Because someone at ZOS thought it was a good idea to go against everything others had already learned about client/server game mechanics.
I'm pretty sure the meetings prior to launch had a lot of suits talking about "innovation".
They should have used a prediction model that does not wait for a client response, preferably using UDP for the data transport.
And not surprisingly, ZOS has been patching their crappy "innovative" network code ever since.
I'm pretty certain ESO uses prediction because I've played games without prediction before and it can be nasty with just a few clients. It's hard to imagine ESO could function without prediction. My understanding is that ESO uses UDP too. But I'm not anywhere close to a network programmer and I've never performed an analysis of any kind on ESO traffic.
What have you based your conclusions on?
I tend not to fault the server as much as I fault the gameplay design; because ultimately it is the game designers who have created gameplay that surpasses the limitations of the server.