I find it easier not to think of this as City the MMO per say but I prefer to think of it as a NEW program that is focusing on Role-play and Community there are a lot of mmos out there and the role-play/customizability/Socialization often takes a back seat cause the developers are expected to add content, events, and new powers, and "balance" pvp.
Paragonchat wont have to compete with New mmos because it is something new and difference something that is severely lacking in todays "Entertain me, I am Bored" internet atmosphere. It will be a Place for REAL social connections not just "hey help me kill this boss and let me friend you" and a place for Real creativity rather than reading how to do the new dungeon on Google.
There is a reason that Muds (a text based mmo) are very rare now but Mushes( a mud with no combat), Chatrooms like IMVU, and Facebook type sites are all the rage right now. even if they do make a full combat city of heroes2 down the line I think Paragon Chat may revolutionalize the chatroom industry the way WOW revolutionalized MMOs.