This item is most interesting, and adds weight to some speculation I blogged about earlier (see this, for example). If this happens as reported, Google begins becoming both a service provider and a transport provider. If Google does bid on (and win) spectrum in the upcoming auction, they have the ability to move further in this direction.
How does this play in the structural separation model?
Update (2007-09-24): Nicholas Carr posted this item on his blog, which raises some interesting questions, not so much for Google, but for the kinds of industry trends posited by John Hagel and others.