I am shocked and dismayed by the fogeyish attitude exhibited in most of these posts.
Bill Gates is right. University in its traditional form is already obsolete, and the delivery of learning materials via the internet will replace most traditional higher education in less than ten years. Any university that has not made a major shift towards internet delivery will be in crisis about five years from now, with dramatically falling enrollment.
Why should a professor deliver a class to just a few hundred students in a lecture hall, when they can deliver the same lecture to millions of people at probably a lower total cost (as lecture halls don't come cheap)? Why should a university maintain a huge library building groaning with books, when a hard disk the size of one book could contain the entire contents of all of them? And it's not as if these cheaper forms of course delivery are worse - they're actually better. If lectures are supplied in mp3 or video format, students can listen to them on a flexible timetable, and listen again to bits that they didn't understand the first time. If books and journals are delivered in digital format, they are much easier and quicker to search, and there's no inherent limit to the number of people who can view a given text at a time. Students will be able to fit learning around their busy lives. Existing universities will be able to sell most of their buildings, or rent them out to business.
Some on here have asked, what about social interaction, mutual support among students, and personal support from tutors? All of these can be organized via the internet, using a combination of forums, email, voip, chat and clubs. Personal tuition could be an optional extra, which would allow some self-motivated and bright students to save money by doing without.
If all these things are implemented, the cost of a university degree could be reduced by anything from 50% to more than 90%, depending on the course. Some courses, such as mechanical engineering, chemistry, and medicine, will still have face-to-face classes, but even in these subjects the required number of hours of such classes can be significantly reduced by the use of videos and simulation software.
With such huge potential savings, traditional university will not be able to compete.
You may have heard of the Open University. It has more than 160,000 enrolled students, who all study remotely using the internet. Its degrees are respected, and surveys indicate a high level of student satisfaction. On in addition to enrolled students, untold numbers of people use the learning materials it gives away free (22 million downloads from iTunes U, so far). The Open University is in Britain. There are similar institutions in Japan and a few other countries. Why none in the USA? I suspect that the reason is that until recently (2006), the Department of Education operated a rule stipulating federal aid and federal student loans were not available for online courses. Obviously, such a rule would be a disincentive to colleges thinking of developing such courses. Now that it has gone, we can expect to see a rapid expansion of online education in the USA.