Console vendors have been largely mum about OnLive. Perlman expects gamers will cling to consoles they've invested in even if they also buy into OnLive's services, but he does suggest that more graphics-intensive games are going to outstrip the power of home computers and current consoles.

"As time goes on the Xbox and 360 as architectures will become frozen in time and will seem to offer lower performance to the user, whereas in a data center of course we upgrade the servers every six months with the latest processors and graphics chips," says Perlman, who showed off the company's sleek little MicroConsole for enabling its service on TVs (a browser plug-in is required for those using OnLive via a PC or Mac.

Like so many newfangled service providers, OnLive is keeping a close eye on the , which heated up again this week in light of an FCC proposal for more formal rules about how carriers handle traffic. Perlman says he filed comments with the FCC not specifically about Net Neutrality, but about ISPs.

"You've got these two extreme views: one which is to let everything go wild and the other is that we need to completely control it," he says. "The sensible answer probably falls somewhere in between. If the Internet gets completely congested in the last mile then there are a lot of applications that can no longer be done."

Perlman has proposed that ISPs publicly characterize their networks, such as whether they have a maximum or minimum speed, what percentage of time their network is congested, what their latency is. This would make it easier for them to offer tiered services appealing to different levels of users.