A cable modem and a priority setting method thereof receive signaling packets from telephone interfaces and local area network (LAN) interfaces, and preset the signaling packets from telephone interfaces as VoIP packets with a first priority and the signaling packets from the LAN interfaces as LAN packets with a second priority. The cable modem and the priority setting method pick out RTP packets from the VoIP and LAN packets, and classify the RTP packets as VoIP RTP packets and LAN RTP packets. The cable modem and the priority setting method determine whether all of the IP phones are on-hook, and update the LAN RTP packets from the second priority to the first priority in response to all of the IP phones being on-hook. The cable modem and the priority setting method allocate bandwidths for the signaling packets corresponding to the first priority and the second priority.