The reason there is no offline mode is that, while data from any transition is small, the total amount of information in the universe us huge, so it wouldn't comfortably fit on a local computer. (I have no idea how big, but I imagine terrabytes, so not realistic to ask this of anyone's computer, let alone the weeks or months of download time for the client)
Huh, no. There is no offline because Frontier decided that a galaxy without the influence of the other players to change things around would be boring. If you go read newsletter #50, you will find that Frontier itself thinks an offline mode is technically feasible.
Now with regards to seeing other players: Since having everything bounce over the central server is a networking nightmare (keeping track of your flightvector and all the changes to it needs a hell of a lot more bandwidth than just the information of rendering the instance), this solved by doing this through P2P. When you see another commander, the information is directly exchanged between your and their computer. Handling the bandwidth is your and their responsibility. To make sure that this doesn't spoil the experience (with lag), instances are created with a maximum of 32 players. When you have 32 players in an instance, you have 32 computers talking to 31 other computers at the same time. That is 496 concurrent connections (if I remember my middle school math correctly). If a few people have a flaky connection, you can imagine the frustration of those players.
And this means that players can choose open, and still play without ever seeing another player, by just tweaking their firewall settings. On top of that, without combat itself being handled by a central server, it's fairly easy for a player to drop out of the instance (e.g., by pulling the plug, though other more elaborate ways exist). So, with a P2P architecture, trying to remove player's options to play in solo would just result in more players finding out how to trick the game into providing them a solo experience, sometimes even at the expense of players that got matched to them.
It's a game played over the internet, so I kinda thought that a decent connection would be like... a basic requirement? But good for you that we have solo.
It wasn't always. Offline mode was promised, and listed as a feature in the store, until a month before launch. And, when offline was removed, Frontier said solo mode required so little bandwidth it could be played without issues while tethered to a lousy 3G data connection while on a train.
So, no, for ED specifically a decent connection was never a basic requirement.