That is incorrect. There are several IoT products with manual fallback options on the market. I don't even know why you're disagreeing to be honest. You don't like IoT devices, I got that part.
Name three.
Also, "manual fallback" is a cop-out. When I want manual operations, I don't go looking for home automation. The "smart" features should be available without Internet. There's nothing technically difficult about this, but it isn't being done because of abusive business practices.
That is a good question. I don't know. But I'd say it became a selling point after the internet became ubiquitous and reliable enough in the eyes of consumers. Otherwise people would be complaining about 'needs internet access to watch a movie/make a video call/play a game/push source code/order food/call a taxi/etc/etc/etc".