That is exactly what happened. It's clear even to the naked eye - people still freak out when power grids get knocked out at night. They see far more stars and think that's what caused the failure. To be more technical, the EM radiation signals that astronomers are interested in is very faint and barely above the background noise level. This is why they have to use large aperture and long exposure to essentially amplify the difference between signal and noise. They can resolve fainter signals (images) if the noise floor (light pollution) is less.
Compared to space telescopes, ground telescopes were limited by atmospheric interference. This has improved much lately with adaptive optics. Space telescopes are better, but it's too costly. You will never see a mega telescope constellation, because there is no money to be made. Ground telescopes still generate considerable valuable data (in scientific terms. corporates wouldn't care any less). Even individuals have ground telescopes that do this. Some projects like Sloan Digital Sky Survey (https://www.sdss.org/) puts massive amounts of data in the public domain. SDSS also does observations that are impossible with space telescopes.
Space telescopes are good, but are complementary to ground telescopes - not a replacement. When (some) people say that we should simply forget ground telescopes in favor of space telescopes, they are actually asking to throw away cheap, accessible, democratic, inclusive and sometimes unique way of astronomical observations in favour of an incredibly costly, elitist and closed methods which is viable only to big corps who have little interest in it because of lack of short term profits.
An aside, there are some people in this thread asking astronomers to stop complaining and just remove the streaks from the image. I would say that's incredibly philistine stance - science has long term benefits that is underrated compared to commercially motivated projects with perceived short-term social benefits. An approach suggested is to statistically remove the streaks from image. That's against the whole purpose of these observations - astronomers are interested in the details that cannot yet be statistically predicted. Another approach is to use multiple exposures and combine them. Again - the signals they are interested in often takes night long exposure before signal is sufficiently amplified above and noise. This can't be solved with multiple exposure. The third approach is to close the sensor (usually CCD) with a shutter when a satellite is in the vicinity. This is more viable. However, this is going to be hard and is going to waste a lot of exposure time.