Early on, cable lines broadcast exactly the same signal to everybody in a city. These days that is no longer true. Cable internet basically requires that the city be broken up into multiple signal domains, perhaps as small as one per neighborhood. This is also used to provide targeted commercials, and on demand content.
Now that we have targeted areas, it is possible in theory to only send the channels in use in that area, and letting the system reuse the space for unviewed channels as DOCSIS channels. Indeed this technology has existed for a while. Yet, correct me if I am wrong, I believe this system is not in active use.
This is true, to an extent.
Targeted area's are really only as accurate as the provider makes them, and its filtered more by the physical line that they're on vs the IP address that they have.
True, but the fewer people on each cable, the more useful being able to able to broadcast the digital channels only 'on demand', letting them become data channels when not in use. If you have one area for the whole city then most of the channels will be in use most of the time, but the fewer in each area, the fewer distinct tv channels are likely to be being watched at any given time, and thus more channels available for data.
For example if CMTS 1 Services Central PHX and CMTS 2 Services East PHX, you can know what area's a node on each is going to affect down to the street addresses if you have an outage.
The problem is Analog broadcasting. The FCC says that if you aren't transmitting for older TV's on your lines, you have to provide an Analog converter. In many smaller systems its cheaper to supply a digital converter and do away with analog entirely since the equipment costs for side by side broadcast are more than just putting out a couple hundred converters (that the government gives a tax credit on).
There's the final part of the problem. The internet switches (nodes) only control the access so long as the equipment exists in three places. The office, the node and the modem at the user. In order to broadcast digitally in the same manner that the internet works, every TV for every customer must be compatible. That means the big, expensive converters the government doesn't subsidize. You know how you pay 5$ a month for them right now? If they threw that switch, there's a good chance the FCC could interpret the rules of the digital cut over to provide those for free, since now they're 'necessary' to have any TV connected. By keeping it simpler its easier to charge more money. *
Could they not avoid this whole mess by always broadcasting the non-encrypted analog channels, and only do the 'channels on demand, DOCSIS when not demanded' for the channels that already require a set-top box or CableCard? That sounds pretty easy. Existing cable boxes could be upgraded in place with a firmware update, so that they communicate the channels they are watching in the same way they communicate VOD requests. Upgrading the CableCards might be harder depending on a few implementation details, but my understanding was that relatively few subscribers opt to use CableCards anyway, so even if they had to all be replaced, the cost should be relatively low.
*Note: I never said I -agree- with any of the practices in place. However, show me a for-profit business that isn't out for money and I'll show you a lie.