I have exact same problem as you said.
Problem is when you merge 2 parties into one; it is either you hear nothing at all from both parties, or you only can talk to 1 person putting the other person on hold.
I called at&t 10 times to find a solution, still no go.
Talking to a service representatives did not help much. They just remove 3 way call feature and put it back on to yyour account from their at&t system, or they suggest power cycle the phone, or call apple.(duh!) At times, it worked momentarily then voila, the same problem.
Then I talked to a tech support, I do not know what it is called but the tech disconnected my iPhone 3g from the network and reconnected it. She said this process is different from partial remove/add features that customer support rep did, it was rather total reset from the network.
Right after the talk with tech support, I was able to connect & merge 3 people together that I could not before.
Next day, I tried three way calling for the same 3 people but it did not work ever since.
I test called three way call today, calling 611 and Apple iPhone support number 800-694-7400 , and it works!.
However, problem still exists when I try to connect my friends, the same 3 people mentioned above.
What gives?
Does the problem have something to do with my friends' carriers? One has T-mo, the other one has Helio, and the third has vonage VOIP home service.
Please let me know what happens.