many as 200 private schools.

"I think the project is right on track,'' Benno C. Schmidt Jr., the president of the Edison Project, said last month. "We've got the financing to carry it through its design and development phases and take our ideas out to the educational marketplace.''

The Edison Project has spent about $20 million on the research and development of its design blueprint, which will be unveiled this fall. (See box, this page.) It now has a commitment of about $40 million for this next phase, coming from three investors: Mr. Whittle, the chairman of Whittle Communications L.P., the project's parent company; the Dutch products giant Phillips Electronics N.V.; and the British publisher Associated Newspaper Holdings P.L.C.

The entertainment and publishing giant Time Warner Inc., a stakeholder in Whittle Communications and an initial investor in Edison, has declined to provide any more funding for the schools project. The company has concluded "that the development of schools is not central to its core business strategy,'' according to an Edison Project statement.

Big Investors Beg Off

Meanwhile, project officials confirmed that a number of large corporations sought as equity partners for the venture over the past year have declined to invest. These included the Walt Disney Company, Paramount Communications Inc., and Tele-Communications Inc.

Some of the companies made bids for ownership stakes in Whittle Communications in exchange for investment in the Edison Project, but Whittle rejected the offers because they were too low.

"Obviously, in the last few months we talked to a lot of potential investors,'' said Mr. Schmidt, who brought new credibility to the project when he left the presidency of Yale University last year to lead Edison. "We have gotten a lot of encouragement. We've gotten an affirmation of our basic vision.''

But the project has received no major new funding that would allow it to build its own schools in large numbers. Edison's inability to sign a big equity partner was treated in the news media this summer as a big setback for the innovative-schools plan. That reaction has rankled Mr. Whittle and Mr. Schmidt.

"I think some of the press is pretty naÃive about how investment decisions like this are made,'' Mr. Schmidt said. "I've raised a lot of money in my time. If you are looking for large investments, it takes time, and you have to be patient.''

Mr. Schmidt said the long-range goal of the project--to open hundreds of private campuses within 10 years--remains unchanged.

"We haven't scaled it down at all,'' he said. "The only thing we've changed is the timing. Anyone who thinks a general vision doesn't get changed as it becomes a specific business plan is hopelessly naÃive.''

But Mr. Whittle raised high expectations with his proposal for building a large network of private schools that would also yield insights for improving the public schools. Thus, his critics have been quick to say that the latest developments are a sign that the project is faltering.

"Why hire someone to run a school who has never run a school before?'' asked Albert Shanker, the president of the American Federation of Teachers and an outspoken critic of one of Mr. Whittle's more successful ventures, the Channel One classroom news show. "If given an opportunity to operate a public school, the Whittle people are likely to learn more than the students they have promised to teach.''

Managing Public Schools

The Edison Project must now work to persuade skeptical public school officials to turn over one or more of their schools to its untried methods.

Mr. Schmidt said the project will go only where it is invited, and will not try to win over the big national education groups, most of which have been wary of the Edison proposal and have battled Whittle over Channel One.

"We had decided as much as six months ago to broaden our focus of the project in the sense of bringing our approach directly into public schools as well as building and creating our own system of private schools,'' Mr. Schmidt said last month. "We heard from so many governors and mayors and public officials that they thought there would be readiness on the part of the more bold school districts'' for the Edison plan.

The most prominent example is in Massachussetts, where Gov. William F. Weld and other state officials have discussed giving the Edison Project control of some of the 25 charter schools recently authorized in the state.

Mr. Schmidt stressed that Edison has not yet reached any agreements with public school districts.

Pitching to Milwaukee

In seeking to run public schools, Edison will be facing competition from other private firms, most notably the Minnesota-based Education Alternatives Inc. Last year, E.A.I. began operating nine public schools in Baltimore, and it is seeking similar arrangements around the country.

David Bennett, the president of E.A.I., said he welcomed the competition from Whittle for contracts with school districts.

"Whatever their primary mission, I am pleased they are focusing on public schools,'' he said. "If we are the only alternative to business as usual, then it is an incomplete model.''

The extent to which the two ventures might compete head to head for such arrangements was underscored last month in Milwaukee, where both firms independently made pitches to a school board subcommittee on the same day.

Both firms told Milwaukee school officials they could run some public schools there at roughly the current per-pupil cost while increasing student performance.

The firms did not get any commitment from the Milwaukee panel, and some school officials there remained skeptical.

"To be very honest, I was underwhelmed by the educational components of each presentation,'' said Mary Bills, the president of the school board. "I have a hard time reconciling education for profit as a strategy for reform. Public education operates for the greater good, and the profit motive has never been part of that.''

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