“Further, as a business, they ought to be free to choose to not do business with anyone at any time, regardless of the ToS.”
Then get off the US Government Internet.
This would be like running a toll freeway on behalf of the US Government but then saying Trump stickers cannot be on the freeway.
The only US government Internet is the series of secure networks connecting US government facilities. The Internet you and I are using is not owned - nor was it ever owned - by the US government. It began as a series of connections between various universities and research facilities and grew into a much larger network through commercial investment.
"This would be like running a toll freeway on behalf of the US Government but then saying Trump stickers cannot be on the freeway.
There is no analogy that makes sense where Amazon AWS is a "highway". You could call it a billboard where you can put up signage. You can call it a TV station that allows people to put up their own TV shows. But in no way is AWS a "highway". And in no way is AWS being run "on behalf of the US government". That's... nonsensical.