Yes, lag in GW is a combination of their lack of server space plus your internet connection. The places with the least amount of lag are towns, because it takes less server resources to upkeep per player than a combat area does. PvP areas also have less lag than PvE areas.
However, there is nothing you can do yourself to improve your connection to GW servers. They need to add more. There used to be no lag at all way back in the day before they hit a million players, now they have almost three times the player base.
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