Hi,
The problem is with those Alcatel modems. I have a similar problem connecting to the net sometimes (4-5/10 times perhaps). I use Iomart ADSL and have a friend who has OpenWorld, he also has the same problem.
The best thing to do is disconnect the modem from the USB port, wait 10 secs and then reconnect it, wait another 20-30 secs and then try connecting to the net.
These modems (and Alcatel is fully aware of it) hang up a bit like your PC hangs up sometimes. Once the modem hangs up it is no longer able to receive any (AT) commands the computer sends to it until the modem is rebooted, similar to a PC.
My ISP has told me that Alcatel does know but is not making any progress towards finding a solution. You can ask for advice but they will always say "get hold of the latest drivers" which didn't work for me, but try them anyway.
The error WinME gives is the closest match as far as it can determine, it is misleading however.
Hope I answered your question and do let me know what the engineer says / does.