The reason Reggie isn't worried is that Onlive is the future. The not-so-near future I mean.
I've said this in a few threads, but here it goes again... So far I still haven't seen any reasonable explanation of how they'll deal with latency and jitter to provide a satisfactory experience to even people with good connections (without having local data centers everywhere). Even for those people, traffic caps will be a big problem.
Onlive will be, at best, a niche product for quite a while. That's if it doesn't fail before it can take off.
Actually, Crysis was used at GDC as a demo for Onlive's capabilities. There was apparently some lag, but Onlive is still in alpha stages so it should get much better later.
They have been working on it for seven years. This tells me that they have done 90%+ (if not 99%+) of what they can do to reduce lag on their end.
The remaining part is Internet lag which they can't control.