Yeah propagation speed will inc but not enough to scale. You could use a second layer 0 base layer solution such as bloxroute that aims to fix the propagation issue. The problem with bloxroute is it skews chain interest by creating a new network interest-yikes.
Communications has increase but they also use second layers as well :P Exp, sharding is pretty big in database and other solutions.
To be fair centralized solutions could be done to transact between exchanges.
Mimblewimble is actually a pretty good solution but even they are working on second layers. Mimblewimble is also less feature rich so if you think Bitcoin has limited smartcontract features well Mimblewimble are way less....
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