I completely agree that its in Google's interest to have faster pipes. But I think Google Fiber may just be another moat for Google, another way for them to hinder their perceived threats.
This was an excellent write up on Google's strategy to build business moats (from 2011): http://abovethecrowd.com/2011/03/24/freight-train-that-is-an...
When FB was asked about a phone they said that any phone user they'd get it wouldn't move the scale given their 1 billion+ users. Same with Google, it's extremely expensive to wire a significant number of their users, so they are doing this hoping AT&T, Comcast etc upgrade their connection and match the price. Which they might--in the areas where Google is entering. Personally, I would not count of the price being, say $70 for a long time.
Recent published estimates have been that it would about $11 billion to roll out nationwide in the US. That is a lot of money, sure, but less than they paid for Motorola Mobility recently. Not prohibitively expensive for Google.
Maybe $110 billion, $11 Billion doesn't go far in US
I've gone and rechecked, the $11 billion number from recently published estimates is for a nationwide rollout to a scale comparable to other nationwide broadband providers "passing" about 15% of homes, and is exclusive of costs of actually acquiring customers.
Also doing it in a few cities as an experiment and doing it as telecom provider are very different too (heavily regulated and extremely expensive). Just imagine what it takes to dig in Manhattan with all the permits, payments, licenses, unions etc etc...