On Friday, Apple (AAPL) is launching a second-generation iPhone, called the iPhone 3G, which addresses both of those problems, while retaining the look and feel of the first model’s hardware and software.

The base version of the new iPhone costs $199 — half the $399 price of its predecessor; the higher-capacity version is now $299, down from $499. Yet, this new iPhone is much, much faster at fetching data over cellphone networks because it uses a speedy cellular technology called 3G. And it now sports a GPS chip for better location sensing.

The company also is rolling out the second generation of its iPhone operating system, with some nice new features, including wireless synchronization with corporate email, calendars and address books. And there’s a new online store for third-party iPhone programs that Apple hopes will make the device usable for a wider variety of tasks, including gaming and productivity applications. This new software and store will also be available on older iPhones, through a free upgrade.

I’ve been testing the iPhone 3G for a couple of weeks, and have found that it mostly keeps its promises. In particular, I found that doing email and surfing the Internet typically was between three and five times as fast using AT&T’s 3G network as it was with the older AT&T network to which the first iPhone was limited.

Apple’s new iPhone operating system includes an ‘App store,’ where you can browse for, and download, third-party software.

The iPhone 3G is hardly the first phone to run on 3G networks, and it still costs more than some of its competitors. But overall, I found it to be a more capable version of an already excellent device. And now that it’s open to third-party programs, the iPhone has a chance to become a true computing platform with wide versatility.

There are two big hidden costs to the new iPhone’s faster speed and lower price tag. First, in my tests, the iPhone 3G’s battery was drained much more quickly in a typical day of use than the battery on the original iPhone, due to the higher power demands of 3G networks. This is an especially significant problem because, unlike most other smart phones, the iPhone has a sealed battery that can’t be replaced with a spare.

Second, Apple’s exclusive carrier in the U.S., AT&T Inc. (T), has effectively negated the iPhone’s up-front price cut by jacking up its monthly fee for unlimited data use by $10. Over the course of the two-year contract you must sign to get the lower hardware prices, that adds $240, overwhelming the $200 savings on the phone itself. If you want text messaging, the cost rises further. With the first iPhone, 200 text messages a month came free. Now, 200 messages will cost $5 a month, or another $120 over the two-year contract.

The iPhone 3G still has a couple of features that made the first version unpalatable to some potential buyers. It uses a virtual on-screen keyboard instead of a physical one. While I find the virtual keyboard easy and accurate, not everyone does. Also, in the U.S. and in many other countries, the iPhone is still tied to a single exclusive carrier, whose coverage or rate plans may be unacceptable to some.

Here is a rundown of the changes in the new model.

Design: The new iPhone looks almost exactly like the old one. It is the same length and width, has the same big, vivid screen, and has the same number and layout of buttons. The main difference is the back, which is now plastic instead of mostly metal and curved instead of flat. It’s very slightly thicker in the middle, with tapered edges, and weighs a tiny bit less.

The new iPhone 3G (left) delivers much higher Internet download speeds over cellular networks than the original iPhone (right).

Like its predecessor, the iPhone 3G comes in two models distinguished only by storage capacity: 8 gigabytes and 16 gigabytes. The top model is available in black or white.

Apple has greatly improved the audio on the new iPhone. I found the speaker was much louder, for music and for the speakerphone. But the new phone produced an echo when used with the built-in Bluetooth system in my car. Also, the headphone jack is now flush with the case instead of recessed as on the first model, so it can accept any standard stereo earphones.

The camera, however, is still bare-bones. It can’t record video and has a resolution of just two megapixels. The power adapter is now tiny, at least in the U.S., but Apple no longer includes a dock for charging, just a cable.

Software: The basic software is similar. The biggest addition for some users will be full compatibility with Microsoft’s (MSFT) widely used Exchange ActiveSync service, which many corporations use. In my tests, I was able to connect the iPhone 3G to my company’s Exchange servers in a few minutes, and my corporate email, calendar and contacts were replicated on the phone. Any changes I made on the iPhone were reflected almost instantly in Microsoft Outlook on my company PC, and vice versa. Email was pushed to the phone as soon as it was received on the company’s servers.

