It's not the matter of "smaller modems". There are GSM chips, which you can use to build your modem (and get calibration, certification and all related stuff by yourself), and there are complete GSM modules - think about them like about USB dongles - ready to use, just connect and turn on. Of course modules are bigger than chips alone and aren't as flexible as chip based designs made specifically for some device - for instance, we could decide to make modem larger in height and width to make it thinner, which is not possible with a module.

While Nokia easily can build their modem just as they wish, we cannot - we have to use some prebuilt module and accept size constraints it's going to force on us.

And no, it's not LTE specific.