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A customer compares the new iPhone 4 he just bought, left, with his old iPhone at the Los Gatos Apple Store in downtown Los Gatos on June 24, 2010. The new phones officially went on sale at 7am this morning. (Gary Reyes/Mercury News)

The smartphone industry has come a long way since Apple released the first iPhone three years ago, but the launch of a new successor to that iconic device is still a momentous event.

Apple has been the pacesetter for the industry. But others are catching up. Google and its partners have rapidly improved the Android operating system and the phones based on it so that the latest Android phones are very competitive with — and in some cases superior to — previous iPhones in design or features.

That's what made the release of the iPhone 4 an important event. It was an open question whether Apple would be able to continue to lead the pack.

The answer is yes.

The iPhone 4 represents the biggest hardware overhaul Apple's done since the original iPhone. Not only has Apple made the case thinner and the back of the phone flat, but it has also replaced the processor with a new one of its own design, swapped out the screen for one with twice the resolution, doubled the amount of system memory, added a forward-facing camera, and improved the camera on the back with higher resolution and an LED flash.

And, thanks to an update to the iOS software on which the iPhone runs, it has a bunch of new tricks. Users can view all their e-mail in a new universal inbox. They can group apps into folders, a feature I found particularly useful because it allowed me to reduce the number of home screens on my device from about 11 to four. And they can finally run third-party programs such as Pandora in the background while they do other things, such as surf the Web or look up restaurant reviews on Yelp, something I've long wanted to be able to do on an iPhone.


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In short, if specs and features are something you obsess over, this ain't even close to last year's model.

But to the average consumer, many of these changes may not mean a whole lot. Last year's model, the iPhone 3GS, will not only run the new iOS 4 software, but it also supports nearly all of its features. And while the design is hard to miss and the new flash for the camera is a welcome addition, I'm guessing most folks won't be able to tell that the new iPhone has more memory or a new processor, because the device doesn't run that much faster than the 3GS.

Still, the iPhone 4 is a standout device for two big reasons: its forward-facing camera and new screen.

Apple is not the first to include a camera on the front of a phone. But it's arguably the first to make video calling from a cell phone an easy and enjoyable experience with a feature called FaceTime.

On the iPhone 4, you can set up a video call by simply placing a regular call. If the other party has an iPhone 4, either one of you can start a video chat by pressing a virtual "FaceTime" button, which is placed among the buttons to mute a call or to put someone on speakerphone.

The video transmitted via FaceTime is smooth and instantaneous. There's no lag or choppiness. Images do tend to blur a bit if you move the camera too fast, but if you're just talking face to face with a friend, you won't notice.

One cool feature is that you can switch the camera transmitting the video for FaceTime to the one on the back of the iPhone 4. That lets you show the person you are talking with what you are seeing rather than just your face.

As neat as it is, FaceTime has some significant limitations. It works only if you are connected to a Wi-Fi network, and only if each party has an iPhone 4.

These limits may be temporary, though. Apple has indicated that users will be able to use FaceTime over the cell phone data networks as soon as next year. And the company is allowing others to make video calling applications that could potentially connect with Apple's software.

The other top feature of the iPhone 4 is its new screen. Apple calls it the "Retina Display," saying — with typical hype — that its resolution is higher than the human retina can perceive.

Whether or not that's the case, the screen is gorgeous — and far superior to the old iPhone screens. In fact, when you look at an old iPhone after some time with the new one, you start to see all the pixilation — all the little black dots and jagged or fuzzy edges — you never really noticed before.

But the new screen is more than just eye candy. It makes reading small text much easier. Typically, when I visit a full Web page on my iPhone, I have to zoom in on it to make out the text. The Retina Display often made zooming unnecessary.

It also allows you to view videos in much higher, crisper resolution. I watched the trailer for the upcoming "Tron: Legacy" on both the iPhone 4 and the iPhone 3GS, and the difference was stark. Where the video on the 3GS looked muddy, pixilated and overly bright, the one on the iPhone 4 looked sharp, distinct and full of vivid color contrasts.

Some early iPhone 4 users have reported seeing some yellow discolorations on their screens, so Apple may be having some problems with its new high-tech displays. I didn't encounter the problem, though.

Other early adopters have had trouble with reception issues on the phone; if, while holding the phone, you cover its upper left corner, you can lose or degrade its connection to AT&T's network. Apple CEO Steve Jobs reportedly acknowledged the problem and suggested users hold the phone a different way or place the phone in a case. As with the screen problem, I didn't experience the reception issue in my limited tests.

Those possible issues aside, FaceTime and the beautiful new screen have me ready to upgrade from my aging iPhone 3G. As good as the Android phones are getting, they're still not iPhones.

Contact Troy Wolverton at 408-920-5021 or twolverton@mercurynews.com. Follow him on online at www.mercurynews.com/troy-wolverton or on Twitter at http://twitter.com/troywolv.

Troy"s
RATING

4.8

(Out of 5)

The breakdown

What: iPhone 4
How much: $199 for 16 GB model, $299 for 32 GB model, both with a two-year contract
Highlights: FaceTime video calling program and high-resolution screen
Lowlights: Still hooked to AT&T"s spotty network; Some users have reported screen discolorations and reception issues
Web: www.apple.com