Success! You’ve jailbroken your iPhone and are now using your iPhone’s 3G connection to get mobile broadband on your laptop—for free. But now you’re probably wondering: can AT&T tell that I’m essentially “stealing” tethering service? After all, AT&T does offer this service to smartphone data plan users, but they charge an extra $20+ a month for the privilege. But thanks to third-party Cydia apps such as PDANet and MyWi, you can get tethering/mobile hotspot service on your iPhone for free.

The fear here is real—by breaching your terms of service or using your phone in a manner other than its intended purpose, you could potentially incur fees or even termination from AT&T. But the prevailing opinion among jailbreakers over the past few years is that AT&T either doesn’t care or doesn’t know that we are illicitly tethering our iPhones. Just keep the following in mind.

Data is Data

As your Internet service provider, AT&T does have some information about the websites that you are accessing. But this is usually limited to hosts, data usage and account information. So, they can see that you are accessing Google.com or Facebook.com, but they won’t necessarily know that the end recipient of the data is your computer, or that the 3G connection on your phone is being shared with other devices.

In theory, they might be able to spy on the user agent specific data being transmitted to your computer and see that you were viewing non-mobile versions of websites. But the iPhone often views the full versions of websites, so this isn’t necessarily a flag. But more pointedly, much of the data that’s transmitted to/from your computer is encrypted, meaning that intermediaries can’t typically glean much information about your web usage other than the IP of your device and the web server you’re accessing.

Watch Your Data Limits

That being said, it’s not a good idea to hog an inordinate amount of data with your tethered 3G connection. If you’re not on an unlimited data plan, the reasons are obvious. You could rack up huge bills by using your 3G connection to download gigs and gigs of multimedia.

But get this: if you are on an unlimited plan, you should still take it easy. While AT&T can’t legally charge you for excess usage (unless they said they could in your contract…), they will pay closer attention to your account if your usage goes above 5 GB a month or so. That extra scrutiny may be enough for them to discover that you are tethering or otherwise misusing your iPhone. For example, if they see that you are accessing World of Warcraft servers or downloading BitTorrents or otherwise connecting to servers that are usually inaccessible on the iPhone, the jig may be up.

Voiding Your Warranty

It’s unlikely, but jailbreaking your iPhone and installing third-party apps could brick it. If this happens, you won’t get any help from the Apple store or AT&T. And if you do, they’ll likely wipe it clean and restore it. But by installing unofficial software onto your phone, you are absolving AT&T and Apple from providing any warranty support for your device. This is more of a risk when unlocking your phone (so you can use a different carrier) and most problematic during official software upgrades. Usually, iPhone updates remove jailbroken elements or make it difficult or impossible to jailbreak your iPhone for a certain amount of time.

Bottom-line: AT&T can’t tell that you’re tethering your iPhone—for now. But don’t rely on your tethered iPhone connection, since they just might crack down on jailbreakers in the future. You’re not at any legal risk, but the future of unofficial tethering grows ever more uncertain as AT&T begins pushing paid mobile hotspot options.