Last week I used the iPhone in Mexico. It worked very well. GSM coverage in the country continues to expand, as it does in the US. But with four bands I found coverage in most areas. I was concerned that the data part of the phone would be very expensive. But what I found was that WIFI, at least in Mexico City, Aguascalientes, Guanajuato and Zacatecas - was that there are lots of opportunities for open WIFI. Prodigy is there also but in many places you will see two alternatives - one open and one Prodigy. When I went into a new area I would look in the settings menu to seek open networks. The risk for an AT&T phone is that data outside the US is very very expensive.
The phone reception was the other question I had and here the iPhone performed quite well. My prior phone was a Razr and reception in many of these areas was limited. The iPhone was much better. What is unclear is whether the numbers of towers has also elaborated. The most amazing situation was going from Zacatecas back to Aguascalientes and carrying on a conversation while we went through some very rural territory.
Cost of all phones in Mexico is very expensive. For example, the AT&T rates in Mexico are 59¢ a minute. But the alternative rates are not significantly better. That suggests for longer conversations I found WIFI spots and then implemented Skype.
One odd result for the use of the phone. In several instances I had a colleague call me and the notation was "blocked user" although I could still receive the call.
Walt Mossberg did a really good post on the issue a couple of weeks ago at the WSJ.
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