On Friday, Apple (AAPL) is launching a second-generation iPhone, called the iPhone 3G, which addresses both of those problems, while retaining the look and feel of the first model’s hardware and software.

The base version of the new iPhone costs $199 — half the $399 price of its predecessor; the higher-capacity version is now $299, down from $499. Yet, this new iPhone is much, much faster at fetching data over cellphone networks because it uses a speedy cellular technology called 3G. And it now sports a GPS chip for better location sensing.

The company also is rolling out the second generation of its iPhone operating system, with some nice new features, including wireless synchronization with corporate email, calendars and address books. And there’s a new online store for third-party iPhone programs that Apple hopes will make the device usable for a wider variety of tasks, including gaming and productivity applications. This new software and store will also be available on older iPhones, through a free upgrade.

I’ve been testing the iPhone 3G for a couple of weeks, and have found that it mostly keeps its promises. In particular, I found that doing email and surfing the Internet typically was between three and five times as fast using AT&T’s 3G network as it was with the older AT&T network to which the first iPhone was limited.

Apple’s new iPhone operating system includes an ‘App store,’ where you can browse for, and download, third-party software.

The iPhone 3G is hardly the first phone to run on 3G networks, and it still costs more than some of its competitors. But overall, I found it to be a more capable version of an already excellent device. And now that it’s open to third-party programs, the iPhone has a chance to become a true computing platform with wide versatility.

There are two big hidden costs to the new iPhone’s faster speed and lower price tag. First, in my tests, the iPhone 3G’s battery was drained much more quickly in a typical day of use than the battery on the original iPhone, due to the higher power demands of 3G networks. This is an especially significant problem because, unlike most other smart phones, the iPhone has a sealed battery that can’t be replaced with a spare.

Second, Apple’s exclusive carrier in the U.S., AT&T Inc. (T), has effectively negated the iPhone’s up-front price cut by jacking up its monthly fee for unlimited data use by $10. Over the course of the two-year contract you must sign to get the lower hardware prices, that adds $240, overwhelming the $200 savings on the phone itself. If you want text messaging, the cost rises further. With the first iPhone, 200 text messages a month came free. Now, 200 messages will cost $5 a month, or another $120 over the two-year contract.

The iPhone 3G still has a couple of features that made the first version unpalatable to some potential buyers. It uses a virtual on-screen keyboard instead of a physical one. While I find the virtual keyboard easy and accurate, not everyone does. Also, in the U.S. and in many other countries, the iPhone is still tied to a single exclusive carrier, whose coverage or rate plans may be unacceptable to some.

Here is a rundown of the changes in the new model.

Design: The new iPhone looks almost exactly like the old one. It is the same length and width, has the same big, vivid screen, and has the same number and layout of buttons. The main difference is the back, which is now plastic instead of mostly metal and curved instead of flat. It’s very slightly thicker in the middle, with tapered edges, and weighs a tiny bit less.

The new iPhone 3G (left) delivers much higher Internet download speeds over cellular networks than the original iPhone (right).

Like its predecessor, the iPhone 3G comes in two models distinguished only by storage capacity: 8 gigabytes and 16 gigabytes. The top model is available in black or white.

Apple has greatly improved the audio on the new iPhone. I found the speaker was much louder, for music and for the speakerphone. But the new phone produced an echo when used with the built-in Bluetooth system in my car. Also, the headphone jack is now flush with the case instead of recessed as on the first model, so it can accept any standard stereo earphones.

The camera, however, is still bare-bones. It can’t record video and has a resolution of just two megapixels. The power adapter is now tiny, at least in the U.S., but Apple no longer includes a dock for charging, just a cable.

Software: The basic software is similar. The biggest addition for some users will be full compatibility with Microsoft’s (MSFT) widely used Exchange ActiveSync service, which many corporations use. In my tests, I was able to connect the iPhone 3G to my company’s Exchange servers in a few minutes, and my corporate email, calendar and contacts were replicated on the phone. Any changes I made on the iPhone were reflected almost instantly in Microsoft Outlook on my company PC, and vice versa. Email was pushed to the phone as soon as it was received on the company’s servers.

