How will WoW handle falling server population?

No, this isn't a "WoW is doomed" post. But XFire reports that the number of hours played by US and European WoW players dropped by 18% from August to September. This is due mainly to school starting again after summer. We don't know exact subscriber numbers for the US and Europe, as Blizzard doesn't publish them any more since they started to decline. They still have robust growth in China, where The Burning Crusade was only recently released. So the only thing we have is a range of annecdotal evidence that WoW user numbers in North America and Europe are shrinking. No death spiral, but a significant drop from the peak in February.

Which raises the question how World of Warcraft is going to handle falling server populations. There is such a thing as an ideal number of people playing on a server. More than that and you get into problems of lag, which Blizzard prevents with login queues. But if the population is significantly less than the ideal number, other problems occur: It gets more difficult to find groups, the less popular zones become deserted, the player economy suffers. And from a financial point of view, Blizzard is paying for server resources that aren't fully utilized.

One of the disadvantages of having a game with hundreds of identical, but separated, servers is that the system is less flexible than lets say the server setup of EVE, where everybody is on the same server, and growing population is dealt with by shifting capacity to where the players are. Games with strictly separated servers can only adjust to falling user numbers by merging their least populated servers. That usually causes problems with people having chosen the same name, one of which will have to change his name, while the other guy starts receiving lots of tells from people who wanted to talk to the first guy. In a MMORPG your social existence is mostly based on your name, that is how people find you and talk to you, so a name change can be a big deal.

Blizzard's other option is to keep all servers running with sub-optimal population numbers, and count on the inevitable next spike of resubscriptions when Wrath of the Lich King comes out. It helps that while total numbers are falling, the population nowadays is very concentrated in the TBC zones. That makes traveling old Azeroth a bit sad, but at least with their level capped characters it is still easy enough to find a group. Patch 2.3 will help even more here, by adding daily quests for specific dungeons, which should lead to many more people wanting to go to the same dungeon at the same time. I really have to give Blizzard credit for patch 2.3, although I'm not happy with all the changes, they at least are obviously trying to put something for every sort of player into that patch.

So, tell me, how is your WoW server nowadays? Does it feel overpopulated, underpopulated, or just right? What would you propose to do against underpopulation of servers? There are still millions of people playing this game, Blizzard just needs to come up with a good way to bring them together.