A method and apparatus for a data access arrangement (DAA) which includes a line modulator containing capacitive elements to increase system stability. The invention provides improved stability during system startup and normal system operation. The line modulator is capable of adjusting the AC modulation and the DC termination presented to the telephone line. Capacitive elements are added to the modulator to provide enhanced system stability. The method includes drawing power from the telephone line, modulating the telephone line, sensing a level of distortion through the line modulator, feeding the sensed level of distortion to the line modulator, and using capacitive circuits to provide additional system stability.