I have been having intermittent problems with Dictation in Word (I have a personal M365 subscription and am on the preview channel: Build 13530.20264). Sometimes it works, other times it doesn't. I would say the split is 80% of the time it is not working
and 20% of the time it is working. However, Dictation works in both Outlook (desktop app) and PowerPoint all the time.
When it doesn't work, I get the error saying "you need Internet connection." After further testing, I've learned that the way I use Word appears to be contributing to the problem. What I do is open a blank file in Word without saving it. I then dictate text
into the blank Word file and then cut and paste it into documents I am editing (Word, Outlook emails, Excel, etc.). I should note that I've been using Word this way for at least a year and have only run into this problem in the last month or two.
I can avoid the error by saving the empty Word file to my personal OneDrive account. This turns on AutoSave and Dictation works.
I've sent in feedback reports so hopefully this will get fixed. I just wanted to document my fix in case it helps someone else.