Edwin - 11:06 am on Feb 11, 2010 (gmt 0)
Imagine how fast Google properties (YouTube, Maps, Gmail etc.) would respond on a Google ISP! Presumably if they have their servers parked right on top of their mega-pipes then the latencies would be infinitessimal...
Perhaps they're looking to go down the ISP route partially to create an "unbeatable" differentiator in the battle against Bing, Yahoo Mail etc. i.e. once you're plugged into Google ISP then all of Google's services (probably over 100 of them at the moment if you count Labs stuff, Blogger, Feedburner etc. as well) simply will work FASTER than you've ever experienced web services working before. And nobody else's services will ever respond as fast, for the proximity-to-source reason I outlined above.
And of course, Google's well positioned because they own by far the most dark fiber in private hands of any corporation.