The problem remained with the replacement phone (red). Diagnostics by Apple indicated the phone was in working order.
I have been working with the phone provider, for a solution but thus far none. We replaced the SIM card. I am waiting for a final tech work up before going back to apple.
I believe it is a design flaw. If I speak loudly and especially speak into the microphone holding the phone at a perpendicular angle to my head then it seems to work better. The speaker phone isn't as good.
Anyone else go through a similar experience?