Sorry, no your wrong. I work for an ISP and I know exactly what the GP was referring to. The removal DSL from the list of tariffed products (the list that sets price for wholesale telco products) is what killed small/medium ISPs. The national dialup pools had absolutely nothing to do with it.
Before the rule changes, any mom-n-pop ISP (which could be 20,000 subscribers) could sell DSL internet to a customer for the DSL-line tariff charge + ISP charge (the same tariff charge as the telco charged its direct customers). The only difference between ISP A, ISP B, and the telco monopoly ISP was the ISP charge and the customer services provided by each.
After the tariff change, the local telco monopoly now charges much more for the DSL line charge to a third party alone than it does for its own complete bundled service. As an example... Qwest now charges $33/mon for a bare-naked DSL line serviced by a third party ISP. Add in $20/mon for the ISP charge. Qwest's own DSL package price is $29.95, less the line cost itself.
Remember, this is just the price difference in the last-mile DSL circuit. The mom-n-pop ISP also pays the telco for dedicated high-bandwidth circuits to every CO DSLAM to pickup the aggregate circuits (typically). How does a local mom-n-pop ISP (often with far better customer service) compete when the base price of the DSL circuit (without service) is more than the incumbent monopoly package price?