One huge advantage of ActivityPub based federation is that every service that uses it can talk to any other service. So, you can share data between Mastodon, PeerTube, PixelFed, Plume, and any other federated platforms. This also allows different competing services in the same space such as Mastodon and Pleroma to work with each other. Meanwhile, traditional commercial platforms like Fb, Twitter, and Youtube have zero incentive to allow users to move data between them.
While I agree that it would be great if people could just host via their ISP, VPS hosting has gotten both a lot easier and cheaper nowadays. You can get a Digital Ocean server for 5 bucks a month, and thanks to containers it's much easier to package and distribute the services. VPS providers will also often have cheap backup options. This dramatically lowers the barrier for managing a service.