The perils of iPhone post-pay contract law are something we’ve dipped metaphorical toes into before, but today’s tale of woe concerns that other side of the credit-check tracks: pre-pay AT&T accounts.  Merry iPhone owner ‘JD’ had some screen issues with his handset and so returned it to Apple to be fixed; his iPhone subsequently got lost, and the replacement they provided, to cut a long story short, refused to work with his existing pre-pay account:

If you activated an iPhone with a new AT&T prepaid plan, you *must* keep using that iPhone. You *cannot* replace that iPhone with another iPhone. The only way to use a new iPhone with your prepaid account, is to *create a new account with a new phone number,* and have them move your balance over. Period. Apparently this is a “security feature” and the system was “designed that way,” specifically for prepaid iPhone plans.

JD’s is a long story, but it all boils down to a simple point: if you’re on a pre-pay contract, take good care of your iPhone, since there’s no guarantee that Apple will be able to transfer your contract to a replacement handset.  That means your phone number might be lost.

This starts out on July 1st, when I picked up an iPhone from my local (NYC) Apple Store. Went back to the office, and activated it. Right off the bat, I’m offered the choice of going to an AT&T Store to pony up a deposit, or choose a prepaid plan. My credit is not the best, and while if I had to guess, my deposit wouldn’t be more than $300 (based on experiences with other carriers), I didn’t know how well AT&T’s service would fare here in New York City. So, I chose a prepaid plan.

After a day of not being able to receive calls while my number was being ported over, and another two days after that not being able to send or receive text messages from anyone but AT&T subscribers, my iPhone was fully working.

Albeit with a pop-up message informing me of my balance after doing anything that used airtime, but that’s a story for another day.

A few weeks later, and I notice that there are these large, bright white swaths developing on the screen. They took up the top 1/3rd of the screen, and would get brighter the more I used the iPhone (the longer the screen was on). So like any picky consumer, I headed down to the Apple Store to get it replaced.

Sure enough, after 14 days, you can’t have it replaced in-store. They treat it like a computer rather than an iPod, which for most cases you can get an in-store swap past 14 days.

I inform the Genius that the iPhone isn’t a computer at all, as it resembles the functions of an iPod in every way except for the fact that it makes calls. The Genius would have none of this, and insisted that my iPhone would have to be sent in for repair. I stand by my statement that the iPhone, in its current incarnation, is not a computer whatsoever, but that also is a story for another day.

The Genius takes my iPhone, wraps it delicately in its cardboard coffin, and offers me a loaner iPhone. (Protip: the loaner iPhones apparently have a different build of “mobile OS X” than regular iPhones.) I take the loaner iPhone, and go on my merry way.

Fast forward a week or so. I go to check the status of my repair. To my surprise, Apple’s repair status page says that it has been delivered back to me! “But wherever could it be,” I wonder. Clicking the tracking link leads me to a FedEx page that informs me yes, my repaired iPhone has been delivered… to someone in Louisiana. If you don’t recall from earlier, I’m in New York. And no, my N’s dont look like L’s nor do my Y’s look like A’s. Besides, the paperwork from the Genius that sent out my iPhone had *printed* information, and it does indeed say that my shipping address is in New York. Thank goodness for that new-fangled laser printing technology, eh?

Anyway, after a day or two on the phone with Apple, I get a call from a very helpful gentleman at Apple Corporate, who apologizes for the situation and decides to just send me a brand new iPhone. Not too shabby.

I received the new iPhone yesterday. After erasing the loaner iPhone, I pop my SIM card into the new iPhone, and am greeted by the “Activate iPhone” screen. So I plug it into my MacBook Pro. iTunes pops up the screen, “Activating your new iPhone. Please enter your AT&T Wireless number, zip code, last 4 of your social.” I follow my master’s instructions, but after “verifying” my information, I’m informed that AT&T is “sorry, but your current account cannot be used with the iPhone.”

Huh. I was already using two iPhones with this account – my original one, and the loaner one. So I try again, and again and again. Old SIM, new SIM, no difference.

I grab the office phone, and give AT&T a call. Cutting a long story short, I’m informed that I “cannot use the new iPhone with my prepaid account.” So I call Apple. By the height of this Apple call, I’m on the line with one iPhone technician and two AT&T technicians at the same time. Helpful folks all around. But we just couldn’t get the iPhone onto my prepaid account. We all decide that it might be best to head over to the Apple Store to try another iPhone, to eliminate bad hardware as the culprit. I get my Apple case number and the Apple tech’s direct phone number. Total phone time: 4 hours.

Head over to my Apple Store, 10:10pm appointment. The Genius pops open a brand new iPhone, I put my SIMs in, and the same result – error messages. Genius informs me that they’ve “had nothing but trouble with prepaid accounts, if you were on a postpaid account it would work like (snaps fingers) *that*.” I thank him for his time, and head home. Ticked.

This afternoon, after trying unsuccessfully to contact the same Apple tech, I decide to call AT&T. After talking to and getting bounced around 14 or so different people (most at AT&T, a few at Apple), total phone time 3 hours, here’s the verdict, given to me from AT&T technicians and managers on high:

If you activated an iPhone with a new AT&T prepaid plan, you *must* keep using that iPhone. You *cannot* replace that iPhone with another iPhone. The only way to use a new iPhone with your prepaid account, is to *create a new account with a new phone number,* and have them move your balance over. Period. Apparently this is a “security feature” and the system was “designed that way,” specifically for prepaid iPhone plans. (Based on the number of people at AT&T that either were, or were not, aware of this, I can surmise that their internal communication is dreadful.)

This is a “security feature” despite the fact that the *helpful* AT&T techs were able to, and did, change all IMEI numbers, make sure the proper SIM ID number was on my account, basically checked every last detail of my account to make sure that it would recognize this new iPhone. But, no dice. Nutshelled, it’s all related to that first step where your iPhone is at the Activate screen, and it then requires communication with iTunes, which in turn communicates with AT&T, to really activate.

So if you have a prepaid account and you lose your iPhone, break it, have it stolen, anything that would mean getting a replacement iPhone, it cannot be used on your prepaid account. At all.

This poses quite a problem: I need to keep my number. I’ve had my number for at least 8 years, and I rely on my phone for *all* business and personal matters. Losing my number is not an option. If I want to use my iPhone with my phone number, I have to switch from a prepaid account to a normal postpaid postpaid account, by paying whatever my required deposit would be, simultaneously getting locked into a 2-year contract.

This situation allows me to state very simply: AT&T is holding my iPhone, and phone number, hostage. For me to use my iPhone with my phone number would require me to pay anywhere from $100 to $1000 dollars and be contractually obligated to continue paying AT&T for 2 years.

My other choice? Ditch my iPhone, pop my SIM into a regular GSM handset, and have them remove the add’l iPhone-specific items from my prepaid plan. Which is what I’m doing until I can figure out what to do. I have 13 days to decide (Apple’s return period), because beyond that point, I can’t argue that the new iPhone I received from Apple Dispatch qualifies as an item I can return to the Apple Store for a refund, even if I have to eat a restocking fee.

Whelp, that’s the story. If nothing else, I hope this serves as fair warning to anyone looking to purchase an iPhone while they’re AT&T-only devices. Especially if you think you’re doing yourself a favor by choosing that no-contract prepaid plan they may offer you.

I’d be interested to know how many MY iTablet readers are pre-pay customers – give us a shout in the comments as to whether you’ve signed up to this little-publicised plan.

[via Consumerist]