what kind of modulator did you get? I've heard of cheap ones doing that. Like anything else you get what you pay for.
How old is it? Take it back and have it replaced or refunded and get a better one/different model.
Monstercable has them for $59.99 and you don't get any better than Monster Cable. If you're willing to buy online, you can get a Nexxtech/RadioShack brand modulator from "The Source by Circuit City" (formerly Radio Shack Canada) for $29.99. I found they worked really well in my tenure at that retail store... whatever every you want to call the division of InterTAN Canada.
RF Modulators