It sounds like it's gotten damaged in some way. usually at&t will replace your smartchip for a small fee. as for your contacts, you will lose them, which really sucks, but i don;t know how to solve that problem unless you have they're backup plan.
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You are placing the smart chip on top of the smart chip holder. It's a little metal square where the smart chip should go. Lift up the metal square and place the smart chip underneath. I had to go to my local AT&T dealer to figure this out.
The first thing to try is cleaning the contacts for the smart chip, on the phone and the chip itself. Use a little rubbing alcohol on cotton buds and be careful you don't bend the contacts in the phone. If that doesn't remedy the problem, get your service provider to give you a new chip. They should be willing to give you one for free. If that doesn't fix it, then it is probably a phone problem. You may go to your service provider or any nearest mobile phone repair shop to have it fixed. You may also have the phone replaced if your budget allows it.