> In light of that, I then imagine that other providers are already storing photos and data unencrypted and did not object to adding scanning on the server side, and also did not share anything about the scanning with the public.

It is well known that competitors scan on server side, I don't think that's any kind of a secret with Google Drive et al. Outrage is exactly about that -- client side scanning is seen as way more intrusive, for a good reason.