The big games companies will then all make these contracts but include clauses that prevent them from making similar deals with smaller distributors.
Probably not great for the consumer in the long run either if it leads to an effective monopoly in online games.
Making games bigger does not have to be that much more expensive , especially if you start adding stuff like 1080p video.
Yes, a lot of people have gotten so cynical they haven't noticed, no sarcasm, but many consumer internet connections over the past few years have simply gotten better, without much fanfare. I believe right now my mid-grade Comcast connection is now primarily speed limited by my wireless router, rather than the Internet connection itself. This was not true when I signed up for it four years ago. I still have a 250GB/month cap (which I still only come about 33% of the way to using) but I wouldn't be surprised that grows sometime before the XBox720 gets out there.
It seems like games have been shipping less video as the in-game engines become more and more capable. Game companies were already straining to fill the disk in this generation, I think in the next generation it is very likely to be game company resources that are the limiting factor rather than bandwidth concerns.