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Sifting through all the rumors and fake blurry pics can be overwhelming.  In the months leading up to WWDC it seems as though every obscure website somehow has access to an early release iPhone that they take pics of with the worst camera known to man (current iPhone camera?) that apparently doesn’t have auto focus.  Most of these pics can be easily debunked as a halfway decent photoshop experiments but some are pretty convincing.  Here I will lay out what rumors we have heard and seen so far and give my insight as to weather we will actually see this come to fruition or not.

1. A new iPhone will be unveiled at WWDC. Put simply, Apple has never confirmed a release of updated hardware.  Apple led by Mr. Jobs has a history of being very tight lipped on new hardware until they can stage a big media event such as WWDC to say “And one more thing!”  Many sources have all but bet the farm that a new iPhone is coming including Walt Mossberg who typically has great insight into Apple workings.  In a WSJ article addressing the Palm Pre Walt hints at the new iPhone.
   

   Whether the Pre is better than the iPhone depends on your personal preferences, though I’d note that the new iPhone to be unveiled next week will have lots of added features that could alter those calculations.

   I firmly believe an updated version of the iPhone will be unveiled not only because they released the 3G a year after the original iPhone but I believe they have to in order to overshadow the Palm Pre latest releases in the smart phone world.

2. New external design. Images of design concepts have surfaced depicting everything from slide out qwerty keyboards to a “Nano” sized phone.  The most believable images hint to a change in the back plate from the glossy plastic to a matte finish.  Apple’s history of hardware design points towards a slight overhaul in the form of  color or materials but not a shape change.  Many rumor mongers think we will see an array of colors as Apple has done in the past with some of the iPod lines.  I don’t think they will go this route because the iPhone has become an elegant icon that doesn’t warrant a fashion move as of yet, maybe at the 10th anniversary.
3. Updated camera, processor, ram, and storage. Talks of an update from a 2 MP camera to 3.2 MP are highly likely.  Users have been screaming for an updated camera since the original iPhone.  While the iPhone camera is not the best, it was on par with most other camera phones on the market.  Camera phones have been making the jump to large mega pixels while the iPhone has stayed stagnant in this category.  That being said, I believe this is the time that Apple must jump on board.  The most interesting rumor that has also been depicted in images are of an autofocus camera.  Rumors of an upgrade to a 600 MHz processor and 256 MB of ram will come true.  Processor and ram updates are most likely a necessity due to more intense apps.  If Apple wants to keep pushing the app store and more useful apps the phone must be able to keep up with the strain.  Even now the 3G iPhone gets sluggish and even crashes due to low memory.  There is no way the iPhone will be able to keep up with the next generation of mobile games and apps without an update here.  Many sites have hinted at a bump in storage to 16 and 32 GB models.  I do not doubt this at all.  History shows apple likes to double up their storage and dump the smaller of the bunch each upgrade.
   
4. The new iPhone will include a compass. Lately there have been some images of this in action that look quite real.  This has many impacts on the function of the iPhone.  Turn by turn navigation has already been revealed as a feature going to be available to developers.  The compass will work together with GPS to precisely pinpoint your directions, making turn by turn that much better.  The compass could also be used to add info to picture meta data and give information about what you took pictures of.
5. Video capture and editing. I think this most likely will come true based on findings inside the OS 3.0 code.  There have been images surfacing of it in action but again most likey someones photoshop skills in action.  I believe that this option will be Apple’s biggest marketing tactic for this release.  I would like to add another rumor to the mill claiming that Apple will name the new device the iPhone 3V.
6. Video conferencing. In the last week or so images have surfaced of a front facing camera and video conferencing ability.  Most of the photos have big inconsistantcies that point to fakery.  This would be a really cool feature but I don’t think it will come this time.  Apple tends to hold features back so they have something to update and market later.  Also, I think AT&T might want them to wait until they can beef up their network to handle the hammering it would take given this function.

All in all, I believe we will see the 3rd iteration of the iPhone in the next couple hours but really the only people that know what we will be waiting in line for is Steve Jobs and his minions.  Keep your fingers crossed for the best but don’t be surprised if some of the features that you know are coming because you saw it with your own eyes in a blurry picture, don’t come to pass.  I’ll be updating this post as the news rolls in.