The bulk of the customers generating the $40 billion per year for AWS do not care enough about bandwidth (transfer) costs for it to change the market completely. While it may be in the top ten as a consideration on cost, it's nowhere near the top.

All Google would do by slashing transfer pricing is lure a lot of low value customers - and worse - to their shores and harm their service in the process.

It's a benefit to the cloud majors to keep transfer costs artificially high, which is why none of them have pulled the trigger on that competitive angle. It helps keep various types of low value + high abuse risk customers out and of course the transfer pricing is a profit center. Google isn't eager / desperate to saturate its services with terrible customers any more than the other large providers.