Could be that these networks are just overloaded (I believe it would affect 3G users more dramatically, since operators prefer people to use 3.5G and probably configure their network resources accordingly).

I never have a problem with 3G vs. 3.5G with T-Mobile in the US. It's always worked for me.

BTW both 3.5G (HSPA) and 3G (UMTS) are the same technology. There are some speed and latency improvements in HSPA dealing with fast acknowledgements and better data coding, but the backend network is almost exactly the same. So it's quite odd that stuff would work in HSPA but not in UMTS; however as was pointed out if there are a lot of UMTS users hitting the tower at the same time, like a bunch of older phones or users just far enough away to only get UMTS then perhaps those channels could be congested.

Recent thread discussing problems related to 'Connection Error' and 'Network Busy' messages over 3G: http://talk.maemo.org/showthread.php?t=60610&page=1

One person sent his to Nokia for repair, I am considering doing the same.

thats strange.
my device always is on 3g (calls working), only switching to 3.5g when i'm using internet. i'm also on t-mobile, but in germany.
sounds like you constantly need 3.5g, but i never heard that you can be on 3.5g constantly. i thought its only used on demand when internet is being used.

It probably is a faulty sim card indeed, I'll try to get them to change mine coming week and see what happens..

I Have the same problem....

I posted it a long time ago:
http://talk.maemo.org/showpost.php?p=720403&postcount=5

But... It seems like T-Mobile NL suffers from this problem?
Because I also use T-Mobile (Netherlands) and my internet will only work if there is 3,5G (or 2G, but very slow ofcourse)

I think this has nothing to do with the simcard....

3.5g basically has faster internet
rest is almost the same

n70 etc jus support 3g
means no call?
no net?
please research

and to answer the original question

3.5g is the faster version of 3g
in n95 etc, u had the option of disabling hspda or something to jus keep 3g
but in new cellphones, its not there coz ppl dont need it..

*no offense, but this question made me giggle*

I replaced the sim card, same issue... It seems that here in NL, t-mobile acquired Orange. They didn't use their network due to incompatible devices, so the broke it down. Then the government (OPTA) forced them to start using the Orange frequencies. So they started using these on their existing sites, overloading them. The whole 3G network in crowded places is not functional anymore. It's just used to forward users to 3.5G, which isn't available everywhere. So you end up with an active 3G connection which doesn't allow any traffic going over it. Switching back to 2G is your best option in these cases, IF that's available...
So we're f*cked..

KPN has the same issue (with telfort) but less. They have an ancient backbone network though.. Which leaves us with Vodafone, which has an expensive service and monthly limits for data.
So we're f*cked...

Another option is free-WIFI like FON, which works great for many foreign cities. But we dutch people are cheap and don't want to share our bandwidth (I think it's not even allowed by the ISPs), so that won't be a workable solution either.

So we're f*cked

I know this answer doesn't apply to all of you, but for my network it works this way:

HSDPA (3.5G) = High speed downlink packet access = If you're not downloading anything, it will show 3G in the corner.

When the download starts, it will change to 3.5G, it doesn't mean that it's changing the network, it just indicates that you're transferring stuff using the HSDPA method.

Thus, if for some odd reason you just can't transfer anything, it will just show 3G and never pop up 3.5G

Actually, HSDPA is part of the UMTS spec. It's the same network. So that does make sense..