Mainly to keep people from ruining secret plans on the other side of factions(same reason for only one faction on a server with PvP servers).
Take for instance if one person had a friend on alliance who he had teach him an alliance tongue, now if they were in the same zone and someone went on local defense saying they were going to send a couple groups of the raid in from one side of a stronghold while the other group which had just enough to hold off the onslaught went to the main entrance and attracted attention, then said player could report it to the rest of his people and it would ruin the "sneak attack" plans the alliance had.
This actually happened once in a different instance(the player had a character on the other faction) where someone heard of a raid on undercity and reported it. The alliance showed up in the sewer entrance of undercity only to get mauled while entering.
So as much fun as it would be to speak to another race outside of your faction, its really not functional.