I think computing power would be a much bigger issue than bandwidth. You'd need to run many instances of the game for each user, and continuously kill and fork them.
And frankly, a $500 computer today can already display quite good graphics. Maybe by the time gigabit bandwidth is ubiquitous, computers will be usable enough that installing and running a game locally will be as seamless as clicking a link on a web page, so we won't need cloud gaming amymore.
And then a cheating client will be developed that uses the information in these "alternate timeline" frames to alert you of enemies around the corner, etc.
I'm not saying that's catastrophic, but I think the impossibility of cheating is one of OnLives clear advantages. Sure you can write a bot, but it will only have access to the same information a human player does.
Sure it would be a "waste" of compute power and network, but that's certainly one way to, in a sense, "push data across distances faster than the speed of light". That's exactly the kind of approach which would be unimaginable in a scenario where you have to worry about compressing media in order to get a single stream across in a timely manner (read: now), but might actually fall within the realm of possibility when gigabit bandwidth is ubiquitous.