The Cupertino, Calif.-based company said its current formula "mistakenly displays two more bars than it should for a given signal strength" so that, for instance, four bars of signal might show when only two should.

'Never Real in the First Place'

The company said this could be contributing to the reported signal drop of as many as four or five bars, described by a number of users as occurring when the iPhone 4 is held in such a way that the black strip in the lower left corner of the metal band is covered. Apple noted that this is a "far bigger drop than normal," and pointed out that gripping virtually any mobile phone -- including the Android-powered Droid, Nokia devices, and RIM BlackBerrys -- can reduce reception by a bar or more.

Because of the faulty metering, the company said, users who hold the phone in a certain way may be misled into thinking the signal drop is larger than it is. "Their big drop in bars," Apple added, "is because their high bars were never real in the first place."

AT&T's "recently recommended formula" for calculating bars will be used in the software update. In addition, the update will make the first three bars taller so they're easier to see, and will be available for the iPhone 3GS and 3G as well, which use the same erroneous formula.

Avi Greengart, an analyst with industry research firm Current Analysis, said his personal experience with the iPhone 4 is that "the signal drops when I touch the area of the external antenna."

'Gas Gauge' Fix

He said the software fix could make the true signal drop more accurate, but it appears to be a hardware issue as well. But, he noted, "literally any phone on the market can have its antenna blocked if the user holds it in a certain way."

The solution, he said, is to "offer everyone a bumper," or rubber case. "Providing a case in the box is not a radical admission of a problem," he said, adding that it would be "better than just changing the gas gauge." He noted that RIM's phones, many of HTC's, and Google's Nexus One all provide a case or sleeve of some kind.

The "gas gauge" fix comes as several lawsuits were filed against Apple and AT&T Wireless on Wednesday and Thursday, alleging negligence in marketing, unfair business practices, and false and misleading advertising. One of the lawsuits, from a Cambridge, Mass., resident, asks that Apple provide or pay for a bumper for each iPhone 4 customer .

A memo, allegedly an internal Apple customer-care document, has been leaked to several Apple fan sites. It advised AppleCare employees about how to deal with complaints relating to reception, noting that "gripping almost any mobile phone in certain places will reduce its reception." Among other suggestions to users, the memo says "the use of a case or bumper that is made out of rubber or plastic may improve wireless performance" by keeping a hand from directly covering those areas.