We don't do on-prem but we do make heavy use of colo. The thought of cloud growth and DC space consolidation some day pushing out traditional flat rate providers absolutely terrifies me.
At some point those cloud premiums will trickle down through the supply chain, and eventually it could become hard to find reasonably priced colo space because the big guys with huge cash-flush pockets are buying up any available space with a significant premium attached. I don't know if this is ever likely, but growth of cloud could conceivably put pressure on available physical colo space.
Similar deal with Internet peering. There may be a critical point after which cloud vendors, through their sheer size will be able to change how these agreements are structured for everyone.