Some waiting on iPhone improvements before buying

By Regan E. Doherty

CHICAGO (Reuters) - Apple Inc.'s (AAPL.O) upcoming iPhone is shaping up as this year's must-have gadget, but several perceived shortcomings are pushing some potential buyers to wait for an updated version.

Worries over the high cost, slow network speed, and battery life are deterring some customers from ponying up a minimum of $499 for the device, despite the buzz across the gadget-crazed landscape of tech retail.

AT&T, the largest U.S. wireless provider, has an exclusive agreement to sell two version of the phone, priced at $499 and $599, in the United States under a two-year contract.

The new phone features a touch screen and combines the features of a cell phone, iPod, digital organizer and wireless Internet device. The phones will go on sale Friday evening at 6:00 p.m. local time across the United States in Apple and AT&T retail stores, as well as on Apple's Web site.

But the phone does not work on AT&T's fastest network, which runs on so-called 3-G technology. That, some said, will make Web-browsing slower than phones running on other networks.

Kate Rockwood, 24, a graduate student at Northwestern University, is shopping for a new phone as her contract with Verizon Communications Inc. (VZ.N) expires this month.

"I really, really, really had my heart set on an iPhone," Rockwood said, citing the phone's much-touted Web capability as its most attractive feature.

But she said a desire for faster network speed, as well as longer battery life, will make her wait for a later version. She said she is wary of investing big money for service with questionable speed.

"To me, that's a $600 gamble," Rockwood said.

Phillip Kaplan, 29, a graduate student in Chicago with a background in graphic design, said he would not even consider buying the first version of the phone.

"The whole idea for me is to not even think about the first version," said Kaplan, who believes that many glitches will be discovered once consumers actually start using the product.

FIRST VERSION WORRIES

Another area of concern is whether the iPhone's on-screen keyboard will be as easy to use as Apple Chief Executive Steve Jobs claims. A wonky keyboard could turn off power users who write a lot of e-mail.

"Just like you don't buy the first model year of a car, you might not want to buy the first version of the iPhone," said Todd Dagres, a partner in Boston-based venture capital firm Spark Capital, which specializes in digital media and technology.

Dagres also said Apple has a track record of rolling out new, improved and cheaper models, such as the later versions of its iPod digital music and video players. Apple will likely do the same with iPhone, he said.