Yea I got you. For the OMS CS at Georgia Tech, I would never enroll in such conditions to be honest, not for a Graduate program and especially not if I'll be paying thousands of dollars, whether it is on-campus or online.
I don't doubt this model is viable, I'm not even saying it's bad quality. Certainly you'll find many people who'll tell you that they learned a lot and that they've blosomed. However I doubt this is an optimal solution, there is clearly room to improve quality a lot by decreasing the class sizes - thus increasing the individual support.
"The instructor is an active participant" means a lot. He becomes a "participant" instead of being an instructor. The reason is simple, there's no way to accomodate 200 people. Do you think he'll have the time to have something as small as a 10 minutes discussion with every student every week ?
When I was at college, I was regularly talking with my instructors for 30 minutes, sometimes hours in their office. To me it's crucial at every stage of education and not enough emphasized in the current system. But I think it is critical to have this direct, easy and unrestricted access to the instructor at graduate school.
At some college, I've seen a graduate school instructor complaning about the fact that he had to accept 23 students for a term instead of 15-18 because the demand was too high.
Concerning your main point, here are my thoughts :
- If they set the online programs at a lower price, then it will "mean" that it is lower quality than the on-campus program.
- If they set it at the same price, potential on-campus students will choose to enroll online to avoid having to attend lectures, thus taking the best of both worlds.
- Therefore the best option for them is to price online programs higher so people who are able to be on-campus will go on-campus and the rest will go online. I wouldn't be surprised if they also take into account the cost of housing to avoid making the online option too attractive.
Tuitions are not the only source of revenue for colleges, so they have to be careful and make sure students keep coming on-campus.