Phonology is held to play a central role in typical reading development (Shankweiler et al., 1979) and sensory or phonological deficits are often held to be a primary cause of reading disability (Snowling, 2008). However, little is known about the nature of phonology at the endpoint of atypical reading development -- that is, in adult poor readers. We examined the time course of (auditory) lexical activation, competition, and learning in a community sample with a high proportion of poor readers in two experiments. In Experiment 1, contrary to our expectations, we found that poor readers were more sensitive to subphonemic coarticulatory cues than better readers. In Experiment 2, we examined the time course of word learning along with the time course of phonological competition. Poor readers differed from better readers in the trajectory of learning, and also in phonological competition: typical readers exhibited strong competition between rhymes, but poor readers did not. Simulations with a computational model suggest that instability in phonological organization (simulated via reduced lateral inhibition) can explain differences in both studies in counter-intuitive ways, shedding new light on an old problem.