That's a big "for starters."

In-band signaling — or rather, in-band markup — is a big part of what makes a "terminal" (i.e. a TTY/PTY device) semantically a "terminal": a hybrid character-grid / event-log that works both as a sink for streamed-in text, and as a "plotter" for making line-printer art. A device that both streams out as, effectively, an input-event log (where this log can be captured for replay, as with script(1) or most logging systems); but which also maintains a notion of being a ring-buffer "containing" a rectangularly-bounded volume of text (and control-events), such that clients just connecting onto it can begin streaming just from the beginning of that buffer, to end up with one complete "image" of the latest PTY state, minus any scrollback, without needing previous history.

All that is kind of predicated on control-characters being embedded in the text and "following" the text around, such that taking a slice of the text (as the PTY's ring-buffer does every time a line is expunged) will preserve the corresponding slice of events.

What would reading back the contents of a PTY device look like in a world with out-of-band TTY signalling? What would flow over a serial port? Would it even be a character-stream device, or are you imagining a TTY/PTY as operating in something more akin to a structured datagram event-stream mode, such that you'd use sendmsg(2) and recv(2) on it rather than write(2) and read(2)?

I mean, it's not an impossible dream; but that really is a "start over with a whole separate ecosystem that no existing software works with until made compatible" kind of change. Effectively it'd be a separate thing from TTYs, that just happens to have similar functionality. But it wouldn't support any existing software, or any existing hardware, except by virtualization (i.e. running a PTY emulator process inside your modern OoB-signalling terminal emulator.) Kind of like what Windows has been going through to replace its own command-line.

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Personally, I'd prefer to keep in-band signalling (in the "in-band markup" sense above, not the "you have to recognize conventional escape-code sequences heuristically to even know they're not regular text" sense.)

But I'd rather just make the in-band signalling structured — i.e. to make TTYs into a data-stream containing a variable-length self-synchronizing bit-encoding with clear prefix separation for control- and data- packets.

Y'know, like UTF-8 is for text.

...or, well, speaking of Unicode: we could just use Unicode for this, reserving another block† of control characters to go with the 30-odd ones that sit at the beginning of the BMP. Then "is this is a control codepoint, and if so, what does it mean" could just be answered by consulting a Unicode table. (In such a setup, CSI command parameterization would be accomplished with zero-width joiners, variant selectors, and other things. Just picture control-characters as invisible emoji — specifically like the flag emoji that are formed by spelling out country-codes in a sort of "flags meta-alphabet"; or like that family emoji [https://emojipedia.org/family/] with the combinatoric variants.)

† Why not use the Private Use Area? Because this would be an explicitly inter-compatible signalling standard, not a proprietary usage. It's not text, but it is a standard signal within a text document. Just like emoji — or like the existing control codepoints in Unicode.