Gary Hutzel, "It was a terrible idea from the get-go. The idea was to create this amazing 3-D image, but TV's a 2-D medium, so it's hard to show that it's 3-D. So you have to move the camera around so that audience can see that it's 3-D, but then it could look to them like the guy beamed in. So you have to find a way to deal with that. It created all these problems that the writers hadn't thought about, and it missed the whole point of why Gene Roddenberry wanted a viewscreen: so you could avoid unnecessary expense." (Star Trek: Deep Space Nine Companion (p. 420))
It would seem that the use of the holo-communicator was eventually discontinued by Starfleet, as it never appeared after "Doctor Bashir, I Presume". Ronald D. Moore suggested that it was moved into the Defiant's ready room for Season six. (AOL chat, 1997) As for the production reason, he stated that the writers never had a "viewscreen-type scene" that would be more effective with the holo-communicator. (AOL chat, 1998)