Earlier quoted context omitted.
I remember a trick of connecting at a standard speed and then running a certain AT command that reduced the latency considerably - from 250ms down to 180 or so. Can't remember what it was but it made a very big difference to Quakeworld. The client prediction made it very playable on a sub-200 ping.
Possibly turning off compression or error correction; both of those would be toggled with an AT command and add latency.
I think you're right - AT%C0 once you're connected didn't drop the line, it just reduced the communications overhead between the modems. Good days :)