One drawback: While you can have both personal and Exchange email accounts on the new iPhone, if you synchronize with Exchange calendars and contacts, your personal calendar and contacts are erased.

The new iPhone and upgraded older iPhones also will be able to use a new Apple consumer service, MobileMe, which offers synchronized push email, calendars, photos and contacts.

There are other improvements. You can now delete multiple emails at once, set parental controls and search your contacts. You can also save photos in emails or from Web sites. You can also now open Microsoft PowerPoint files sent as attachments, though I found in my tests that opening larger PowerPoint files crashed the phone.

Some software features missing from the first iPhone are still AWOL on the new one. There’s no copy and paste function, no universal search, no instant messaging and no MMS for sending photos quickly between phones.

Network: Like the old iPhone, the new one can perform Internet tasks using either Wi-Fi wireless networking or the cellphone networks. But the addition of 3G cellular capability makes the new model more useful for Web surfing, email and other data tasks when you’re not in Wi-Fi range. In my tests, in Washington and New York, I got data speeds mostly ranging between 200 and 500 kilobits per second. By comparison, the original iPhone, tested in the same spots at the same time, mostly got cellular data speeds between 70 and 150 kbps on AT&T’s old EDGE network. The new iPhone typically was between three and five times as fast as the old one.

While AT&T now has 3G networks in 280 U.S. cities, and aims to be in 350 by year end, it is converting its cellphone towers gradually, so not all areas of included cities have 3G coverage. The new iPhone falls back to EDGE speeds when 3G isn’t present.

One side benefit to 3G is that in some areas, voice coverage improves. At my neighborhood shopping center, where the first iPhone got little or no AT&T service, the iPhone 3G registered strong coverage. But I still found that calls regularly broke up on some major streets. In New York City, riding in a taxi along the Hudson, one important call was dropped three times on the new iPhone. Finally, I borrowed a cheap Verizon (VZ) phone and got perfect reception.

Battery life: Apple claims that over 3G, the new iPhone can get five hours of talk time, or five hours of Internet use. Talk time is twice as long on the older EDGE network, and Internet time is an hour better with Wi-Fi.

I ran my own battery tests using the phone’s 3G capability. Although I left the Wi-Fi function on, I didn’t connect it to a network, so the phone had to rely on 3G. In my test of voice calling, I got 4 hours and 27 minutes, short of Apple’s maximum claim and nearly three hours less than what I recorded in the same test last year on the original iPhone. In my test of Internet use over 3G, I got 5 hours and 49 minutes, better than Apple’s claim, but far short of the nine hours I got using Wi-Fi in last year’s tests.

More important, in daily use, I found the battery indicator on the new 3G model slipping below 20% by early afternoon or midafternoon on some days, and it entirely ran out of juice on one day. I overcame this problem by learning to use Wi-Fi instead of 3G whenever possible, turning down the screen brightness and even turning off 3G altogether, which the phone permits.

The iPhone 3G’s battery life is comparable to, or better than, that of some other 3G competitors. But they have replaceable batteries. The iPhone doesn’t.

Third-party software: If things go as Apple hopes, third-party software could be the biggest attraction to the new iPhone 3G, and to upgraded older iPhones. By some estimates, there will be hundreds of these programs, some free and some paid, almost immediately.

Apple didn’t supply me with programs for testing, but I managed to try several on older devices upgraded to the new operating system. I tested a game that used the phone’s motion sensors to control the action, and I tested several programs from America Online (TWX), including AOL Instant Messenger; AOL Radio, which streams music from the Internet; and AOL’s Truveo video search engine. All worked very well.

Among the programs Apple has publicly previewed were a sales automation program from Salesforce.com, a game called Super Monkey Ball from Sega and a program for bidding on eBay (EBAY). Also made public were a news reader from the Associated Press, a program for following live games from Major League Baseball and several programs for doctors, including the Epocrates drug reference.

