This is a reader video found on Macrumors forums illustrating something weird. When the guy holds the iPhone in his hands, touching the outside antenna band in two places, he drops reception. Placing the phone down gets him 4 bars. Updated.
We're not sure if he's doing something particularly weird, like holding the metal antenna in such a way that it's shorting out. But it is strange. Or it could be just a bug in the software, showing no bars and no reception even when you do have reception. But he does hold the phone with the glass, and it doesn't have this reception issue.
Update: Make sure to test this while you're IN a call too, to see if the call drops. This way we can determine if it's just displaying bars incorrectly, or if it really does impact your reception.
Update 2: Here's a video from Foundry Architect (same guy as above), with Wi-Fi off, that illustrates the same issue.
Update 3: Another confirmation from Chris Morris where he shows the problem, where it doesn't lose service, but loses about four bars.
Chris also said he tested the hands thing while in five calls, and said that none have dropped so far. He had a conversation for 10 minutes while the phone was displaying no signal with no problem. This might point to a display issue? But how does that explain the images below, in Update 4? Weird. Here's him making a call while the phone shows zero bars.
Update 4: Reader Chris Sheehan did a speed test with the phone sitting down, with his hands on the phone, and one with his hands on but with a leather case on it. They're in order, and the one with his hands on the bare phone is really bad times.
Update 5: Reader Garrett Hampton has the same, and his illustrates dramatically going from five bars to one bar, back to four bars. This is worrying.
Update 6: Reader Tobias directs us to this article, in which a Danish professor who's an expert in antennas, predicted that human touch would interfere with the antenna, because it's on the outside of the phone.
Update 7: Reader Sam says it only happens to him when touches the left side, connecting both antennas. I wonder, maybe there's some kind of weird way of holding it where you don't connect both antennas?
Update 8: Reader Steven confirms! His jumps from five bars directly to one bar... on EDGE.
Update 9: Reader Justin also confirms.
Update 10: The cynical view is that this is a known issue, and is one of the reasons why Apple is finally releasing the first-party bumper case, where they previously just let third-parties take care of it. [Apple Store]
Update 11: Commenter tineras has the same issue too. He said he repeated it 20+ times with similar results each time. It won't even start the test if he holds the phone at the start of the test.
Update 12: TotheFloor's video shows what happens when he's in a call. When the phone hits one bar, he can still make a call, but not when it's "searching for signal". He says when he's in a call and the phone drops to one bar, the person on the other end can't hear him.
Update 13: FameFoundry narrowed it down to touching the left side and the bottom (left) portion of the phone. They tested it multiple times with multiple people, indoors, outdoors, in various locations (even shoes vs no shoes) and it drops exactly the same every time.
Update 14: Look! Reader Adam posts this video of his phone not having this problem. Very interesting.
Update 15: Reader Lucas confirms the bar droppage.
He also tests making a call, and the bars continuously drop, but they haven't dropped the call. So the call is still active at one bar, but they're still connected.
Update 16: Reader Erik confirms what FameFoundry (Update 13) found, which is, if you don't touch the bottom of the phone, you're fine. But as soon as you connect the left side with the bottom, that's when reception starts to drop.
Update 17: Reader Eduard reproduces this by placing down the phone on its side and using not (just) his hand, but a key. He bridges the two antenna pieces, left and bottom, and drops the reception clearly.
Update 18: German Giz Reader Jean-Marie has the same issue... in Germany. Again, it's when he closes the circuit between the left and the bottom portion of the phone.
Update 19: Reader Henry suggests putting some nail polish to see if it insulates and blocks the connection between the two pieces.
It seems to me that if you applied a bit of clear nail polish to the bridge between the two antennas on the iPhone, there would be no debilitating connection. The clear nail polish would barely be noticeable.
This does rely on an assumption: the problems are caused by the two antennas being electrically connected as you hold the phone. As far as electromagnetic interference in the LF/HF spectrum, I don't know. If that's the problem, it obviously won't help.
Also, worth keeping in mind: nail polish based on nitrocellulose in an organic solvent is highly flammable. Nitrocellulose itself is the primary ingredient in most smokeless powders. I would suggest using a newer polymer-based nail polish. If using the latter, be careful with the dosage, as it is based on a conductive solvent. This paragraph makes the venture sound high risk, but really, I've used nail polish on several CPUs, with no major problems.
So if anyone tests this out and it does fix the issue, let me know!
Update 20: We're also getting tips of people reproducing this problem on 3G and 3GS, albeit not nearly as dramatically as on the iPhone 4 going from five bars to "searching". But when we test this ourselves with our older phones, we can't reproduce it at all, sometimes actually gaining a bar when the phone is held.
Update 21: Reader Nathan made a video to illustrate that a case DOES work, using an older Otterbox rubberish case to insulate the phone. In particular, the side and bottom from making a circuit.
Update 22: Reader Brian's one-year-old inspired him to make a new way to hold the phone.
Update 23: Reader Joe called up Apple to ask about the reception issues, and they said...
Their answer? "Get a bumper" and "it's not their problem".
I told the CSR that if their solution is to buy a bumper, why aren't they giving them out for free? Again, she said not her problem.
Quite an infuriating call - while I sympathize with the verbal beat-down that many of the Apple CSRs will be getting over this problem, they need a better solution than to recommend fixing the problem with their own rubber cases...
Update 24: Reader William has the same issue, and his reception drops quite fast.
Update 25: Reader Patrick tests his with a case and without a case, showing that it is the case that's protecting it. This means that the theory that just holding the phone - any phone - with your hand will cause it to lose reception isn't the reasoning here. It's actually the contacts between the left and bottom that's doing it, since he holds his phone the exact same way (plus there's an additional case over it).
Update 26: Reader Carlos confirms that his issue is fixed by a case as well.
Update 27: Tech mag T3 does a side-by-side with the naked iPhone 4 losing signal, and the iPhone 4 with bumper case not. However, the way they hold the bumper-ed iPhone might not make contact with both the left and bottom sides (if it were naked), but it's bumpered, so it doesn't matter anyway.
Update 28: One theory is this conductivity problem could be related to moisture on your hands. If you have this problem, try drying off your hands and trying again. If you DON'T have this problem, try making your hands wet, and trying it.
Update 29: Reader Greg just wrote in that he can force a dropped call from three bars by doing the "trick".
Update 30: Reader Rich applied some Scotch tape and actually solved his problem. Here's what he did.
Update 31: Here's my own test, using my right hand to hold the phone. connecting the two antenna pieces (left and bottom). I confirm it.
Update 32: Just made a little image illustrating the right way and the wrong way to hold the phone.
Image credit: Wasabimon