One theory of mine (perhaps uninformed; I'm not really a networking expert) is that because of the dynamically configurable nature of their systems, they need to use routers rather than relatively dumb and cheap switches at almost every level - in order to have flexible networking and still maintain isolation between customers.
This could get quite expensive if you have to pay Cisco/Juniper for this. If this is true Google will have quite an edge with their software defined networking here, I would guess.