A system and method of digitally modeling and significantly reducing the direct coupling between a telephone appliance loudspeaker and microphone employs a handset microphone in a phone appliance, such as, for example, a speakerphone, as a reference channel along with the speakerphone microphone to reduce the direct coupling between the speakerphone loudspeaker and the speakerphone microphone. Using an analog adaptive echo cancellation scheme, the sensitivity and dynamic range of a telephone device microphone to speech from talkers in an enclosure but not from signals emitted by a telephone loudspeaker are enhanced. Nonlinear distortions produced by a telephone appliance loudspeaker are measured by a telephone appliance handset microphone and used in a feedback subsystem, e.g., network, to reduce nonlinear distortions in the telephone appliance loudspeaker and loudspeaker driving circuit.