O2 says it will disconnect iPhone owners who use the new internet tethering feature in the iPhone 3.0 update without signing up for its Bolt On service.
iPhone owners who have installed the iPhone 3.0 update are reporting that it is possible to use the new tethering solution to hook up a laptop to use an iPhone's internet connection for free.
O2s iPhone tethering bolt on will cost up to £29.36 a month. However reports indicate that iPhone users have been able to get around this requirement.
O2 threatens to disconnect anyone using tethering as it will be in breach of their contract.
O2 said: "Any use of this particular feature without the purchase of the Bolt On is specifically prohibited under our terms of service. Under those terms we reserve the right to charge customers making modem use of their iPhone or disconnect them."