With an external PHY you can use single pair ethernet, which is much more suitable for use in embedded devices. Single pair ethernet directly competes against I2C and CAN, because you only need 2 wires for full duplex 100mbit/1000mbit connectivity.
Single pair ethernet also has the massive advantage that it isn't restricted to the garbage RJ45 plugs, which are basically a nightmare in embedded devices.
The problem with Single Pair Ethernet is: nothing supports it.
You don't see off the shelf home routers that just so happen to have SPE support in every LAN plug, or USB Ethernet adapters that support SPE alongside the normal 10/100/1000Base-T, or SoCs that integrate an entire SPE PHY. So it ends up stuck in this adoption limbo.
The advantage of normal Ethernet is that everyone already has the hardware for it, and SPE doesn't have that advantage.
But where would be the fun in that?