Use of own domain name with Office 365 Home/Premium

I think you're wrong.  Microsoft already have the infrastructure for this and ability in their products to segment the market.  This should be money for old rope for them.

OK, lets say the infrastructure and support does not cost extra.

I think they did the homework and could see that there is a large number of up to 5 users small businesses (home businesses sort of) who (if the custom domain option were available) would have switched from Business to a cheaper Home plan, cannibalizing the more expensive plan.

I'm still happily using Office 2011.  Excel 2011 processes VBA macros on my 9.5 year old MacBook Pro (Intel Core 2 Duo CPU) faster than Excel 15.x (2016???) does on 2 year old MBP (i7 CPU).  My running log spreadsheet that I've been using since 2006 is almost unusable in the latest Excel because the macro processing is so slow that it interferes with data entry!  Why would I pay for an upgrade, whether it's a permanent licesning (gets cheaper by the month), or a subscription (will only get more expensive)?

I think you're wrong.  Microsoft already have the infrastructure for this and ability in their products to segment the market.  This should be money for old rope for them.

I do it for the cloud storage. Same price as Dropbox, O365 is the bonus.

So you said yourself, it is the same price as DropBox, so even without custom domains you have already got the better deal, and there should be no complains about O365 pricing then. Custom domains could be a great bonus option, but it is not there. Get used to that.

Off-topic about OneDrive storage:

I cannot see how 1TB could work for me. 5GB of the free storage is enough for the needs of the documents (like actual office documents). 1TB is far too little for keeping the photos and short home videos accumulated over last years. I needed to find other ways of doing photos and videos storage at home and having external backup for my family needs. 

So, I was wondering how do you utilize 1TB per family member?

What is that that forces you to purchase the O365 instead of Office 2016 which would last for several years?

I had the subscription for 1 year. However I realized that my family does not utilize that at all.

So, after that, I have purchased 2 copies of Office 2016 for a pretty good price and then I have one license that I use on my work machine. I do not think I would have a problem with using Office 2010 either, for example.

I do it for the cloud storage. Same price as Dropbox, O365 is the bonus.