We study the problem of characterizing the behavior of lossy and data corrupting communication channels in a networked control setting, where the channel's behavior exhibits temporal correlation. We propose a behavior characterization mechanism based on a hidden Markov model (HMM). The use of a HMM in this regard presents multiple challenges including dealing with incomplete observation sequences (due to data losses and corruptions) and the lack of a priori information about the model complexity (number of states in the model). We address the first challenges by using the plant state information and history of received/applied control inputs to fill in the gaps in the observation sequences, and by enhancing the HMM learning algorithm to deal with missing observations . Further, we adopt two model quality criteria for determining behavior model complexity. The contributions of this paper include: (1) an enhanced learning algorithm for refining the HMM model parameters to handle missing observations, and (2) simultaneous use of two well-defined model quality criteria to determine the model complexity. Simulation results demonstrate over 90% accuracy in predicting the output of a channel at a given time step, when compared to a traditional HMM based model that requires complete knowledge of the model complexity and observation sequence.