I also see it as a feature. If instances have a natural active user cap, then server-based communities can't get so big as to outpace moderation. And admins have the ability to moderate local users' behaviour on off-site sublemmies by enforcing their own codes of conduct.

The internet used to be small, but expansive. It became big, but concentrated.

I liked the former. I know many people like the latter. Those people are welcome to their corporate slums.