Yes, because at that time, a modem didn't actually talk to a modem over a switched analog line. Instead, line cards digitized the analog phone signal, the digital stream was then routed through the telecom network, and the converted back to analog. So the analog path was actually two short segments. The line cards digitized at 8kHz (enough for 4kHz analog bandwidth), using a logarithmic mapping (u-law? a-law?), and they managed to get 7 bits reliably through the two conversions.

ISDN essentially moved that line card into the consumer's phone. So ISDN "modems" talked directly digital, and got to 64kbit/s.