[webwright]

No. Price is a signal of value-- you'll basically get all of the cheap-bastard customers for whom a $5/month savings is worthwhile.

Additionally, you'll be hamstrung from a budget point of view in terms of marketing and product dev budgets.

That said, there are magical price points and economies that technology can get you. For example, Encarta (the CD-ROM encyclopedia) gutted the door-to-door encyclopedia business because they could be cheap with a high profit margin.

So instead of trying to undercut an efficient technology startup, try to undercut someone (or a whole industry) who isn't using technology effectively.