If there is a Dial tone at the wall socket, but not at the Modem. Then i would suspect a loose connection somewhere in the extension cable.
When you get this error you need to eliminate your cabling.
Plug a phone in at the 'PC' end of the cable and see if you can hear a dial tone.
1/ No dial tone at PC end. Dial tone at wall socket = faulty extension cable.
2/No dial tone at PC end or wall socket = fault with socket or BT line (check other phones in the house to decide)
3/Dial tone at PC end, then you have a fault with the Modem. if it is internal, is it seated properly?
Hope this is of some help