A method and apparatus of transmitting a modulated data over a digital voice network that includes voice compression. The method and apparatus determine whether a voice signal to be transmitted over the network includes a modulated data signal and then encodes or demodulates the modulated data signal and bypasses voice compression when a modulated data signal is detected. The method and apparatus may detect a modulated data signal by detecting the presence of an answer tone and then searching for a plurality of phase reversals having a particular time distance from each other in the voice signal. Once the encoded or demodulated signal is transmitted over the digital voice network, the method and apparatus of the present invention may detect whether the received signal is an encoded data signal or a demodulated data signal. Then the coded data signal may be decoded back into a modulated data signal. Likewise, the demodulated data signal may be modulated back into a modulated data signal. In one embodiment, the invention encodes voice signals including modulated data signals by linearly quantizing the voice signals.