Bottom line: If you’ve been waiting to buy an iPhone until it dropped in price, or ran on faster cell networks, you might want to take the plunge, if you can live with the higher service costs and the weaker battery life. The same goes for those with existing iPhones who love the device but crave faster cellular data speeds. But if you already own an iPhone, and can usually use Wi-Fi for data, you probably should hold off and get the free software upgrade before deciding whether it’s worth getting the new hardware.

Find all of Walt Mossberg’s columns and videos online, free, at the All Things Digital Web site, walt.allthingsd.com. Email him at mossberg@wsj.com.

Here are a few questions about computers I’ve received recently from people like you, and my answers. I have edited and restated the questions a bit, for readability. This week my mailbox contained questions about finding low-cost DSL service, choosing video-editing software and transferring files from a Windows PC to a Mac.

If you have a question, send it to me at mossberg@wsj.com, and I may select it to be answered here in Mossberg’s Mailbox.

Last week, you mentioned that DSL Internet service is available in the U.S. for $15 a month. I can’t find anything nearly that low. Can you elaborate?

Verizon, which is an Internet service provider operating in 28 states plus the District of Columbia and Puerto Rico, has an entry-level DSL plan for $14.95 a month. According to the Verizon Web site, this plan requires a one-year agreement, but it isn’t a teaser price that lasts for only a few months. You also get the first month free and they throw in the DSL modem. For this price, you get a DSL line that operates at speeds up to 768 kilobits per second for downloads and 128 kilobits per second for uploads. That’s more than 13 times the maximum download speed of a dial-up connection.

More info is at: www22.verizon.com/forhomedsl/channels/dsl/packages/.

I realize that this plan, or any Verizon plan, isn’t available in the other 22 states. And, I realize that, even where it is available, it may not be possible to get it at your house because of the technical limitations of DSL, which works well only within a certain distance from a phone company office. I also know that such service, at any price, is often unavailable in rural areas.

But, for tens of millions of people, this is a very inexpensive way to get broadband. It’s less than America Online charges for dial-up service.

A friend of mine is looking for some video-editing software to be used on a PC running Windows. What software would you recommend for this application?

I haven’t tested this category of software in a while, but any of the leading software packages should do. They include Pinnacle Studio Plus, Adobe Premiere Elements and Roxio Easy Media Creator. The first two are video-editing programs. The last includes a video-editing program, but it is a suite that also handles things like music and photos. Of the two video-only programs, Pinnacle’s is probably best for a novice user. It costs about $90.

I know the Macintosh can handle most common types of files used on Windows computers. But my question is more basic: if I switch to a Mac from Windows, how do I physically transfer my files?

If you buy your new Mac at an Apple store, Apple will do this job, or part of it, free. According to the Apple Web site, you can just bring the two computers to the store, and a “Genius” — Apple’s name for a tech support person in its stores — will move all the files in any folder you choose on your Windows machine onto your new Mac. Presumably, this would include the My Documents folder, which contains most of the data files on most Windows PCs. The “Genius” will also do this for $50 for people who bought their Macs elsewhere. There is some fine print to this deal. For details, see: www.apple.com/switch/howto/genius.html.

There are also numerous ways to do this yourself, depending on the capabilities of your Windows machine. You can copy the files from the old computer onto an external hard disk, or a USB thumb drive. You can burn them onto CDs or DVDs. You can copy them to the hard disk of an iPod, if you haven’t filled it up with music, and if you configure it for use as a disk drive.

Because the Mac can read Windows-formatted disk drives, you should be able to plug any of these devices into your new Mac, or insert the CDs or DVDs, and they should show up on the Mac’s desktop. Then, you can simply copy the files to folders of your choice on the Mac’s hard disk. You can also email files to yourself, or transfer them over a local network.

* * *

Because of the volume of e-mail I receive, I can’t routinely answer individual questions by e-mail, or consult on individual problems or purchasing decisions. I read all questions I receive and select three each week to answer in the column.

