Sorry Doc, but that doesn't really make sense either... In effect, it makes the value, damage-wise, less than if they fired at range band 2. True, you have fewer dice, but the number of chances of hitting goes from 50% down to 33.33%. That's a mighty big penalty.
In naval terms, you are firing at a target that's in very close proximity, bring the guns to bear on a target isn't an issue and would actually be easier, the closer the target is (less adjustments for range, windage, etc.) the odds that you hit should go up, not down.
I just wondered what's the reasoning for the rule?