[johnohara]

It all comes down to certifying student proficiency (course credit).

Udacity and Coursera are not really competitors in the area of course content. They are competitors in the area of student certification. In the reputation behind the process. Meaning rigorous final exams, independently administered, suitable for inclusion on curricula vitae, etc.

By offering courses for free, Udacity and Coursera compete directly with Stanford. But Stanford can compete with them just as well, by allowing students to enroll in the free classes, mentoring them, and then offering their own certification exams -- for credit.

My guess is they won't do that. They'll just find someone else to teach the course. But I bet in the future they intend to keep a very close eye on the department.