As others pointed out, if you already had your own ISP you were free to use that.
The bigger outcry was in Europe where you had to use dream arena (via BT in the UK) and pay per minute for your connection in the first year even if you had your own ISP already.
Luckily you were allowed to use your own ISP eventually. But yeah, this was all before broadband hsf any traction and the likes of AOL charged monthly fees as well as for all your minutes.
Xbox Live etc bear no resemblance to this at all.