I don't think they've implemented central servers, so you're dealing with the internet connection of the host (aka. P2P). If they have a large upload pipe, which can be much smaller than the download pipe by the way, they can handle sending updates to all of the clients, but if its constrained, you'll get some issues.
My internet connection is 1MB down, and .4MB up. I never try to host if I can help it, because of this situation. XBox Live used to randomly make me the host, and it was always a disaster when that happened.