| The market for Internet access services is highly competitive. There are
no substantial barriers to entry, and the Company expects that competition will
intensify in the future. The Company believes that its ability to compete
successfully will be significantly affected by numerous factors, including
price, ease of use, reliability, customer support, geographic coverage and
industry and general economic trends (particularly unfavorable economic
conditions adversely affecting consumer discretionary spending). The Company's competitors include many large companies that have substantially greater market presence and financial, technical, marketing and other resources than the Company, including (i) international, national and regional commercial Internet service providers, such as Performance Systems International, Inc., Bolt Beranek & Newman, Inc. and UUNET Technologies, Inc. ("UUNET"); (ii) established on-line services companies that currently offer Internet access, such as America Online, Inc. ("AOL"), CompuServe Incorporated, Prodigy Services Company, Earthlink, and Delphi Internet Services; (iii) computer hardware and software and other technology companies, such as IBM and Microsoft Corp. ("Microsoft"); (iv) national long distance carriers, such as AT&T; Corp., MCI Communications Corp. and Sprint Corp.; (v) regional telephone companies; and (vi) cable operators, such as Tele-Communications, Inc. New competitors, including large computer hardware and software, media, cable and telecommunications companies, have increased their focus on the Internet access market, resulting in even greater competition for the Company. Increased competition has resulted and could continue to result in significant price competition, which in turn could result in significant reductions in the average selling price of the Company's services. In addition, increased competition for new subscribers could result in increased sales and marketing expenses and related subscriber acquisition costs, which could materially adversely affect the Company's potential profitability. There can be no assurance that the Company will be able to offset the effects of any such competition or resulting price reductions through an increase in the number of its subscribers, higher revenue from enhanced services or cost reductions or that the Company will have the financial resources, technical expertise or marketing and support capabilities to compete successfully. Most of the established on-line services companies and telecommunications companies currently offer Internet access. In addition, new competitors, including large computer hardware and software, media and telecommunications companies, have increased their focus on the Internet access market, resulting in even greater competition for the Company. In particular, Microsoft has introduced an Internet access solution, including front-end software and an on-line service, called "Microsoft Network." The application software for this on-line service is bundled with Microsoft's Windows 95 operating system, which may give the service a significant advantage over other on-line and Internet services. Microsoft has undertaken a strategic alliance with UUNET that provides Microsoft customers access to the Internet through UUNET's POPs. Microsoft has also purchased an interest in Comcast, a leading cable operator, to converge software and cable networks to deliver Internet access. In addition, IBM's most recent version of its OS/2 operating system software includes Internet utilities, and IBM offers Internet access through its own private communications network. AOL is offering direct Internet access. The ability of these competitors or others to bundle services and products with Internet connectivity services could place the Company at a significant competitive disadvantage. The market for Internet access is characterized by rapidly changing technology, evolving industry standards, emerging competition and frequent new software and service introductions. There can be no assurance that theCompany can successfully identify new product and service opportunities as they arise and develop and bring new products and services to market in a timely manner or that software, services or technologies developed by others will not render the Company's services or technologies noncompetitive, obsolete or less marketable. The Company currently does not have any proprietary applications software. |