Update: As it turns out the folks over at AndroidPolice had already discovered this problem a few days back and the trouble is due to engineering resource constraints. Due to such engineering constraints T-Mobile blocks the specialized P2P mode that Google uses to connect video chats.
Nexus S owners have been hit with some disappointing news with the arrival of Android 2.3.4 which gives them the above error when attempting to initiate a video chat over 3G. “You must be connected to a WiFi network to start a video chat.” Uh oh. We’ve been able to independently confirm Engadget’s report that this is indeed a problem for a multitude of Nexus S owners. The puzzling thing is that this feature is working just fine for Sprint Nexus S 4G owners on their own 3G network.
As a secondary note at least one T-Mobile user is seeing the same issue reported on his G-Slate on T-Mobile’s 4G network. What gives Tmo?
Thanks Zeon and Tenkely!