

Microsofts cloud gaming is already profitable. Also, they got their ass kicked so badly against the ps5 that there’s no profitable avenue in developing and trying to sell a future console. They’re better off concentrating on pc games and cloud gaming. Sony can’t really compete against them in that market, just like microsoft is unlikely to make it worth while to compete against Sony in a console.
You overestimate how much Microsoft would care about people with bad internet. They’ll opt for smaller numbers paying a subscription per month/year on cheap hardware. No point in losing money against Sony directly.