Apple can put a better camera in it, add more capacity, a better processor, a front-facing camera for videoconferencing, and a dozen other things -- but quite honestly, I'd be perfectly happy if none of that made it into the next-gen iPhone so long as one feature does find its way in: support for 900 MHz UMTS/HSDPA.
The iPhone 3G and 3GS, as well as the forthcoming iPad, all contain 3G antenna/chipsets that support UMTS/HSDPA at 850, 1900, and 2100 MHz. UMTS/HSDPA is an alphabet-soup way of referring to the GSM flavors of 3G. In other words, high-speed broadband works at those frequencies, and only those frequencies. If high-speed broadband isn't available at those frequencies, the iPhone will fall back to GSM/EDGE at 850, 900, 1800, or 1900 MHz.
For those of you living in the US and on AT&T, the iPhone's 3G frequency range is especially tailored for your use. Most of AT&T's 3G network runs on 850 MHz, while T-Mobile runs at 1700 MHz -- this is why the iPhone only works at EDGE speeds with T-Mobile, because the iPhone's 3G chipset isn't tailored for the 1700 MHz band.
3G networks in many other areas of the world, including portions of Europe, Asia, Australia, and New Zealand function at 900 MHz. This creates several problems for users in those regions; read on to find out why.
I can't speak for those other countries, but here in New Zealand, there's only one wireless provider selling the iPhone at a subsidized price: Vodafone. Vodafone's 3G network runs at two frequencies: 2100 MHz in metropolitan areas, and 900 MHz for "extended" 3G everywhere else. The result for NZ iPhone users on Vodafone's network: 3G service is only available in major cities, often only in the downtown areas. Here in Palmerston North, 3G service is centered on the central business district and Massey University. Places outside of those areas, even my house barely 2 kilometers away from downtown, have sporadic access to 3G, if any at all.
Outside of the areas serviced with 2100 MHz 3G, Vodafone transmits in the 900 MHz band -- but since there's no such thing as EDGE here, the iPhone is restricted to GPRS on the 900 MHz band, which means excruciatingly slow speeds akin to wireless 56k dialup anywhere outside the major cities. It's almost not even worth using the iPhone at GPRS speeds, because even simple web pages can take several minutes to open, if they open at all before MobileSafari says the page has timed out.
New Zealand's other major telecommunications provider, Telecom, has a network that's arguably better-suited to the iPhone. Like AT&T in the States, Telecom's XT network transmits "extended" 3G wireless at 850 MHz, which is fully compatible with the iPhone's 3G chipset. So outside the major cities, in areas where the iPhone would be choked to GPRS speeds on Vodafone's network, iPhones on Telecom are capable of surfing at 3G speeds. It's slower than it would be on the 2100 MHz networks in the cities, but it's still far better than plodding along on GPRS.
The problem is that even though Telecom's network is a better fit for the iPhone's current 3G chipset, Telecom doesn't sell the iPhone, nor do they have any specific plans tailored to it. If you want to use the iPhone on Telecom's network, you have to buy one outright from either Vodafone or Apple, at a cost of up to NZ$1379 for a 32 GB iPhone 3GS, or nearly US$975. Then you have to piece together a plan from Telecom's various offerings rather than a one-stop solution like what Vodafone offers, which seems like a huge pain to me. Plus, to get things like MMS and tethering working properly on Telecom's XT network, you have to go out of your way to download special carrier files. While it's easy to download and install these carrier files, it's far from the "it just works" solution touted by Apple.
There's two ways this situation could be relieved, at least in New Zealand: either Apple could offer the iPhone through Telecom, officially, or it could expand the wireless capabilities of its 3G chipset to support 900 MHz UMTS/HSDPA. I prefer the latter option, because expanding the number of 3G frequencies the iPhone supports would make it compatible with far more of the world's wireless networks. As it stands now, two of the iPhone's three UMTS/HSDPA frequencies only enjoy wide support in the Western Hemisphere. While the 2100 MHz band operates virtually everywhere in the Eastern Hemisphere, it usually only covers metropolitan areas. Adding support for 900 MHz UMTS/HSDPA would mean vastly expanded coverage for the iPhone in Europe, Asia, and Oceania; in other words, most of the rest of the world besides North America.
Is this terribly likely to happen? No. One of the things I was watching very closely leading up to the iPad launch was what 3G frequencies the device would support. When the iPad's frequency bands turned out to be identical to the iPhone, I uttered a few choice words that I won't repeat here, because it makes it all but certain that the next-gen iPhone's UMTS/HSDPA will continue to operate at 850/1900/2100 MHz, severely curtailing its utility for much of the world. But Apple has surprised us before, and it's not impossible that it may do so again -- at the very least, they could offer multiple versions of the iPhone with 3G chipsets tailored to different regions' frequencies.