It has, just not fully. See the very first checkbox in the link you posted. Indeed this protocol is designed so applications can pick and choose what parts they want to use.

It has been implemented to a degree that it is useful for most users. For instance, you can now map Control-I and Tab separately, as well as keys like Control-1, Control-2, Control-;, etc.

Thank you for your work on neovim :)

I noticed the difference by playing with kitty. It makes me consider switching to a compatible terminal emulator.

It is also supported by iTerm2, Wezterm, and foot. Alacritty does not (yet) support dynamically modifying the key encoding per-application, but you can hardcode the encodings in your config file (there is an issue in the Alacritty repo that explains how to do this).

You may not have to switch at all if you are already using one of these terminal emulators.