Write to Walter S. Mossberg at mossberg@wsj.com

Like all other trends in technology, this one, sometimes called “Web 2.0,” is overhyped. It’s been happening quietly for years, but it’s a long way from replacing all the software you use.

Still, the biggest software company of all, Microsoft, has recently launched a major initiative to produce this kind of remote software. Its project, called Windows Live, is hardly unique. Google, Yahoo, America Online and many others are also offering new Web applications. But Microsoft’s Windows Live may be the biggest of these efforts.

Google Earth image of building housing Journal’s Washington bureau, top; the Microsoft image, below.

Why would Microsoft, or its rivals, want to make this switch? Well, theoretically at least, it allows them to write one program that can be used on multiple platforms — say, both Windows and Macintosh computers, or even cellphones. And it may allow them to sell subscriptions to their software, or to sell ads that could run inside the software. It will also make it easier to update programs, and to construct programs that can synchronize data among multiple PCs or users.

Some of this stuff would clearly benefit consumers. You could fire up your favorite program from any Internet-connected device, just as you can log onto Web-based email now from any PC. And you wouldn’t have to download or install updates.

But other features of this new world, like ads in software, may be annoying to many consumers. In the world of Web 2.0, people without fast, costly broadband connections would be able to do less and less with their computers.

To get an early look at this new approach, I’ve been poking around in Windows Live, which is a grab bag of mostly free programs. Some, like Windows Live Messenger and Windows Live Mail, are renamed and revamped parts of the company’s MSN online service. Others, like the OneCare Live security service, are new ideas.

All of these programs are in the testing phase, and this column isn’t intended to be a full review of any of them. But here’s a quick, early look at three components of Windows Live.

Windows Live Local: This is a local search and mapping service, complete with aerial photos of cities and towns. Built on an earlier Microsoft project called Virtual Earth, it’s intended to compete with the local search and mapping features of Google and Yahoo. It’s also a competitor to Google Earth, a satellite mapping service that requires an installed program to use. By contrast, Windows Live Local works entirely from a Web browser, and it runs in both Internet Explorer and Firefox, and on both Windows and Macs.

The most startling feature of Windows Live Local is that it can display real 3D aerial images of buildings and houses in many U.S. cities and suburbs. These pictures don’t merely display the roofs of buildings, as Google’s do, but their sides. The difference is enormous. Instead of puzzling over roof shapes, you can easily identify buildings and get a much better feel for neighborhoods.

In its current form, however, Live Local has limitations. For large swaths of the country, 3D photos, which Microsoft calls “Bird’s Eye” views, aren’t available. In Bird’s Eye mode, panning and zooming are clumsy and limited, street names aren’t overlaid on the images, and there’s no easy way to save them. But it’s still a huge step forward. It’s at local.live.com.

Windows Live Mail: This is a massive upgrade of Microsoft’s popular free Hotmail email service. It is simultaneously much cleaner looking and more sophisticated. There’s now a preview pane to the right of the message list, just as in Outlook. Messages can be dragged into folders. When you right click on something, useful email options appear instead of just browser commands.

The new mail program auto-completes addresses and saves sent messages. There are various new security and editing features. Overall, it works much more like Outlook or Outlook Express, though currently many features don’t work on the Mac or Firefox. It will also offer two gigabytes of free storage. People with current Hotmail addresses will be able to keep them, but new addresses will look like “johndoe@livemail.com.” It will be available at mail.live.com soon.

Windows Live OneCare: This is a complete, managed security service, for Windows only, that will be available by paid subscription. The goal is to keep a computer constantly protected and updated with little or no intervention from the user. It does require locally installed software, but it’s managed remotely by Microsoft, the same way a corporate IT department remotely manages the security of all the computers at a company.

OneCare, which I will review in full later, also has features to keep a computer tuned up and backed up. As of now, it lacks a crucial feature: antispyware capability. But that is planned. It’s at onecare.com.

