Some modems are more sensitive to line conditions, and this depends heavily on how many devices are on the line.
If you are able to dial out and the tones can be heard on the line, more than likely the modem is working.
To test this, dial your ISP, and just as the modem starts creating the tones, lift a handset close by and listen on the line for the tones.
If you hear the tones OK, try disconnecting all other devices from the line (upstairs telephone, Caller ID's, Faxes...)
Then try dial again.
Also, cable extensions can cause this, shorten the cable as close to the wall-plug as possible and retest.