Binary groups were huge and users expected them for free. And users would download huge amounts of stuff. So it's pretty much a cost sink, and ISPs who tried to start charging (for this service that had dramatically increased costs) were faced with vigorous campaigns. At some point it's easier to just cancel and tell disattisfied customers to get a new ISP if they're unhappy.
The amount of groups distributing images of child sexual abuse created some risk (not every ISP is in the US) and things like stealth binary groups distributing porn put a bunch of people in oppressive regimes in tricky situations.
ISPs could have dropped binaries and only carried text groups. But this means putting up with groups of people who strongly held but conflicting opinions:
1) be a dumb pipe and provide everything
2) be a dumb pipe but filter spam with a Breidbart index of something or other.
3) make the news server operate to rules laid out in the ISP's ToS. (Young people may not realise but a lot of effort on the early Internet was spent on "what do we do if our users go on the Internet and start swearing?" Many ISPs had rules forbidding swearing. (At least, they did in europe))
Then www forums sprung up and they had some advantages: avatars, mods, etc.
I don't recognize the bit about "dumb pipes". News is a service, not a pipe. Very few servers carry all groups. Some didn't even carry the alt groups, that wasn't fun.
The ISPs I worked at in the late 90s did not carry the binaries groups, becuase of the outrageous storage requirements. I think that was quite common.
No provider would carry all groups, and when you looked at particular groups most providers would not carry all posts.
But you still had some people saying that providers should do zero filtering at all, ever, and that doing so was evil censorship of the worst North Korean kind. Filtering was strictly something for users to do.
That's impossible for providers to do when people are using groups to distribute images of child sexual abuse.
Many customers were happy that sporge was filtered. Most customers wanted some kind of spam filtering, even using the very tight definition of Breidbart Index.
So there were conflicts in the userbase, which got pushed onto ISP support. Since ISPs were already paying for huge storage requirements I can totally understand this being part of the consideration to cut usenet.
Not carrying all groups is not the same as filtering. I'm sure the reasoning you describe exists, but it wasn't a very mainstream view. As a tiny data point, none of the ISPs I worked at saw this as a support problem.
These have been delegated up to the forum's moderators. People much prefer the work of filtering be done by someone else. Client-side killfiling never really solved the problem of killing half a discussion.
This all more or less kind of happened eventually, but the parts that were early did not go the way you state, and the parts that did go that way were much, much much later and did not directly influence the overall fate of usenet.
All in all, no, you're only talking about some side stuff that only clouds the history.
Speaking as someone who was an extremely heavy user of Usenet back in the day, it seems pretty clear that spammers overwhelmed it well before it became primarily used for binaries, and most people were happy to turn to web forums once they were available.
(Edit: moderated Usenet groups appeared fairly early, but what I recall is that spammers overwhelmed the moderators, even there.)
Usenet never completely died btw, so that's not a fair description; there are people using it as a forum to this day, in nontrivial absolute numbers, but of course small numbers relatively, compared with web forums.
The amount of groups distributing images of child sexual abuse created some risk (not every ISP is in the US) and things like stealth binary groups distributing porn put a bunch of people in oppressive regimes in tricky situations.
http://www.exit109.com/~jeremy/news/misplacedbin.html
ISPs could have dropped binaries and only carried text groups. But this means putting up with groups of people who strongly held but conflicting opinions:
1) be a dumb pipe and provide everything
2) be a dumb pipe but filter spam with a Breidbart index of something or other.
3) make the news server operate to rules laid out in the ISP's ToS. (Young people may not realise but a lot of effort on the early Internet was spent on "what do we do if our users go on the Internet and start swearing?" Many ISPs had rules forbidding swearing. (At least, they did in europe))
Then www forums sprung up and they had some advantages: avatars, mods, etc.