In a letter from Apple made public today related to on going reception issues users have experience with their new iPhoene 4 smartphone, the company says it all comes down to software.

Saying the iPhone 4 has been the most successful product launch in the company's history, and reminding users the handset has been judged by reviewers around the world to be the best smartphone ever, Apple says they were surprised when reports of reception problems started coming out.

The explanation reads "To start with, gripping almost any mobile phone in certain ways will reduce its reception by 1 or more bars. This is true of iPhone 4, iPhone 3GS, as well as many Droid, Nokia and RIM phones. But some users have reported that iPhone 4 can drop 4 or 5 bars when tightly held in a way which covers the black strip in the lower left corner of the metal band. This is a far bigger drop than normal, and as a result some have accused the iPhone 4 of having a faulty antenna design."

"At the same time, we continue to read articles and receive hundreds of emails from users saying that iPhone 4 reception is better than the iPhone 3GS. They are delighted. This matches our own experience and testing. What can explain all of this?"

According to the company they have discovered the cause of this dramatic drop in bars, and it is both simple and surprising.

"Upon investigation, we were stunned to find that the formula we use to calculate how many bars of signal strength to display is totally wrong. Our formula, in many instances, mistakenly displays 2 more bars than it should for a given signal strength. For example, we sometimes display 4 bars when we should be displaying as few as 2 bars. Users observing a drop of several bars when they grip their iPhone in a certain way are most likely in an area with very weak signal strength, but they don’t know it because we are erroneously displaying 4 or 5 bars. Their big drop in bars is because their high bars were never real in the first place."

To fix this problem the company will be adopting AT&T’s recommended formula for calculating how many bars to display for a given signal strength. As a result the real signal strength remains the same, but the iPhone’s bars will report it far more accurately, providing users a much better indication of the reception they will get in a given area.

The fix will also make bars 1, 2 and 3 a bit taller so they will be easier to see.

This will come out as a free software update within a few weeks that incorporates the corrected formula. Since this mistake has been present since the original iPhone, this software update will also be available for the iPhone 3GS and iPhone 3G.

"We have gone back to our labs and retested everything, and the results are the same— the iPhone 4’s wireless performance is the best we have ever shipped. For the vast majority of users who have not been troubled by this issue, this software update will only make your bars more accurate. For those who have had concerns, we apologize for any anxiety we may have caused."