I am curious to know whether small USB 3G modems could be used as cellular towers, and if you would need special firmware to do it or if it is not possible at all. They can communicate with the tower, why can't they act as one? Can it not use the right channels or what?
In theory yes, but in practice no. Besides the firmware, the hardware in the client device is usually set to communicate on only a few frequencies and the transmitter is limited to the uplink frequencies while the receiver circuitry is limited to the downlink frequencies for noise suppression and other reasons. One would have to change the filter circuits, not something easily done with surface mount technology and it may be directly embedded in the chips. Franklin wireless is keen on making their devices unmodifiable. The DSP's used in the tower are able to handle hundreds or thousands of simultaneous connections and usually have their frequency limits unlocked. Those units also cost $$$ and are too large to fit in your pocket.