Consumers would love faster broadband, but they can't afford to pay more for it. Businesses can, and they have a variety of options available.
That being said, I'm jealous, so very jealous of Kansas right now.
In fact Google's product is rational: If you are going to bother to build out in a competitor's territory, you want to get all of your competitor's customers to switch, so you need a disruptive product.
Google is spot on to roll out FTTH, but existing plants aren't going to disappear any time soon, and likely will not react to the disruption play at large.
An even better analogy is that the companies that build airplanes also build cars. They have a decent margin on cars but a much lower margin on airplanes. So, even if they could make planes that were larger and faster, they profit more from keeping people driving their cars.
Market research had revealed that many customers thought Concorde was more expensive than it actually was; thus ticket prices were progressively raised to match these perceptions.[36] It is reported that British Airways then ran Concorde at a profit, unlike their French counterpart.[127][128] http://en.wikipedia.org/wiki/Concorde
As to network capacity, it's actually fairly cheap, prices are based around perceived value not cost just look at text messaging plans. That and cable competing with hulu/netflix.