I was, in truth, not even surprised that they’d picked the beginning of our Road Show to make this announcement. As you’ve already read, we’d been a longtime nemesis of the communication giants. Anecdotal evidence I’d been hearing from former AT&T staffers indicated we’d become a sort of personal bogeyman to upper management. If they didn’t kill us off now, the company they’d considered their most serious upstart rival would have the necessary financing to eventually take them on as an equal. (I think this is more than wishful thinking on our part. As future events and newspaper headlines would clearly show, AT&T was totally unprepared to enter the Internet business at this time and could in no way handle even limited customer demand. No other major rivals were about to upstage their entry. In fact, their premature entry into the business wound up being a great debacle, and AT&T is still feeling the effects.)

What did surprise me was that they had gone with an unlimited pricing plan. AT&T, highly conscious of their profit margins (and dividend checks), usually prices everything on a per-unit basis. Not only that, but to cover their high overhead, this unit pricing always winds up being the highest in the industry. Low, unlimited pricing, if successful, would actually bankrupt them. And that’s when I saw their Achilles’ heel. Instead of panicking, I’d run the ball right through what everyone thought was the strongest point of their defense.

The plan they laid out was not really to sell Internet access. It was a Trojan horse designed to get people to keep paying their overpriced phone rates in order to get the Internet. Attack the phone rates and they couldn’t fight back. Their profit margin wouldn’t let them.

As we drove from a large investment banking house in London to Heathrow, I formulated my 20/20 perfect vision plan. Bring us your Internet and phone business and we promise to cut anyone’s rates (including, of course, AT&T’s) by 20 percent on both services. As an efficient phone company it cost us only 5¢ to route the same calls AT&T charges up to 20¢ for. That made it easy for us to undercut them by 20 percent and still have more than enough margin left over to cut our Internet rates by 20 percent as well. In fact, it was much more profitable than the old way. AT&T, with only an 8 percent profit margin, could not match us. Our Internet rivals, with no phone capabilities, were equally hopeless. The plan was a great winner. As a member of my own audience, I cheered wildly. This was fun. Before arriving at Heathrow I called the Cowen analyst in Boston with the plan. She loved it. The market would eat it up.

In the car from Orly to Paris I got on the phone to New York with our advertising, PR, and operations people. The next day our response to the AT&T challenge was carried in Investor Business Daily and other major papers. Within two days the ads starting appearing around the country and, of course, in our Road Show presentations. Fund managers hostile to us when we walked in were won over. AT&T’s gambit had gained them nothing.

By the time we reached New York our show had become more a bandwagon than an attempt to pry investment dollars from wary fund managers. People were throwing money at us, and the offering was already sold out several times over, in spite of AT&T’s assault. The guys at Cowen and our family and friends were ecstatic. For our presentation at the Waldorf, Cowen had to secure a larger banquet room, not only to hold all the eager investors, but all the well-wishers who wanted to attend. Even Joe Cohen, Cowen’s chairman, showed up for the lunch.