You are absolutely right and I take back what I said as being overly simplistic. Back in ARPAnet days there wasn't much an application layer. It really depends if you are looking at it from a transport layer or not. But since we're talking about cloud it's not useful or even particularly helpful to either argument to be overly broad about defining the Internet. I do suppose one could argue the cloud is definitely capable of exploiting favorable packet flows to exist wherever on the network- but it doesn't have to which is precisely my point..
I classify your comment as interesting. But it doesn't say one thing or another of the merits (or lack thereof) of cloud technology.
It just really pisses me off to hear people who think they know what they are talking about dismiss cloud as some revist of technology that has existed since the 70s. In a manner of speaking it is, but it is yet another layer of abstraction with new possibilities and conveniences and fewer disadvantages.