IMessage not working between my iPhone and friend

I composed an iMessage to a friend. We've texted before so I know iMessage should be working as all previous texts have been in iMessage "blue". Today, in this latest message, I was waiting for the screen to turn blue as I was composing but it never changed. I have an iPhone with IOS5 and my friend has the same. The text was sent in "green" as a text. It never changed to "blue". I had my friend check her settings and her iMessage menu was "on". So I'm wondering why this situation has changed for us. Cost me $.20 with ATT b/c I dropped my 200 msg plan!

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.

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