My system has dial tone on the handset, but it is an intercom dial tone. What happens if they press the line assigned to line 1 or dial 801 or some other simple code. If they unplug the modular plug at CO1 and plug it into a REGULAR phone does it work? And lastly, how do they expect you to fix it without visiting the site? Not calling in and out sounds like trouble at the demarc, but you're not there :-)
Carl
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