They had the option for a long time. One of the main selling points of Windows 2000 and ME was native internet support without messing with anything, and people did use that.
But was only near the release of Vista that Windows started to phone home.
True but internet wasn't as ubiquitous then as it is now. Most laptops didn't have WiFi and sometimes not even Ethernet. In many cases they still had a modem.
Also there was much more scrutiny in those days. I think Windows phoning home in those days would have been a huge thing. Similar to the resistance to the TPM which eventually made it in (but in a more watered-down version which didn't have so many privacy and vendor-lock-in concerns as the original proposal).
Of course now all companies are doubling down on all of this. The TPM on steroids now exists as Apple's T2 (and built into M1) chip, Intel's ME, and Windows systems are getting next-gen lock-down crap with Pluton now.
I feel like when we protest for privacy, even a major win is just slowing down the other forces, not stopping them.
True that. I think the main thing they've learned over the years is how to craft their public image, which I guess can be said about every corporation out there.
They did plenty of very different things, but this is something they only have done since the late XP days.