A data modem includes a data compression circuit which compresses incoming data prior to transmission. The compression ratio obtained from the compression process is used to select a constellation for transmission of the data. When higher compression rates are achieved, fewer constellation points (symbols) representing fewer bits per point are transmitted. In this manner, incoming data rate can be held constant while utilizing a more robust constellation which has greater immunity to transmission line impairments. This reduces errors and retransmissions which can ultimately lead to reduction in effective throughput in conventional systems.