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Imaginedvl said:

It works without it.

The only case is if you did not save your password, then it needs internet to authenticate you. Nothing wrong here :)
I cannot connect on my kids Xbox One (I do not want to save my password on it as it is for the kids) but mine works perfectly well (where I saved my password), I cna play all my games (tried 3 of them to be more accurate) only some MP issues.

STATE may be in that situation (where he did not saved his password) and therefor there is no other choice but to be online to validate it.
Microsoft is working on it (Xbox Live service is flagged as limited is on their support page), sucks anyway for you STAGE :(

I think you might have found my problem! I need to take my account off of my xbox and reestablish it a saved password! It wont even let me put my password in! Thats the problem!

I have no clue that if you dont leave the password on your xbox you must authenticate online. Im going to fix that right now.