Google announced the winner as Kansas City last month. http://www.businessweek.com/technology/content/apr2011/tc201... has some interesting notes about the implications of Google running the service and disrupting the ISP market. One strategy they talked about was using Kansas City's own infrastructure to run fiber through utility poles and already present street conduits to get fiber to the home and cut costs.
IIRC, a post to NANOG a while ago claimed that the cost to run fiber to the home is well over $1k/household. I think the math works out to the conclusion that neither Netflix nor Google has enough money in the bank to run fiber to a large fraction of America.
So the question becomes: if you get fiber to 1% of America, is that going to be enough of a demo project to convince someone to come up with the money for the rest of America?
There's no way Netflix could afford to do that. Most of their cash will need to go to licensing deals just to stay ahead of the competition. As streaming video becomes ubiquitous, content will be the differentiating factor.
Whatever happened to Google's "experiment" of running a fat pipe to one community?