Is this fixable if I am not on AT&T, it happened after a drop and everything else works fine. Thanks in advance guys.

There is a flat cable that goes form the bottom to the mainboard of the iphone. That cable connects the mic, home button, speaker, doc connector.

If you just drop the phone is probably that the cable just move a little bit and is not making contact.
I had and iphone with the same behavior but in this one the cable was broken, (short circuit burn the cable),I replace the cable and at the beggining the MIC wasn't working, I just align it property and its working now.

You can buy the cable and replace it (around 20 dlls), but in order to do that you will need to completely disassemble the phone, (you have to remove the screen too, and do a little bit of soldering)

The cable looks like this:
Signal cable

One question, does you iphone still communicates with the PC and charges the battery?

I have just broken my iphone trying to repair the home button, which was causing me trouble from the very first day. When I got to the home button (after removing hte screen and everything else) I accidentally tore that cable (just left to the L14 and L15 transistors) and now the home button and mic are not functioning, obviously. Charging and speakers are OK.

Where did you buy the cable in the photo?

I know a few people who got there phone swapped in apple stores. It was a NYC store, and they still have a big stock of iphones sitting around and don't seem to care about swapping.

Why don't you restore the phone to factory default, do a hack to unlock it and drop the install icon.

Don't know how picky they are, they might not look to closely at it hehe.