That is correct. Wen I am wrote about "communication overhead" I meant having to talk to other teams to get the work done. Talking within the team (including PM, stakeholders etc.) is, IMO, desirable to set the overall team vision and to keep everyone on the same page.

I feel that once two teams, no matter how closely related, get the feeling of two different "mandates" (often personified by two managers, sometimes not), it becomes very expensive to keep them aligned. It is probably faster(wrt achieving the end goal) to go with fewer people in one team.