Area codes and Zip codes predate the Internet.
While I don't expect FFXIV to take this route, and I'd shun games that try to do the "lets create a stupid amount of servers, populated by 3 people and a cat" a la Minecraft.
The "correct" solution, albeit difficult to pull off would be to be a combination of "cellular" networks and overlay instances.
For example. Take Rowena's building in Mor Dhona. As soon as you enter the front door, all the "cells" outside would stop transmitting except the one immediately outside the door. For things like NPC shops, you'd get your own personal instance so that it isn't crowded by player collisions. For Player housing "shops" and field shops they would "crowd control" creating an "invisible" barrier so that the "player shop" can be seen and interacted with, and player collisions turned off in that immediate cell.
Player collisions would be turned on only for cells outside of "town" cells, thus allowing strategic use of mounts, vehicles and obstacles for FATE type events
Player Name collisions, are also easily dealt with. The underlying cells would have a "home" cell (that the player can change) so only that player gets the "unique" name in that cell. In the event that two players have the same name, the "visiting" player would get20"from (cell plain name)" affixed to their name. If two players with the same name want to have the same home cell, they will always get a prefix name reflecting their "job" in the cell. eg "(Blacksmith) Jill Wayne" and both players can't be the same job in the same cell at the same time. So it would only become an issue if everyone wanted to be called "Ninja Naruto Animekid"
So the instance solves the population problem at the cell level, while the cell'ing solves how to put everyone into the same world without creating so much fragmentation.
But I digress, the problem with FFXIV is that the servers were made "smaller", like they cut all the previous zones up into 5 or so pieces, in what used to be one zone. So this also limits the number of players that can play per server so there is more headroom for SE to add more content that comes back to these places. I'm sure everyone has seen plenty of the "no entry" doors to buildings all over the place.