Activate iPhone Without SIM

Then you can't activate the phone. Of course, you could buy a SIM tray. They go for around $2. I'm sure you can find one with a web search. Better yet: https://lmgtfy.com/?q=iPhone+3GS+SIM+tray

Try activating in iTunes, assuming it is not still locked to AT&T. Macworld UK has an article from just a couple of months ago that an iPhone not locked to a carrier will activate without a SIM in iTunes.

Some months ago after getting my iPhone XS, I was able to erase and active my AT&T unlocked iPhone 7 without a SIM (its SIM was in the iPhone XS, so there was no SIM at all in the iPhone 7 when I erased and activated it over WiFi).

I have no idea what a contract has to do with it. If the iPhone was activated when you bought it and you were using it as a iPod with just WiFi then it would work. As soon as you needed to restore or update it you need to activate it with a SIM.

So make one yourself if you don't think a company should be able to make a profit (it isn't Apple by the way). It doesn't matter what backup you have you still have to activate the iPhone.

You must have a SIM in an iPhone to activate it. Once activated you don't need the SIM anymore, unless you reset the phone. The SIM does not have to be currently active.