Or 3. Their infrastructure requires some server resources to be available. If their DHCP server is down, your computer cannot register with their network. If their DNS server is down, you cannot resolve host names. If they use a HTTP proxy server, you cannot connect to external web sites when it's down. Etc.
However, any serious ISP would have managed their infrastructure so as to avoid Single Points of Failure. In other words, a properly planned network has a fallback in place for when an individual piece of equipment fails. If outages are a recurring problem, you may want to shop around for a competently managed ISP instead.