What is the point of everyone being connected to an ISP?

I've heard that the Inteet exchanges packets by packet switching. But why does everyone need an ISP? Can't your router just be directly connected to your neighbour's routers and their routers connected to their neighbours, all doing the packet switching? In that case, only a few would people would need to be connected to some hub or backbone which would be the gateway to the Inteet outside of the neighbourhood. So why does everyone in the apartement individually connect to the ISP?

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