I did some research and found out why I'm having problems. I am writing this for everyone else to benefit and not make the same mistake I made. AT&T prepaid currently uses GPRS for data they do not support CSD (although special business accounts can be setup to use CSD for the right price). CSD is required to dial another GSM modem for data access. Instead you must use GPRS. See below for an explaination of the different data types available.
GSM Data Overview
GSM divides each radio channel into 8 time slots. Data speeds are determined by the speed of an individual time slot, and the number of time slots used:CSD (Circuit Switched Data)9.6 Kbps over a single time slot. Most GSM phones support CSD. (2G) AT&T prepaid does not support this.HSCSD (High Speed Circuit Switched Data)Each time slot can be 9.6 or 14.4 Kbps, and multiple time slots can be combined for higher speeds, up to 38.4 and 57.6 Kbps respectively. Much less efficient than GPRS from a network standpoint, a significant drawback. (2.5G)GPRS (General Packet Radio Service)Each time slot can be 9.6 to 21.4 Kbps, and multiple time slots can be combined for higher data speeds, up to 171.2 Kbps (all 8 time slots), although current phones are limited to lower data speeds. In practice, GPRS data connections are usually limited to a maximum of 4 downstream time slots with 1 upstream time slot. Packet technology greatly enhances network efficiency. (2.5G)EDGE (Enhanced Data GSM Environment)Effectively an extension of GPRS that increases maximum time slot speed to 48 Kbps, pushing maximum combined data speed up to 384 Kbps (all 8 time slots). In trials, but not yet widely deployed. (3G)In each case, actual availability and speed is determined by the lowest common denominator of:
what the carrier offers;
how the subscriber is configured by the carrier;
configuration of the actual access point in use; and
the capabilities of the phone in use.
It's a common misconception that GSM phones can make analog (dial-up) modem calls directly, but they can't. GSM is digital, and analog modems will only work over analog (AMPS) cellular. The "modem" in a GSM phone actually makes a digital connection to an IWU (Inter Working Unit) located at a carrier's Mobile Switching Center (MSC). The IWU has an analog modem bank that makes the actual dial-up modem calls. If a carrier doesn't provide an IWU, then analog modem calls are not possible.