This discussion is about how the name is delivered to the telephone company being called, not from that company to your phone. In the US, the calling telephone company sends the number, the called company looks it up in a database, then sends the name they get to your phone. Everything but the delivery to the phone takes place over the SS7 network.

This would not work because of the sheer number of users who store nicknames, particularly uncomplimentary ones. Would you want your name displaying as "that douchebag" or "bar slut"?

That's probably an intentional choice by your carrier, many wireless carriers do that rather than provide an actual name for each number.