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This will probably grenade the plans for many small businesses, right now.

Certainly seems intended to drive Workspace subscriptions, but I wonder how many of those users will sign up for Office instead.

This doesn't apply to Google Workspace addresses that most small businesses will be using.

A lot of small businesses actually have a free address for legacy purposes. Send as, even for paid users, won’t support third-party providers.

This is incorrect. The plan doesn't apply to workspace aliases, but it does apply to workspace users using Send-As via SMTP.