Broadcast is instant, but linear.
YouTube and other OTT content at decent quality depends on Cable or FTTC or FTTH. It can't be delivered easily on older Broadband systems. Also very little "connected" viewing causes contention on non-NGB / NGH systems and uses up all the viewer's data allowance (Cap).
So... Maybe add a HDD or other storage to buffer the popular likely to be watched content and download it in the background to give viewers instant stutter free VOD. Except Broadcast with hidden PVR partition can do that 10,000x cheaper.
Also Google has to compete with HbbTv, MHEG5 and youview from the Broadcasters delivering non-broadcast (and hidden broadcast) streams via Internet.
But for widespread acceptance you need Fast Broadband with no cap (or a cap over 200GByte a month) and minimum speed of 20Mbps+ at peak times (not an "up to" speed) so users can use internet at same time or even use OTT internet content in more than one room.
A student or single person can use a Laptop/netbook/tablet anyway, Families are the more likely users of TVs with OTT content and they often have more than one TV and/or may be using internet at the same time.
Our BluRay Home theatre adds internet to our TV and we have a PC Media centre on it too. But Internet browsing or YouTube "clip" viewing is mostly a personal activity, not something done on the shared living room TV.
How long before the local Internet can compete with BluRay for instant viewing at same quality vs simply a download to watch later or after enough has "Buffered"?
They need to test Google TV in the Real World, with real people not in the Fibre fed Googleplex by single Geeks.