You could argue as others have that there should be a default search which is local only, but why is it so important that everyone uses Microsoft's default programs rather than the millions of third party programs available? There seems to be a double standard where people say that it's important that Microsoft not push its own software over alternatives but also that Microsoft's default programs should fit every need of every user.
There's plenty that Microsoft does wrong, but providing a search that uses their search engine while allowing users to install whatever search they like is not so bad. You are already contacting their servers for updates and other things. Having to install an alternative search is really no worse than having to install a web browser. Now you might say that the menu is basic functionality but the browser is not, but what's really the difference?
At least now we know why they're offering the update for free.