Microsoft is right, digital content download is the future. The problem I see is the average consumers fixation with storing a crap load of discs. They most likely won't want to roll with the ball as mentioned here before. Sooner or later it will happen tho, and they will not have much choice.
As for the isp bandwidth talk. I guess that some places put caps on connections, and are moving backwards. It's not all companies tho. There is plenty of ISP's that are upping connections day by day.
I for example live in NYC, and have RCN as my ISP. In the last year I had a jump of 15+Mbits in bandwidth. At this time I can pull 26 Mbits down(20 advertised), and there are plans to go even higher Q1 2008. My company never had any caps, and my used bw is in the high TB's.
There also is other ISP's around here that advertises 25+Mbits down. Not to mention Fios which I heard can hit up to 50Mbits down. The future is here, that is if you don't live on a farm
I'm ready, so bring it on MS!

PS- This thread is the perfect example why technology is behind in the US. Everyone is scared of change, and until they start embracing it we will stay this way.