Yes, I think part of it was the "dark fiber" at the time, made bandwidth relatively cheap. But most personal photos don't use that much bandwidth - being able to use them anywhere online (which iCloud and Instagram don't allow) was a big idea. We went from "my content hosted in the cloud" to "Instagram's content" in a lot of ways. That is only partly a pricing issue.

I think the main thing here is merely that it's costly to keep a massive archive (of mostly garbage[1]) online and available on a long timescale. Not just the S3 bill (which I wouldn't underestimate the cost of, for a site that let just anyone upload basically infinite amounts for a decade), but the cost of having engineers maintain and monitor the site forever, either with revenue having dried up a decade ago, or, also having a staff of people to operate the whole business.

You're remembering that if you uploaded something to some free site in 2001, it was still there in 2004. That was because the same people and companies were still around 3 years later, it wasn't because they cared more about you than 2026 startups do. Sure, 2004 Photobucket may have cared more about us than 2026 Meta does -- but I doubt 2001 AOL or AT&T cared about us more.

[1] I only mean most of the content uploaded to Photobucket 2 decades ago is completely useless and abandoned with no one ever coming back to look for it. Memes or screenshots posted to forums that themselves have been offline for a decade. And just content that people don't remember even creating.