I'm pretty sure it's a bug. I'm stuck in some weird limbo where I can't disable modem mode but it also has all of the router mode settings available.
But either way, VM are having firmware made that allows them to have an entirely separate network running. It also apparently reports back to VM if your device is in modem mode so they know you are opted-out. Modem mode is just a bunch of configuration changes that disable DHCP, wireless and the other ports (though not early on
). It's not some hard kill switch that disables the hardware, just a bit being flipped to 0