yes, you are correct - you cannot download anything quicker than the hosting server can provide, but you are missing the point.
Googles foray is not about providing ISP services, but more about providing hosted content itself.
There are two markets its interested in:
a) hosted social media content on the lines of Facebook, iTunes, Picassa, Maps, Google Places, Youtube. He who provides the datalink controls the delivery of the content: and control of that content is where the future money is to be made
b) software (and associated data) as a service. Google is hell-bent on switching business from using Microsofts Office to using its hosted "cloud" services such as Google Docs. It wants people to use its online software-as-a-service hosted software for which it can levy a recurring service rental charge, and also to use its storage servers for holding data (both home and business)
We are moving away from the period in which people - and companies held data locally, on individual PCs and servers, using application software running locally. The trend now is to hosted applications and hosted data, using remote "cloud" servers (I hate that term). And key to that hosting is rapid data access. Regard this announcement as a technology trial. If Google get it working, you can look forward to them licensing the technology to others in an attempt to increase the speed of the world's data networks. Without that speed, their vision of a world with a unified data network in which your information is held on their servers and is instantly accessible by any device, whether it be PC, Mac, tablet, smart phone or something else, simply can't work to the level they intend
Its telling that the new version of MS Office announced last week, is essentially a local front end for a cloud based system: everything hooks into Office365 - which is the M$ software as a service competitor to Google Docs
And let me just clarify why they are all going down this route
1) M$ makes more money out of its business sales of Office than it does Windows! (And Google know this)
2) M$ have a problem in that companies don't automatically buy the latest version of Office - often they will hang on for years without upgrading. That hits Microsofts revenue stream
So, what do you do? Con the customers into believing in hosted services as the way forward. That way you can charge a recurring fee for the use of the software, AND charge a hefty sum for the storage of the data.
And at the same time M$ or Google get access to all that data, which they can search and index and pick up all kinds of interesting data....