Yet another bug with the new iOS, people. If you are an iPhone 3G user who has officially unlocked your handset to migrate to another carrier that Apple has not partnered with, you may be better off holding back on your iOS 4.2.1 update. This is because a number of users, primarily from Europe, who have made the upgrade have noticed that the update has caused the Internet tethering options on their phone to disappear!
This could be annoying because many of these users pay for the tethering option. Apparently, the bug is because the new iOS does not carry forward the carrier settings when making the update. If you are on a carrier that is contracted with Apple, this should happen seamlessly and you may not be affected. However, iPhone users on other carriers lose the tethering options on their handset completely. The issue does not seem to have affected iPhone 3GS and iPhone 4 users.
Apple has not acknowledged the issue so far and the only fix right now appears to be downgrading your iPhone to the older iOS 4.1 firmware. In case that is not a process you are comfortable with, you do not have an option but to wait for an official fix to come your way.