You are mistaken. I am not describing the 400 foot bubble that is involved in "limited" Remote ID drones.
A "standard" Remote ID drone must (1) broadcast certain real-time data from the drone on
Wifi frequencies (not to mobile phone towers) and (2) update an internet database in real-time. Note that (1) must come from the drone itself, but (2) need not. I'll discuss both of these requirements in the two paragraphs below.
While the broadcast on Wifi frequencies must come from the drone itself, most drones today have Wifi radios which are used to communicate with the controller. A simple firmware update will allow those radios to also transmit a burst every one-second or so with the unencrypted datastream required by the rule for standard drones. The purpose of this broadcast would be to allow anyone in the area with a smartphone or computer and the right app to get a map view of all the drones in the area simply by receiving the broadcast. The FAA rule specifically requires that these broadcasts occur on Part 15 frequencies and thus the broadcast CANNOT be sent out to mobile phone towers. In FCC parlance, a "broadcast" is a one to many, i.e., an FM radio station "broadcasts." A mobile telephone does not.
Note also that you will not necessarily need to broadcast your registration number with this broadcast. Rather, for your own privacy, you can instead opt to broadcast a unique session ID for each flight. The session ID would be generated by your Remote ID service provider. So, a police officer accessing the FAA system could determine your identity, but a neighbor watching the flight could not.
In contrast to the real-time Wifi broadcast that must come from the drone itself, the internet update need NOT come from the drone itself, but can be sent from the Remote Pilot using a mobile phone connected to the controller. Since most drone users today use their mobile phone to operate the camera and view real-time information about their drones operations (barometric altitude, speed, direction, etc.), a simple app update would allow that same data to be transmitted over the internet.
And again,
if you have no internet, you can fly a standard drone as long as it is broadcasting the required data over Wifi. So, if you're on your farm and there's no internet, you're free to fly as long as your device is broadcasting the required data on Wifi, which it will have no trouble doing if you are controlling it using a 2.4Ghz or 5.8Ghz controller. On the other hand, if you have internet and your remote ID service provider is down, then you're grounded.
A limited Remote ID drone is the one that must operate within a 400 foot bubble. It will not need to broadcast anything from the drone. The Remote Pilot need merely update his location information via the internet in real-time. The limited Remote ID drone doesn't have to broadcast real-time data using Wifi. My suspicion is that this rule is to allow drones that won't be remotely controlled by radio (and thus not have a Wifi radio that can be used to broadcast the data), but instead will be remotedly controlled using gestures. So, if someone releases a selfie-drone in the future that has no Wifi radios whatsoever, the user can install software on his phone that will send the required internet updates, and then launch the drone and control it using hand movements. Since the drone won't be allowed to go more than 400 feet from the controller, updating the internet with the controller's location will be "good enough."
I'm not sure why the rule includes this, since such drones are likely to be under .55 pounds and not subject to the rule. It may be that the FAA contemplates changing the .55 pound rule in the future and wants to have a regulatory framework in place when that happens.
I don't think anyone is reading this as the drone has to connect to "the internet" for Internet transmission. You appear to be describing the "limited" option, in the 400 foot bubble. Yes, it looks pretty clear that the existing drone and a phone on it's controller could do that. The problem is the "standard" option, which would not require the drone to be on "the internet" but it would have to broadcast it's location... to something.... which is probably the cell towers, thus the Internet through a data connection. So, if you are interested in the "standard" option, it is a distinction without a difference.
And, I'm really only interested in what I'm allowed to do with the "standard" option, as the limited option is near useless to me. Sure, you could take real estate pics of a house with the bubble, as long as you have Internet, but I like to send drone out a little farther than 400 feet. I own land that is 2/3 of a mile across, in the middle of nowhere, so there's no reason I shouldn't be able to do that to check out stuff in the far corners of the land. Oh, and it also wouldn't have an Internet connection out there, so it wouldn't even take off.