• Email me at mossberg@wsj.com.

Still, for all its success, Skype has been a niche product, little used by mainstream, non-techie consumers. Much less popular in the U.S. than in Europe, it has mainly appealed here to budget-conscious folks like students and recent immigrants, who often want to make lots of international phone calls.

There are two big reasons for Skype’s niche status. First, many computers aren’t equipped with microphones. Most modern laptops come with built-in mikes, but the vast majority of PCs are still desktops, which typically lack mikes. Second, even when computers have mikes, they make clumsy telephones when compared with real phones, which are specifically designed for voice communication.

In addition, free Skype calls can be made only to other Skype users. If you want to call nonmembers who use real phones, you have to sign up for a prepaid service called SkypeOut, although, at two cents a minute, the calls are cheap.

Now, however, Skype is putting those hurdles behind it. Today, the company plans to release a major new version of its phone-calling software, Skype 2.0, with added features — including video calling — and a cleaner interface. It is taking steps to make computer microphones cheap and easy to obtain. More importantly, it is moving its service off the computer to a new breed of Internet-based telephone handsets.

I’ve been testing Skype 2.0, along with the new, cheap, Skype-branded microphones and a new Skype-compatible phone that frees users from sitting in front of a computer while talking. Despite some flaws, this new combination of hardware and software generally worked well, and I believe it stands a chance of propelling Skype into the mainstream.

There’s nothing new about using a computer as a phone. And free computer-to-computer phone calls, among fellow users of a service, are also common now. America Online, Yahoo, Microsoft, Apple Computer, Google and others have offered this service for a while. Most also already offer free video calls — something Skype is just now adding — for users with Web cameras.

But Skype is the company most identified with free Internet phone calls, and it is trying hard to keep that status. The new Skype 2.0, available at Skype.com, is ready now for Windows and will soon be released for the Macintosh and other platforms.

In my tests of Skype 2.0, I used two different Windows computers to place voice calls to Skype users in California, New York and Berlin, Germany. I also made a couple of SkypeOut calls to phones in the Washington, D.C., area.

The new Skype software was easy to use. It searches for people you know to see if they are registered members, and it lets you add them to your contact list with one click.

All my test calls were very clear, though in most cases there was a slight problem in the first few seconds, when callers couldn’t hear me. In a couple of cases, the sound dropped out briefly during a call. And Skype disconnected my call to Berlin in the middle, forcing me to redial. Still, as a tradeoff for free calls, the glitches were tolerable.

I used a variety of microphones, built-in and added-on, cheap and expensive. In general, the built-in and costlier add-on mikes worked best. Skype’s new cheap mike, which comes with an earbud as part of a $4.99 Skype “starter pack” available at RadioShack stores, was a little muffled unless I held it close to my mouth.

I also made a few video calls, using a Logitech Web camera. These worked fine, though they displayed the graininess that marks most Web video calling. An audio conference call also worked well, though you can’t use video if you’re calling more than one person. Skype also offers a conventional text-based chat system and a feature for transferring files. I tested both, and they worked fine.

But I was most impressed with the new Skype phone I tested, the $100 Linksys CIT200. It looks and works like a regular cordless phone. But it links wirelessly to a little base station that connects to your computer. And it has a big Skype button that connects you to the Skype service via the PC. The phone displays your Skype contacts, and you call them with the press of a button. You can also make calls to non-Skype phones, via SkypeOut.

I tested the phone by calling both Skype users and non-Skype users, and it worked great everywhere in and around my home — upstairs, downstairs, even outside in the yard.

There are other phones that can now use Skype, ranging from a $16 handset that connects to the PC with a cable to a $100 cellphone-style wireless headset and a $140 cordless phone that can use both Skype and your regular phone service to place calls. All of them liberate Skype users from the PC.

Skype has escaped from its niche and is heading for the mainstream. You might want to give it a try.

Write to Walter S. Mossberg at mossberg@wsj.com.