Apple initially claimed the iPhone 4 antenna flaw really isn't a flaw at all, but a software bug that misrepresents the number of bars of signal strength. It's now well-known that the iPhone 4 suffers from an antenna design flaw, and a new report by Bloomberg News reveals that Steve Jobs was warned early in the design phase by a top engineer that the antenna design could lead to dropped calls.

Steve Jobs highlighted the iPhone 4 antenna design as "brilliant engineering" during his WWDC keynote. For many users it does offer better reception in areas that previous iPhones experienced problems, but it does have a reproducible issue that causes signal loss when a particular spot on the bottom left of the device is touched when a user holds the iPhone 4 in their left hand.

According to an anonymous source speaking to Bloomberg, senior director of engineering for iPhone and iPod Ruben Caballero warned top Apple management that the antenna design had potential to cause reception problems under certain conditions. This same source also told Bloomberg that one of Apple's carrier partners expressed concern over the antenna design before the iPhone 4's June launch.

Apple offered the explanation last week that the real problem is that all iPhones running iOS 4 actually display too many bars due to the range of numeric signal strength values programmed for each "bar" typically displayed on all cell phones. A beta of iOS 4.1 containing Apple's fix was released to developers yesterday, and reports have confirmed that iPhones now typically show fewer bars of signal strength in areas without perfect reception. Unfortunately for iPhone 4 owners, the change doesn't actually mitigate the signal loss that happens when the small gap in the stainless steel bezel that separates two of the iPhone 4's three antennas is touched, causing the two to be bridged electrically. If the signal is weak enough, it can result in dropped calls or data connections.

Analysts disagree about the potential impact for Apple, but news earlier this week that Consumer Reports decided it could not recommend the device to consumers because of the potential for reception degradation caused a serious slump (about $10, or 4 percent) in Apple's stock value.

Even politicians are expressing concern over the problem. Sen. Charles Schumer (D-NY) inked a missive to Apple over the antenna woes. "I am concerned that the nearly two million purchasers of the iPhone 4 may not have complete information about the quality of the product they have purchased," reads a copy of the letter posted by AppleInsider. "The burden for consumers caused by this glitch, combined with the confusion over its cause and how it will be fixed, has the potential to undermine the many benefits of this innovative device."

Apple will be holding a special press conference at 10am PDT on Friday, and Ars will be on the scene. So far the company hasn't revealed any details of the announcement except to say that it concerns the iPhone 4. Speculation so far is that Apple will publicly address the antenna flaw and offer some kind of fix, though there is always a possibility it could be something else.

We would like know what you think Apple will announce at the press conference. Will Apple dismiss the issue? Offer a recall? Teach us all how to hold the phone properly?

Update: Apple has officially denied everything about the Bloomberg report, and says that it won't be issuing a recall. "We challenge Bloomberg BusinessWeek to produce anything beyond rumors to back this up. It's simply not true," an Apple spokesperson told the Wall Street Journal.

What will Apple reveal during its press conference on Friday?online survey