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Aug 21 2008 12:46PM EDT

Apple iSued

Sam Gustin says: Talk about bad reception.

Apple has been slapped with a lawsuit over service issues plaguing its new iPhone 3G.

Jessica Alena Smith, of Alabama, has sued Apple with breach of warranty and unjust enrichment, claiming that her new phone -- what she refers to as "Defective iPhone 3G" -- has much slower service than advertised.

Referring to the ubiquitous television ads touting the device, the lawsuit reads, "Defendant intended for customers to believe its statements and representations about the Defective iPhone 3Gs, and to trust that the device was 'twice as fast at half the price.'"

Smith, who is seeking class-action status for the suit, also complains of spotty 3G reception and dropped calls, something other iPhone users have taken issue with. On Monday, Apple released a software fix intended to troubleshoot the problems, but it seems the fix may have caused new issues with the phone.

The suit asks Apple to fix or replace all defective iPhones and pay for lawyers' fees.

Between the activation issues that hobbled Apple's iPhone's launch, the issues with its MobileMe Web services suite, and now the iPhone service problems, this is turning into a rocky summer for the company -- no matter how many handsets it has sold, or how big its market capitalization becomes.

What must be particularly galling to company chief executive Steve Jobs is that taken together, these developments threaten to tarnish Apple's sterling reputation for product design. Prominent tech watchers are already accusing Apple of slipping.

And in the hyper-competitive cell phone market, not even the lofty Apple can afford such bad publicity.

The company needs to get a handle on these issues -- and fast.

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