Update 4: I am working with an AT&T spokesperson to try to detangle the contradictory information discussed below. No results as yet, but will update when that becomes possible.

Update 5: The prepaid crackdown for iPhone applies to only some prepaid plans. PayAsYouGo GoPhone customers will be affected but not PickYourPlan GoPhone customers, who will be safe from service degradation. Brad Mays of AT&T tells TUAW that they are briefing their reps to better convey the distinction to customers.

Similar carrier restrictions are apparently not limited to the United States. TUAW reader Robin forwarded a screenshot from the UK, which directs customers to this O2 information page. Customers are being urged to change from normal prepaid plans to an authorized O2 iPhone tariff.

Update 6: Brad Mays emphasizes that PAYG customers do not have an official iPhone Data Plan and that PickYourPlan data "is necessary to make the 3.0 software work properly with their device". PAYG customers are directed to this page for more information. He added, "[O]ur reps are now fully aligned around this information."

TUAW reader Daniel B. called AT&T today and writes that he was offered a prepaid PYP option with a $30 iPhone data plan. This is the first we've heard of PYP prepaid accounts being offered, believing AT&T would no longer provide this option. I have, once again, contacted Mays to see what's going on.

Original Post
I just spent the last half hour on the phone with AT&T, and I can't quite believe what I heard.

I am an AT&T customer, and have been so since the weekend that the iPhone debuted. I am on an official iPhone GoPhone plan. I have paid monthly for two years and am up to date on said payments. After two years, AT&T now tells me that I will either begin a new contract on my existing equipment, or lose access to a reliable data plan.

My jaw is dragging the floor.

When TUAW reader Daniel Burkholder tipped us off this afternoon, I thought he was somehow misled by the text message that appeared on his iPhone. It reads:

AT&T Free MSG: A new software upgrade for iPhone will be available on 6/17. This upgrade may affect your data service. Please visit att.com/iphone or call 800-901-9878 for a representative. If you download the software and are not on an approved iPhone data plan, your data service will be interrupted.

So I called, despite the fact that I am on an approved data plan. Sure, my account is grandfathered in, and new iPhone 3G purchasers can no longer get GoPhone activation (click the "New to AT&T" link to see the relevant section), but it's never been an issue.

I was told that AT&T was asking customers to move to a contract plan as they no longer plan to support prepaid data. "This is a recommendation," the technical support person told me. "If you decide not to go, it's okay but we're informing customers that service will not be up to par."

I asked if they were deliberately cutting out GoPhone customers from full Internet access (and mind you, I asked this in several ways, at least three or four times), and was told 'Yes.' "This will affect logging onto the Internet and using your data services."

How will they detect this? According to the technical representative, their equipment will be checking the SIM and using the account information when accessing AT&T's data services. "Based on your plan, you will not receive the same quality service on your GoPhone plan, even with the same equipment. This is a technical change on AT&T's end on how we service that data plan." Gotcha -- so nothing at all to do with the 3.0 OS upgrade, but merely a convenient point of transition.

I pushed further, asking whether I could move to a postpaid plan without invoking a two-year contract as I already fully owned my equipment and had been a customer for two years on my current plan. "You will have to enter a new contract as this service change is not compatible with the iPhone prepaid. You cannot enter a postpaid contract without a two year commitment."

The technician pointed out that "the iPhone has drastically cut prices" on recent models. I responded that my 2G iPhone was working fine. He pointed out that this was an official AT&T policy and that they have decided that "all prepaid customers should transfer into a contract plan for the iPhone."

I asked him to point me to an official policy statement but he said at this time only the text messages going out are available as official communications with customers. "This is an official iPhone advisory. We are informing customers by text messages."

So this is how AT&T rewards me for two years of customer loyalty: I either have to start paying up another $20+ per month and commit to two years of additional service (without any further breaks on equipment or contract terms, if I don't choose to buy a 3G S right now), or accept that I'm going to be paying good money each month for a plan with substandard data service. Based on the fact that the data pinching will happen deliberately on AT&T's end, I'd call it a strongarm approach and a rotten way to treat customers.

It's one thing, if you're going to make a change in the terms of service for an admittedly legacy (but still perfectly usable) service plan, to clearly communicate customer options well ahead of the transition date, and to work with loyal users to find accommodations that satisfy. It's quite another thing to lower the boom with two days warning: upgrade or suffer.

Update Official statement here, which does not yet shed any further light on the matter. Developing.

Update 2 Three different AT&T reps checked my *specific* plan using my account information, which is the original iPhone GoPhone plan and said that yes, I would be affected and that no, this didn't just affect people who stuck SIMs into iPhones

Update 3 We have a query into AT&T PR that has not yet been replied to, asking why service reps are giving information that seems out of line with the statement

Yesterday, I wrote about AT&T's new $20/month unlimited data feature pack. Today, my daughter was home sick from school. Why is that important? Because we gave her a cheap AT&T Pay As You Go phone, which she uses to keep in touch when her bus is late or if she needs to contact us for some reason. Pay As You Go plus idle phone = Data Plan Experimentation!

Read on for details...

I recently had the chance to sit down with my iPhone and a prepaid SIM with a $50 account balance. I really got a chance to see how the iPhone would function with a pay-as-you-go plan and its data plan.

What I learned was this: although using iPhone with pay-as-you-go means you can make occasional phone calls when you need to, you'll want to avoid EDGE data and stick to WiFi whenever possible. Here's the complete run-down.