Looks like ISPs are in for competition from a new source -- device manufacturers. Last week HTC announced HTCmail - a service powered by Microsoft's Hosted Exchange offering.
There is much talk about the next great thing in software architectures - Software-as-a-service. Microsoft has been working on making this happen in the marketplace (Hosted Exchange is quite old; I recall trying to sell the concept to a telco and a bank some 4-5 years ago). Anyway, Microsoft probably has a solid base of empirical data to understand how software-as-a-service will work in the marketplace. I think that this will be invaluable in white-labelling software (white-labelling is a business strategy like co-branding (retail) or code-sharing (airlines) that allows a player to extend the reach of their offerings -- HTC is aiming at mass market or small businesses who could not be bothered by installing or configuring Exchange installations)
I'm not quite sure what Microsoft's SaaS strategy is, but I would suspect they are looking to attract other players to distribute services from their Live-portfolio. Could P&C insurance vendors be mature partners? or banks? After all they have been white-labelling for some time now. And then, should Telcos focus on delivering high-quality access for these services?.. or should they aggressively go after digital content? Probably both.
Disruption appears to be more the rule than the exception.