It's two different discussions. One about not having 3 divisions and one about having 3 divisions. If we do, the third division must be the smallest because to few teams will have the energy of trying to reach division 2. We can't either let already established names start over in division 3. I think there is a chance of there being quite many teams in division 3 for the first season, but after that the growth will be zero.
What we can learn from e-sport is that new teams emerge, often in form of a colleberation of two old teams. I have no idea how making most teams starting over in division 3 will gain competition. Every e-sport depends on new talent and new teams emerging. The system that is proposed is working against this purpose.
Not good for competition.