(Before I get to this, Smanda has weighed in with some interesting points in response to the first part about how distance education can affect the location of colleges. Scroll down and check it out.)
I know I promised a post on the benefits of colleges working together, but before I get to that, I have another downer post. Even when colleges are geographically positioned to cooperate, and it's in their best interests, they often don't. Of course, sometimes colleges act against their own interests for stupid reasons, like inertia or pride - but it's not always cupidity or stupidity. There's nothing mysterious about this, no conspiracy, just human nature and its organizational equivalent, red tape. Let me give you a specific example.
My sister is a seminarian. Her institution (we'll call it #1) is fortunate enough to be located in a major urban area, in the same neighborhood as one of the nation's elite universities. Right next door to her seminary is another one of a different denomination (#2), and both belong to a city-wide consortium of seminaries. As you may know, seminaries in general are having financial difficulties these days. Costs are rising, their fundraising is minimal, the mainline churches supporting them don't have much more money because they're shrinking, and the alumni aren't in a position to give much back in the way of donations. Moreover, seminaries tend to be below optimally efficient size, and they can't cross-subsidize programs with lucrative new programs, since they have narrowly defined missions.
Under these circumstances, consortia and cost-sharing agreements are a brilliant idea. The trouble is implementing them.
For example, #1 and #2 share a bookstore. This makes excellent sense. But other efficiencies are limited by church policy. You can't run a student health clinic efficiently at that size institution; the obvious solution would be for #1 to pay the major elite institution for access to its clinic. Unfortunately, the church body doesn't allow this, because not all of its seminaries can do this, and they want them to be "equal." (Of course, they're not truly equal now. The one in a rural Midwestern area obviously has fewer local possibilities for internship-type experiences, for example; the urban seminary charges higher rents.) Mandating equality tends to level down, not up.
But if the problems were just caused by these school's denominational affiliations, it would be a problem peculiar to seminaries, and it's not.
For example, there are savings that could be implemented consortia-wide rather than denomination-wide. Right now every school in the area has its own email system and servers. Surely a joint IT department would be cheaper, and it would solve problems such as a server going down and there not being staff on-call to get it back up! Email is not a mission-central core function, so outsourcing it would not be like outsourcing teaching. IT issues are the sort of problem that plague very small schools of any type, not just seminaries, yet cooperative agreements tend to be out of their financial reach because they are broke. They'd have to spend money now to save it later, but they don't have it now.
They're not far different from grad students. Frequently it would be cheaper for me to buy the economy size, or the one-year yoga package, or the bicycle to save on gas, etc. But I can't get up the cash required for the initial investment, and credit card interest rates would negate the savings. Schools that need cooperation the most are in the same boat.