One drawback: While you can have both personal and Exchange email accounts on the new iPhone, if you synchronize with Exchange calendars and contacts, your personal calendar and contacts are erased.

The new iPhone and upgraded older iPhones also will be able to use a new Apple consumer service, MobileMe, which offers synchronized push email, calendars, photos and contacts.

There are other improvements. You can now delete multiple emails at once, set parental controls and search your contacts. You can also save photos in emails or from Web sites. You can also now open Microsoft PowerPoint files sent as attachments, though I found in my tests that opening larger PowerPoint files crashed the phone.

Some software features missing from the first iPhone are still AWOL on the new one. There’s no copy and paste function, no universal search, no instant messaging and no MMS for sending photos quickly between phones.

Network: Like the old iPhone, the new one can perform Internet tasks using either Wi-Fi wireless networking or the cellphone networks. But the addition of 3G cellular capability makes the new model more useful for Web surfing, email and other data tasks when you’re not in Wi-Fi range. In my tests, in Washington and New York, I got data speeds mostly ranging between 200 and 500 kilobits per second. By comparison, the original iPhone, tested in the same spots at the same time, mostly got cellular data speeds between 70 and 150 kbps on AT&T’s old EDGE network. The new iPhone typically was between three and five times as fast as the old one.

While AT&T now has 3G networks in 280 U.S. cities, and aims to be in 350 by year end, it is converting its cellphone towers gradually, so not all areas of included cities have 3G coverage. The new iPhone falls back to EDGE speeds when 3G isn’t present.

One side benefit to 3G is that in some areas, voice coverage improves. At my neighborhood shopping center, where the first iPhone got little or no AT&T service, the iPhone 3G registered strong coverage. But I still found that calls regularly broke up on some major streets. In New York City, riding in a taxi along the Hudson, one important call was dropped three times on the new iPhone. Finally, I borrowed a cheap Verizon (VZ) phone and got perfect reception.

Battery life: Apple claims that over 3G, the new iPhone can get five hours of talk time, or five hours of Internet use. Talk time is twice as long on the older EDGE network, and Internet time is an hour better with Wi-Fi.

I ran my own battery tests using the phone’s 3G capability. Although I left the Wi-Fi function on, I didn’t connect it to a network, so the phone had to rely on 3G. In my test of voice calling, I got 4 hours and 27 minutes, short of Apple’s maximum claim and nearly three hours less than what I recorded in the same test last year on the original iPhone. In my test of Internet use over 3G, I got 5 hours and 49 minutes, better than Apple’s claim, but far short of the nine hours I got using Wi-Fi in last year’s tests.

More important, in daily use, I found the battery indicator on the new 3G model slipping below 20% by early afternoon or midafternoon on some days, and it entirely ran out of juice on one day. I overcame this problem by learning to use Wi-Fi instead of 3G whenever possible, turning down the screen brightness and even turning off 3G altogether, which the phone permits.

The iPhone 3G’s battery life is comparable to, or better than, that of some other 3G competitors. But they have replaceable batteries. The iPhone doesn’t.

Third-party software: If things go as Apple hopes, third-party software could be the biggest attraction to the new iPhone 3G, and to upgraded older iPhones. By some estimates, there will be hundreds of these programs, some free and some paid, almost immediately.

Apple didn’t supply me with programs for testing, but I managed to try several on older devices upgraded to the new operating system. I tested a game that used the phone’s motion sensors to control the action, and I tested several programs from America Online (TWX), including AOL Instant Messenger; AOL Radio, which streams music from the Internet; and AOL’s Truveo video search engine. All worked very well.

Among the programs Apple has publicly previewed were a sales automation program from Salesforce.com, a game called Super Monkey Ball from Sega and a program for bidding on eBay (EBAY). Also made public were a news reader from the Associated Press, a program for following live games from Major League Baseball and several programs for doctors, including the Epocrates drug reference.

Bottom line: If you’ve been waiting to buy an iPhone until it dropped in price, or ran on faster cell networks, you might want to take the plunge, if you can live with the higher service costs and the weaker battery life. The same goes for those with existing iPhones who love the device but crave faster cellular data speeds. But if you already own an iPhone, and can usually use Wi-Fi for data, you probably should hold off and get the free software upgrade before deciding whether it’s worth getting the new hardware.

