But just think what would happen if Google or Amazon decided to go customer service friendly and charge for managing and hand holding. My feeling is that they could turn on that spigot at any time if they wanted to.
As for google, they couldn't interface with a real customer if their life depended on it. And the idea that they could suddenly build out a massive managed hosting service on a whim is not reflective of reality. Your claim is basically saying that no company in the world has a competitive advantage because anyone else could just start doing what that company is doing on a moment's notice.
Compare it to any "standard" vps offering and they're insanely expensive. Compared to the vast majority of dedicated hosters they're insanely expensive. Plus you're the only one on your cpu/memory/disk.
Anybody with a monthly AWS spend of $100 or more could have 2 dedicated servers, one in .eu, one in the US, for 20-30% less dollars, 5-10x more cpu, 32 Gig of dedicated memory or more, 100x more bandwitdth (and no surprise overuse charges, finding hosters that just "limit" you to 10 mbit is easy), everything non-shared and good support. Hetzner ES40 is EUR 40/month, 32Gig ram, 2Tb disk, unlimited bandwidth, similar offerings are available in the US (e.g. www.ovh.com.ca ).
Total spend for effectively ~ m3.2xlarge instance, one in US, one in EU : $120.
AWS spend for a comparable config : 1 month of m3.2xlarge : $650 5/10 Tb of internet facing traffic: $600/$1200
I think this is being generous to AWS, because an m3/2xlarge does not match the specifications of the dedicated server offerings.
Granted, these services are not as flexible as AWS. At the prices they offer though, is there anyone who really argues AWS is better for anything but their free tier ? As for the "extras" amazon offers : since they're all proprietary businesses, every amazon extra you use (e.g. S3) is something you're betting the business on.
And since none of the aws/google/... offerings are anywhere near what I want (just set this .jar in my homedirectory live, ditto for go binaries, or move-tag-and-push git publishing), I have to script stuff to make that happen anyway (I love docker).
Why does AWS have customers at all ?
Besides, in this region with messy peering agreement, AWS network also has the lowest ping time and the fewest hops.
AWS is effectively (almost) a transit-only network. That has pros and cons. On the plus side, it should have decent connectivity anywhere. On the minus side, if (almost) any link at all on a network is congested, that will almost certainly congest AWS traffic too. They're relatively unlikely to have long-running issues. Also : they're REALLY expensive.
Here's a calculator : http://calculator.s3.amazonaws.com/calc5.html