I follow Galloway on twitter, listen to his podcasts, etc. He's a smart guy. I've also spent >20 years in a top US research university as a faculty member and administrator and I'm not sure I buy this (and he is far from the first person to say it).
To be sure, there are market segments for which this is true. Terminal Masters programs are definitely candidates for an online market--and some schools have already started to accomplish it. Georgia Tech has a computer science MS degree that is quite successful. My own institution (Michigan) recently started a Masters of Applied Data Science that is entirely online and it is doing well.
The GA Tech program is particularly interesting. Even though it is quite a bit less expensive---both in terms of tuition and because you don't have to leave home and can live somewhere much less expensive than Atlanta---it has not cannibalized the residential masters program. The latter gets roughly the same application traffic it always has. The people in the online version are typically folks already in the labor market who are looking to move up or switch careers, and those people were never going to enroll in a residential program because they have full time jobs that they can't afford to leave.
Some Doctoral degrees work the same way. Ed.D. programs are often online, again for the same reasons: their market consists mostly of people who are already in careers and are looking to move up the advancement ladder or into adjacent career tracks to what they are doing now. Others are definitely residential, and likely to remain that way: anything in the sciences, for two reasons. First, they tend to be lab-oriented, and it's not clear how to replicate them online. Second, they are structured much more as apprenticeships, where coursework isn't that important but day to day interactions--especially unplanned ones--are a big part of the learning experience. Computer science is a good example of the latter. Unless you are doing something that interfaces with the real world (robotics, embedded hardware) it's trival to do virtually. But, the online tools aren't there for an equivalent training opportunity.
However, I don't think this is going to happen at the undergraduate level--at least, not at schools that have something approaching competitive admissions, and not anytime soon. The value proposition of an undergraduate degree at a place like Michigan is not the courses we teach. After all, our thermodynamics course looks exactly like everyone else's version: there are three laws, everyone agrees on what they are, and we all explain them more or less the same way. (Entropy is always increasing!)
The value proposition is instead in what happens when you identify a set of students with some combination of high ability and strong preparation, and put them together in a few square miles for four years. They learn from each other more than they learn from us in ways both formal and informal. The 2AM debates on philosophy, religion, and current affairs are things you just can't replicate in a bunch of predefined classes taught inexpensively at large scale.
In one of my administrative roles, I oversaw the undergraduate education programs in the College of Engineering--about 10,000 students. The College had an advisory board of successful alumni (read: wealthy current and prospective donors). The nature of wealth being what it is, most of them had connections to computing and advanced technology. They all said for years that we were at risk of being disrupted out of existence by online education. At least, they did until I posed the following question:
Suppose your child had two options. They could come to Michigan, live here for four years and take classes in residence at our current tuition rates. Or, they could instead live anywhere they wanted except for Ann Arbor, pay 1/10th the price, and take exactly the same classes online. Which would you have them choose?
You can imagine that they didn't have to think hard about the answer.
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