To be fair, I would be really pissed if the majority of people that I played with were half way around the world causing major lag. I'm pretty OK with this. I think they actually did the right thing here.
Pfft lag is a weak excuse. It really depends on the quality of both internet connections. I've had horrible Smash multiplayer with people of my country and smooth battles with my friend from America. While distance affects the connection it is not something noticeable or a deal breaker unless the other person has a crappy connection.
I have friends in the US, Latin America, Spain and Europe. I moved from Mexico to Australia which means I cannot play with my mother, my brothers nor my close growing-up friends. This really makes me sad. I feel it was unnecessary. It is not like there's voice chat or something like that big and dynamic that required to reduce the pool.