Find all of Walt Mossberg’s columns and videos online, free, at the All Things Digital Web site, walt.allthingsd.com. Email him at mossberg@wsj.com.

The latest to arrive is the Samsung Instinct, to be introduced by Sprint (S) on June 20. I’ve been testing the Instinct, and while it isn’t a bad phone and has some features the Apple product lacks, it’s no match for the iPhone. The manufacturers haven’t replicated the iPhone’s greatest strength: beautiful, powerful, breakthrough software.

Samsung Instinct

Also, the timing of the Instinct is unfortunate. It was designed to go up against the first iPhone. Sprint even has a Web site (nowisgood.com) comparing the two devices. But the Instinct will go on sale only three weeks before Apple and AT&T (T) start selling the new 3G iPhone, the second-generation model announced earlier this week. This second iPhone model corrects some of the first model’s main weaknesses, wiping out some advantages Sprint hoped the Instinct would have.

Before getting into the details of the Instinct, a few words about the new iPhone, its main competition. I don’t do full reviews of products until I have tested them extensively, but my first impressions of the 3G iPhone are largely positive.

The price of the new iPhone’s base model, which comes with 8 gigabytes of memory, is $199, a 50% price cut from the comparable first-generation model. Yet, it now works on AT&T’s fastest data network, promising anywhere from two to five times the speed of its predecessor. It also has GPS for tracking your location, and fully supports over-the-air synchronization of email, contacts and calendars — through Microsoft (MSFT) Exchange in corporations or via a similar new consumer service from Apple called MobileMe. And you’ll be able to download directly to the phone a whole universe of third-party programs, from productivity software to games.

On the downside, the new iPhone’s camera remains very basic and still can’t capture video. For people who prefer physical keyboards, the iPhone will still fall short. It continues to include only a virtual onscreen keyboard. And the iPhone remains locked to a single carrier in the U.S., AT&T, which will charge $10 more per month for unlimited data consumption on the device.

The iPhone, along with some competitors like the BlackBerry, are really hand-held computers that happen to make voice calls. And they’re getting more powerful and innovative. So far, competitors like the Instinct, while trying to look like iPhones, are still mainly voice devices with so-so computing features tacked on.

For instance, while the Instinct is a touch-screen device, it lacks the iPhone’s “multi-touch” system, which includes features that recognize multiple fingers and gestures, and allows actions like shrinking a photo by “pinching” it. The touch system on the Instinct is more like that on an ancient ATM than a cutting-edge gadget, even though it has a gimmicky feedback mechanism that gives you a tiny vibration-jolt when you press an icon.

Physically, the Instinct looks a lot like the iPhone — a dark slab without a physical keyboard or many buttons dominated by a large screen. It’s a bit longer and thicker than the iPhone, but a tad narrower and lighter. Its screen is smaller than the iPhone’s and has lower resolution.

The Instinct has the same $199 price tag as the new iPhone, after a rebate and with a two-year contract. Service plans are likely to start at around $70, in line with the minimum monthly fee AT&T will charge on the new iPhone. But it comes with just one-quarter of the memory the base iPhone includes.

Like the 3G iPhone, the Instinct runs on a fast cellular network that promises speeds similar to what people get with slow home DSL service. In my tests, it seemed to deliver this promised speed. It also has GPS and navigation. But, unlike the iPhone, the Instinct lacks Wi-Fi wireless networking, which can often be faster than the cellphone networks or available where there is no speedy cellphone coverage.

The Instinct has a removable battery, something the iPhone lacks. And Sprint claims 5.7 hours of talk time on one charge, more than the five hours that Apple claims for its 3G model. Sprint’s new baby has a few other features that even the latest iPhone omits, such as a built-in service for viewing TV shows and a voice-command system.

But I found its email system and Web browser to be less sophisticated than the iPhone’s or the BlackBerry’s. I also thought the phone’s onscreen keyboard was harder to use than Apple’s. It would flip unpredictably from landscape to portrait mode. The Instinct does allow handwriting recognition as an alternative, something the iPhone doesn’t.

