Server lag when players are too far apart

When players move too far apart while on a dedicated server, the server will lag uncontrollably until either one player moves closer or disconnects.

What I expected to happen was...:
Server would be unaffected.

What actually happened was...:
Server lag was so great the game was rendered unplayable.

Steps to Reproduce:
1. Teleport or move one player more than 1000 blocks in any direction.
2. Server will lag and drop clients.