The good news is that this incarnation of the service is dead. The idea is not dead.
In the meantime I can think of 2 reasons why only a handful of people used the service each flight. The first being price. I might buy an hour for $10, but a whole flight for $26.95 adds up pretty fast. The second? A lack of a power outlet in coach seats (some airlines do supply power to first class and possibly to business class -- so far I've never seen power at a coach seat). Continuous use of WiFi eats batteries pretty fast so to really make this fly, it would include power at the seat of the subscriber.
I believe them when they said the terror alert wasn't inrelated. I see that as a little disingenuous though it certainly may not have been the main reason. There is a clear relationship. If passengers can't bring their laptops into the cabin, there are no customers, period.