Turning iPhone 3 into iPod toouch

Have an old iphone 3 that I want to give to daughter for an ipod touch. Turn it on and it tries to activate, but is never able to. Same result with or without the sim card. Same trying from the phone or plugged into mac using iTunes. Says the activation server is temporarily unavailable.
Since it won't activate, I can't do a think with it in iTunes, like restore or upgrade.
Is there a simple way to fix this. Not worth it to have Apple repair it.

FatMac84 wrote:
I went back to ATT thinking that might solve it. They put a new sim in but still could not activate. According to the support articles, the iphone acts like the touch when the sim is removed.
In that case, I'd try resetting the phone to factory settings (make sure you save any data first).
Settings>general>reset.

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