It’s better than cutting everyone off entirely, but far from ideal. You’re basically left with a half cancelled account at that point.
Edit: See @jsnell’s followup. In this response, I totally forgot that you could just change the MX records and continue to use the Google Account. I don’t know why I thought this.
You can still do that, and it's not some obscure feature but asked about on the first page of the account creation flow with the "use my current email address instead" button. It'll be a fully functional Google account, except for supporting mail, and can be changed to a gmail account later (that feature is obscure though).
My guess would be that these legacy accounts will end up as something different than a consumer Google account created with a non-gmail address, but guess we'll see once it launches.
Some other domain providers do offer email forwarding so its not exactly a Google exclusive.
And the quote from Google:
> No, customers cannot move those subscriptions and purchases to a free Google Account. If a customer does not wish to upgrade, they will not be asked to forfeit their login credentials, and they will not lose access to other Google services, such as YouTube, Photos and Google Play, nor paid content, including YouTube and Play Store purchases.
So that sounds like I can migrate email, make sure I'm not using Google Docs, let the account drop to limited mode, and keep using my apps I've purchased. I don't really care about other Google services at this point because I haven't trusted them for years. As long as I can keep logging in on my phone so I have access to my app purchases, that's all I really care about.