If you’re a devoted Sprint customer, or want to avoid AT&T, the Instinct is an OK choice. But it’s no iPhone.

• Find all of Walt Mossberg’s columns and videos online, free, at the new All Things Digital Web site, http://walt.allthingsd.com. Email him at mossberg@wsj.com.

Forget next month. It’s more fun thinking about what digital toys Apple might be making in five years. Of course, Mr. Jobs’s penchant for secrecy means such predictions are often little more than daydreaming. Just do an Internet search for “Apple” and “mockup” to see photos of products invented by Apple fans.

Forrester Research (FORR) is the latest to look into the crystal ball in a new report that imagines the Apple products of 2013. But rather than predict Apple jet packs or other outlandish new directions, the research firm uses the company’s recent history as a guide to forecasting.

Forrester’s conclusion: While much of Apple’s great successes have been mobile products such as the iPod and the iPhone, the company will seek to colonize rooms throughout the home.

Among the new products Forrester predicts Apple will create are wall-mountable digital picture frames with small high-definition screens and speakers that wirelessly play media, including photos, videos and music, stored on a computer elsewhere in the home. Such products already exist, but Apple could put its own twist on them — for example, by adding its design panache and a touch-sensitive screen that lets viewers flip from image to image with a finger swipe, a la the iPhone.

For the bedroom, Forrester envisions an Apple “clock radio” that pipes in music and other media across a home network. Possible, too, is an “AppleSound” universal remote control, also with a touch-sensitive screen, that lets users browse their music collections and change the songs playing through their stereo as they stroll around the house. This latter technology is already available in primitive form through an application called Signal (www.alloysoft.com) that turns the iPod touch and the iPhone into remote controls for Apple’s iTunes program.

Forrester also thinks Apple could extend into the home the technical assistance currently offered by “Genius Bar” personnel in Apple retail stores. Apple in-home installation services will become especially important as its array of products for the home grows. “The complexity level here can be quite daunting if you have five or six of these different devices,” says J.P. Gownder, one of the Forrester analysts who wrote the report.

An Apple spokeswoman declined to comment on the company’s product plans.

Apple prognosticating is such a popular pastime, in part, because Mr. Jobs has proved so adept at becoming a power broker in markets a Silicon Valley computer company — once known as Apple Computer — has no right to dominate. The iPod remains the top MP3 player, with more than 70% of the market, and Apple is now the top retailer of music in the nation, ahead of Wal-Mart (WMT) Stores. Less than a year after entering the cellphone business with the iPhone, Apple became the second-largest provider of smart phones in the U.S.

That said, the company had an underwhelming foray into the living room with a television set-top device called Apple TV that plays music, photos and movies downloaded from the Internet and PCs on a home network. In an interview earlier this year after dropping the price on the product by $70 to $229, Mr. Jobs said he was disappointed in its sales.

Despite the hiccups, veteran observers of Apple say Mr. Jobs’s intent is clear. “I see everything Steve is doing as positioning himself to take over completely the living room,” says John Seely Brown, a visiting scholar at the University of Southern California and the former director of Xerox’s PARC, the Palo Alto, Calif., research center that inspired some of the innovations of the original Macintosh.

One long-running prediction, proved wrong again and again: that Apple might make a television set. Forrester throws cold water on the idea. Yet some still believe that Apple will one day get into the business as conventional TV makers start to integrate into their sets the ability to surf the Web. Apple already designs computer displays that are as large as some HDTVs.

Steve Wozniak, the co-founder of Apple with Mr. Jobs, says it would make “a lot of sense” for Apple to do a television set that can also access media stored on the Internet and local PCs. “I only started thinking that way recently,” Mr. Wozniak says. “Apple is obviously in the world of delivering display devices already.”

Mr. Brown thinks Apple could simplify the traditional functions on TV sets, like the bewildering electronic programming guides that list the hundreds of channels available to viewers. “Most people find operating high-quality TV systems incredibly awkward,” he says. “They’re as bad as our computer systems.”

• Send comments to Nick.Wingfield@wsj.com. Walter S. Mossberg will return on June 5.

