iMessage not working between my iPhone and friend

iMessage only works over wifi. If you were in cell coverage, iMessage wouldn't have worked.

This is absolutely NOT true.

iMessage works over a data connection. Either WiFi or cellular data. If there is a problem delivering the message for some reason, if one or both of you are out of contact with both WiFi and the cellular data network (if you're in a dead zone for example) or in the case of another problem on the Internet that prevents the message from being delivered, it will automatically fall back and send it as SMS.

Cancelling the messaging plan was probably not a wise move. Unless you have SMS blocked entirely on your account, which I believe you can do with AT&T smart limits for $4.95 a month, there is no way to completely prevent iMessage from sending (or receiving) an SMS message. Your only option now is the $20 monthly messaging plan.

I was wrong, it does work over 3g as well. Only 3g is mentioned specifically, don't know about EDGE or other cell data connections.

iMessage is free between iDevices running iOS 5 or higher. Also, it can be used on both WiFi and cellular data connections like 3G. Thus, you should not be paying ATT anything for text messaging if you canceled this service with ATT and communicating with another iOS 5 user. Please take a look at the following reference:

http://www.apple.com/iphone/built-in-apps/messages.html

In short, you're simply using your data plan instead of the ATT text plan when communicating with iDevices.

iMessage may not work if internet connection is not properly detected in both phones due to server delays. The message will then default to SMS if you have that option enabled in your phone. I suggest:

Settings > Messages (with iMessage ON) > Send as SMS > OFF

@modular747 Very good point and I'm switching mine off now.

Modular747,

You saved the day! You are the ONLY PERSON in 6 months to solve my iMessage dilemma! THANK YOU, THANK YOU, THANK YOU!!!!