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IPhone 2.0 will be 3-G. If it is to stand any chance in the as-yet-untapped Japanese market, a fast data connection is a must. The official line from both Apple and AT&T is that a 3-G iPhone will ship this year, and as two launches in one year are unlikely, we can only assume that there will be one international 3-G iPhone. Certainly, the Infineon chipset expected to power the new phone will work on both HSDPA and WCDMA networks, as well as continuing to support EDGE for customers outside of good 3-G coverage.

Camera

The iPhone’s camera sucks. It offers the user no more than the most basic functionality and only captures a measly two megapixels. It’s so bad that a range of unofficial software upgrades has already been released, adding new features and even video. The Infineon chipset mentioned above supports cameras of up to 5 megapixels and also video capture using Apple’s codec of choice, h.264. So more pixels and video seem very likely, but what of video calls? Apple’s Mac application iChat has had video conferencing for some time. It would be a perfect match for the iPhone’s big bright screen, but that would entail a second camera. I’d give this one a 50-50 chance.

Hardware

The current iPhone is so simple that it can hardly be improved. Expect the changes to be small, and then only cosmetic. It looks a little chunky next to the svelte iPod Touch, so the new model will likely be thinner. There are rumblings on the internet that the body will be black plastic instead of aluminum, which seems very unlikely. The current iPhone is surprisingly tough, so we’d expect Apple to stick to glass and metal. The only sure thing thing is that as soon as you see the new model, your old iPhone will look inexplicably clunky.

Software

Software is arguably the most important part of the iPhone. Ever since its launch last year, seemingly every cellphone maker has released a touchscreen phone. None of them comes close in ease of use, because none of them understands that the interface is everything.

The currently beta iPhone SDK shows us that the v2.0 operating system will be an incremental upgrade, adding niceties such as search and, if we’re lucky, copy-and-paste. With the iPod, Apple has often held new features back from older models in order to drive sales. Part of this is the accounting model it uses: In order to comply with the Sarbanes-Oxley (or Oxshit) laws, Apple won’t add new features to old hardware. The iPhone, though, like the Apple TV, is accounted for on a subscription basis. Expect the v1.0 iPhone to run the exact same software as the new one, exempting features which utilize new hardware.

Now it’s your turn. What do you expect to see? Suggestions in the comments.