That may sound like Apple’s heavily publicized iPhone, which runs on the AT&T wireless network, but it’s not. This phone is called the Voyager, and it’s made by LG and runs on the rival Verizon Wireless network.

Despite their superficial similarities, the two devices are very, very different. In fact, Verizon’s public-relations people are at pains to say the Voyager isn’t intended as an “iPhone killer” or even a “smart phone.”

Still, the Voyager is worth a close look, if only because it is one of the first competitors that attempts to mimic Apple’s touch interface, and many of its functions overlap the iPhone’s.

The Voyager beats the iPhone in certain respects. Unlike Apple’s product, it runs on a fast, 3G data network. And my experience has been that Verizon’s network has better coverage than AT&T’s in many cities, especially on the East Coast. It also costs less: $299, after a rebate, with a two-year service contract, compared with $399 for the iPhone.

In addition, the Voyager has GPS and thus provides real-time navigation, a capability the iPhone currently lacks. And the Voyager can even receive live TV programs for an extra monthly fee of $15, though it gets only eight channels and its TV function works only in certain cities.

A big advantage of the Voyager for some people is that it has a physical keyboard for typing in addition to the kind of virtual onscreen keys that are the iPhone’s only method for entering text. This keyboard is revealed by opening the phone, which then resembles a little laptop with a display that’s separate from the outside touch screen. I found that typing worked pretty well. For folks who insist on a physical keyboard, this is a big deal.

Finally, LG has enhanced the Voyager’s touch screen with feedback: When you tap an icon or scroll through a list, you get a light physical sensation.

But the Voyager is bulkier than the sleek iPhone — about 50% thicker and 40% larger overall — even though it’s a tad lighter. And it lacks the iPhone’s ability to use Wi-Fi hot spots and home networks, which are often faster than Verizon’s 3G network. It also has only about half the battery life; a smaller, lower-resolution screen, and just a fraction of the Apple’s internal memory. (Unlike the iPhone, the Voyager lets you add memory cards, but it doesn’t come with any.)

Most importantly, the Voyager suffers badly in the area where Apple’s phone shines: software. Whether Verizon considers it a direct iPhone competitor or not, the LG product tries to do many of the same things, and it generally falls short.

This is the true challenge that the iPhone poses to established phone makers like LG. Apple has managed to build into its phone a real PC-grade operating system with a breakthrough user interface and elegant programs, something that has eluded the major cellphone makers.

As with so many of the new feature-packed mobile phones, the Voyager’s user interface is clumsy and confusing, requiring too many steps to perform simple tasks. And its applications, such as the photo organizer, music player, Web browser and email program, are primitive compared with the iPhone’s.

In fact, the Voyager, bafflingly, has several different user interfaces — two on the outer touch screen and an entirely different one on the inner screen above the keyboard that doesn’t work by touch at all. Some functions work only with the inner screen.

Scrolling through lists with the Voyager’s touch screen is a halting, frustrating process compared with the smooth, slick scrolling on the iPhone. Its touch functions are old style and basic compared with the new “multitouch” approach that Apple built into the iPhone. Unlike the iPhone, the Voyager doesn’t allow you to “flick” through photos or other screens, or to use two fingers to enlarge or shrink photos or Web pages. It also doesn’t automatically change photos or Web pages from portrait to landscape view by just turning the phone.

In addition, while the Voyager’s Web browser can show real Web-page layouts, I found it to be far inferior to the iPhone’s browser, which shows entire pages and then zooms in on the parts you want to read with a couple of finger taps.

Apparently because the Voyager isn’t considered a business tool or smart phone, its email function isn’t included on any of the main menus or even located under the envelope icon labeled “messaging.” To find it, you have to wade through multiple menus with unhelpful names like “Tools on the Go.”

Even doing something as simple as entering flight mode — which turns off a phone’s internal radios for use on a plane and takes two steps on the iPhone — requires five steps on the Voyager.

Verizon is promising to improve the Voyager, but right now it’s a classic example of how the leading cellphone makers are going to have to step up their games, especially in software, to match Apple’s upstart device.

• Email me at mossberg@wsj.com. Find all my columns and videos online free at the new All Things Digital Web site, http://walt.allthingsd.com.