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Phone says in use static on line

I have unpluged the phone and pluged it back in, etc. The phone ID says in use and when you pick up the receiver it has static on the line. When you call the number it says "leave a message line is busy"  Internet is working fine.

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Sounds like something in the system is holding the line open. Any fax machines or security systems?

Also, do you have a phone modem thats inside, or a NIU, which is a outside modem about the size of a shoebox. If you have a inside phone modem, then try connecting a phone directly to it. If that works, you know its a internal issue to your house.