“1“ being pronounced as “yao” (幺) is a military number variant. It became popular and used by civilians.
It is similar to the military alphabet for English and other languages and served a similar function.
when using military codes, people often choose a word to pronounce a letter, so there’s no misunderstanding when the connection is bad or the environment is noisy. like Bravo for B and Delta for D.
Similarly, some of the numbers when say it in Chinese can be difficult to hear.
However, not all numbers have an alternative pronunciation. The reason why some of the numbers have military pronunciation but others do not is that these are numbers that are usually pronounced differently in different dialects. As you probably know Chinese dialects differ greatly from each other. A lot of dialects are mutually unintelligible, even both of them are speaking Chinese. (They can probably communicate in writing). So this had become a problem during wartime communication, especially when reading numbers.
So they developed a replacement pronunciation, only for the numbers with pronunciations that are easy to be mistaken or vary greatly from dialect to dialect.
Although none of the other pronunciations stick, 1 being “yao” seemed to become part of civilian pronunciation, especially when pronouncing phone numbers.
That being said, if you say a phone number and pronounce 1 as “yi”, most people wouldn’t mind.