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Why is a Modem (internet connection) required to create a wifi network?

Why is a modem required to create a wifi network? A wifi network should work with or without connection to the outside world. What information is eero (amazon) gaining by always having a modem connection? 

I was not concerned initially, but now I am. I just moved and purchased some eero's and tried to set up the network and all of my smart devices prior to the ISP installation. This would allow me to essentially be plug + play when the ISP arrives. Now eero is saying that I need an external connection even to set up the network. This feels like a huge flaw and potentially red flag security/privacy wise. 

The tech support was of no help and kept repeating "the gateway eero needs to be connected to the modem" which is not the answer to my question. 

Does anyone have insights into this?

Also, what happens when the ISP goes down? Will all of my smart devices cease to work if eero requires network connection to create a wifi network?

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