They're bluffing, and Google knows it
These guys are bluffing, plain and simple, and Google knows it. What are they going to do if Google refuses to pay? Block them or degrade their service? Oh, that will go over well with their customers. It'll be a public relations nightmare that will go on and on. First, they'll get slammed for simply blocking or degrading Google, which they'll have to explain. They'll explain that Google isn't paying its "fair share" for bandwidth, at which point Google will fire back that it pays quite a lot for bandwidth, thank you very much, and it may also publicly ask why sites such as Bing, Yahoo, MSNBC, Facebook, MySpace, etc. aren't also being blocked. Are they all paying? If not, why is Google being singled out? And if they should pay, then shouldn't subs be either getting discounted service or maybe even free service? Then the ISP will have to try to explain their rationale for trying to double-dip by charging both customers and Web sites, and we know that the more they talk about this, the sillier and greedier they look, and we also know this isn't a discussion they want to have out in the open.
So who wants to be the first ISP to try this stunt?
I have to agree with you on this one. I can't see this going anywhere. If they force the issue, they will have to start explaining a whole bunch of stuff on multiple fronts.