I sent this same message to X10 support. Think I should post their response so others can be aware:
Hi David,
I am sorry. Unfortunately, at this time, it does require an internet connection. We understand there are many that feel the same as you do and are in talks about what we can do to avoid an internet connection. Unfortunately, there is no other information regarding that and would not expect something like that to be made available anytime soon.
Thanks,
X10 Support