First, they're slow. It's unlikely that modems will ever provide much more throughput because of the relationship between frequency, distance, and signal strength. Current FCC limits and phone company standards allow only a certain frequency range to be transmitted at a given signal strength or voltage. This restricts POTS lines to the current top throughput because hardware vendors just can't squeeze any more information within those proscribed limits. ADSL, as we'll see, breaks out of those bounds entirely.
Modems are also an inefficient use of the telephone network.
While you're reading, you aren't using the connection, but because your modem is hogging the line, it can't be used by anyone else. Circuit-switching makes sense for uses like voice calls, where silence has meaning, but they're a complete waste for Internet use, where silence is just dead air. Because modems must dial up your ISP, you have to wait every time you want to connect. People using modems don't realize how annoying this is until they've used a dedicated Internet connection, which makes the Internet constantly available without delay. All of these factors have conspired to produce a strange economic model.