I have already noticed several players taking over accounts that are dead or buying accounts from other players and switching realms in preparation of this happening. I think it would be a huge mistake to consolidate. Many of us have already paid and earned our cities in GW. If this happens, only the strongest Guild will survive and other Guilds will get frustrated and leave there fore abandoning the game. This has happened to other games when making changes such as this.
If you want to kill the server - make the move. You say it will increase competition - I say it will kill it because there will not be any way for advancement in the arena OR in GW.