Apple Inc.'s second-generation iPhone -- dubbed the iPhone 3G -- is slated to hit the shelves of Apple, O2 and Carphone Warehouse stores across the UK on July 11. The iPhone 3G will sport both cosmetic and serious under-the-hood upgrades from the current model and will feature a new, lower purchase price. It will also ship with the iPhone 2.0 firmware, offering access to a host of new operating system features, most notably the ability to install third-party applications using the AppStore.

The iPhone 2.0 software will be available as a free upgrade for all previous iPhone models (and as a $9.99 paid update for the iPod Touch, UK price TBA).

For current iPhone owners, yesterday's announcements raise a conundrum: Should you buy the new iPhone 3G or just update your first-generation iPhone with the new software? For the gadget-obsessed or serious road warriors, the choice seems clear: get to the front of the line at your nearest Apple Store on July 11. For more casual users, however, shelling out £99 to replace an iPhone that's less than a year old may not be as easy a decision -- especially since it also means re-upping with O2 for an additional 18 months.

New software vs. the new hardware
Overall, the biggest advances in functionality for the iPhone -- both in the year since its release and those coming next month -- are software-based. The iTunes Wi-Fi music store, the revamped Google Maps app that allows an iPhone to determine its location based on cell tower and Wi-Fi hot spot locations, and the ability to send text messages to multiple contacts were all made possible by software and firmware updates; no 3G or true GPS required. Given the breadth of applications possible for the iPhone, it's not surprising that the bulk of yesterday's keynote focused on the benefits of the upcoming iPhone 2.0 update more than the hardware.

That means that if you're looking for a bunch of very cool downloadable applications, support for Exchange and other enterprise features, or access to Apple's .Mac replacement, MobileMe, you don't need a new iPhone. With its new features and functions, iPhone 2.0 will make every iPhone seem like new. So whether you just bought a first-generation iPhone last month before supplies dried up or you bought one when they were released last summer, you can still get all the spiffy goodness at no cost

For those who don't want to live on the bleeding edge of technology or just don't want to pony money to replace a perfectly good device, the choice to simply update an existing iPhone is compelling. In fact, there are really only three major features -- 3G data speeds, GPS and better battery life -- that you'll get by purchasing a new iPhone. You'll also be able to use any standard headphones with the new iPhone without an adapter, thanks to Apple's move away from the original iPhone's recessed headphone jack. Sure, it's a nice bonus, but I don't know that I'd consider it a major feature worth making part of my upgrade decision.

The need for speed
The biggest change between the iPhone of '07 and the one due out in a month is right in the new model's name -- 3G - -and it's not a difference to be taken lightly. One of the biggest criticisms of the iPhone since its announcement in January 2007 was that it relied on the slower but more prevalent EDGE network. EDGE is significantly slower than 3G wireless data services. By adding Wi-Fi to the iPhone, Apple was able to mitigate the impact of the slower data speeds, but only somewhat. In fact, one of the things I noticed after a few weeks of switching from a 3G Windows Mobile phone to an iPhone was how it affcted the way I check my e-mail while on the go.

The iPhone 3G will offer full support for the HSDPA and UMTS standards and O2's recent 3G upgrades will allow many iPhone owners to take advantage of significantly faster mobile browsing. While this may not be a must-have feature for everyone, it is for anyone who needs or wants to be able to check e-mail, surf the Web, check YouTube videos or use any data-intensive iPhone application outside the range of a Wi-Fi hot spot. Remember the previewed app that offers up live updates of games, complete with video of individual plays immediately after they happen? You're going to want 3G for that sort of service.

The second major update is the addition of true GPS. Although not as critical for everyone as 3G performance, this is also a potential big deal. One of the most innovative features of the iPhone SDK that developers can use when writing applications is the Core Location services. It allows applications to detect where a user is and to integrate that with other features, such as the ability to display contacts in a given vicinity or to integrate with social networking sites. Even with no other applications involved, the power of GPS with Google Maps alone makes it a great feature and really gives the iPhone some of the functions of a full-fledged GPS device. I wouldn't be surprised to see a third-party application offer a much broader feature set for navigation using GPS. No doubt, the powers that be responsible for the popular Tom-Tom and Garmin GPS devices are paying close attention.

Clearly GPS has a lot of potential on the iPhone. That said, many apps will likely be able to work with the existing iPhone's ability to triangulate its location. So, why is GPS a serious reason to upgrade?

The answer is pretty clear if you've ever used this function in any place other than a densely populated urban area. While in the business district of a major city, it may pinpoint you to within half a block or less. But when there are few cell towers and known Wi-Fi hot spots, the iPhone's ability to determine your location goes downhill quickly. Out in the suburbs, you might find your location indicated within a mile-wide radius or even larger.

That doesn't work well for determining your location, showing you where friends are, finding restaurants, or getting directions if you're lost. That makes GPS a compelling feature, particularly since it means you're getting a powerful navigation tool in addition to the faster 3G data service.

Better battery life
Another major feature that Apple has touted in the iPhone 3G is improved battery life. While the battery life on the original iPhone wasn't bad, it certainly wasn't as solid as some other phones on the market. Increased battery life means more talk and standby time as well as more time listening to music, surfing the Internet and using all those new games and apps. So, while it's not a must-have update, it's surely worth factoring into the decision-making process.
More space

Although not a new feature, a new iPhone could give you more storage capacity. If you currently own a 4GB or 8GB iPhone, you can use this as a chance to move up to an 8GB or 16GB model. Sure, you could've done that before now, but it would've been more expensive and wouldn't have gotten you any new features -- just more room to grow.

If you're one of the people who bought the 4GB iPhone model before Apple discontinued it last fall, this could be a major upgrade for you. It might even be needed, depending on how many photos, music files and videos you're taking with you. In today's media-filled world, 4GB isn't a lot of space to begin with, but each iPhone update that Apple has shipped has used more of that space for the version of Mac OS X powering the iPhone; it's no stretch to imagine that the iPhone 2.0 update will take up more. And I'm not even taking into consideration the space you sacrifice to download and install third-party applications. When you consider that over half a gigabyte of space already gets used, the prospect of losing more for system and application files can make the decision to either stick with a 4GB iPhone or upgrade similar to choosing between a studio apartment and a town house.

Is the price right?
New features aside, price may be the ultimate factor in determining whether you upgrade. Starting at £99 -- £159 if you go for the 16GB model -- the iPhone 3G will be priced lower than any iPhone model to date by a sizable margin. The price point is also very close to or lower than that of most current iPods. The lower cost and combination of new features make a compelling case for upgrading -- and an even more compelling case for buying your first iPhone.

Sure, those who paid £269 for an iPhone just a year ago will feel the sting, as will those who paid a little less later in the year. As for me, the iPhone I bought last fall is going to someone else in slightly used condition. Having weighed the advantages and costs, I'm upgrading to the 16GB model in black.

Ryan Faas is a frequent Computerworld contributor specializing in Mac and multiplatform network issues. You can find more information about him at