With disappointment over the iPhone’s limited EDGE capabilities still hovering, speculation about the release of the long-awaited, third-generation version of the handset is at an all-time high. When a 3G phone wasn’t released concurrently with Apple’s announcement of its European partners as many analysts had anticipated, most have changed their predictions to an unveiling early next year. A 3G iPhone is inevitable, and demand for it is high among both operators and customers. But demand is just one consideration for Apple. When and where 3G fits into Apple’s often wild and unpredictable launch schedule is still up in the air as is what form the new iPhone will take.

Apple’s head honcho himself, CEO Steve Jobs, hinted at this during his keynote speech at Macworld San Francisco in September. He mentioned nonchalantly that the company's choice of GSM network support via EDGE would allow it to produce a 3G wireless phone and "many other amazing things" in the near future, adding that Apple was “working on the next iPhone already, the one after that and the one after that.”

Clearly, the question for iPhone-fanatics has gone from whether Apple will make a 3G model, to when it will introduce it. With no conclusive announcements thus far (and both Apple and AT&T refusing to comment), consumers, bloggers and operators everywhere can only speculate.

“If they are not launching a 3G device by next year, they are too blind to see the market potential,” said iSuppli wireless communications analyst Tina Teng.

If a 3G iPhone is developed within the year, it will have to be a GSM/UMTS version since its five-year exclusive agreement with AT&T will not have expired, Teng said. With Verizon Wireless and Sprint out of the equation, the potential market for any CDMA phone are greatly reduced.

According to VZW though, Verizon isn’t interested in a CDMA iPhone—at least not yet. Verizon Wireless officials have said that the carrier was approached by Apple for the possibility of an iPhone launch, but they turned it down due to Apple’s insistence on controlling the customer relationship. But an iPhone launch with Verizon Wireless would have run counter to Apple’s global plans for the iPhone. A CDMA iPhone could have been sold in the U.S, and a few other global markets while a GSM/UMTS phone could be sold worldwide.

Another option would be for the newly emerging WiMAX networks, but Yankee Group senior analyst John Jackson said that a Sprint WiMax deal will not become a reality anytime soon.

“There is simply not sufficient scale to develop a phone for [WiMax] technology; not sufficient scale and no obvious use-case,” Jackson said, referring to the next-generation mobile broadband network Sprint and Clearwire are launching next year. While a WiMAX implementation would be ideal for the data-centric iPhone, a nationwide commercial network is still more than a year out in the U.S. and likely even further in other countries.

Apple’s stated logic for not including 3G in its original phones was that the unique UMTS frequencies in the U.S. would prevent it from launching a global phone and the fact that a 3G network would significantly decrease the phone’s battery power. However, UMTS frequencies aren’t the only bands that differ between the U.S., Europe and Asia. Standard cellular and PCS bands aren’t harmonized across the world. Yet Apple included dual-band GSM/EDGE radios in the initial iPhone launch in order it could sell the phone globally, while leaving 3G bands out.

Last month, speaking about the 3G iPhone, Jobs explained that the 3G technology would take too much a toll on the iPhone's batteries – a problem potentially addressed by a removable battery in the 3G version. According to Apple, the current iPhone offers up to eight hours of talk time, six hours of Internet use, seven hours of video playback or 24 hours of audio playback. The standby time estimated by Apple is 250 hours - more than 10 days.

3G chipmakers appear to be addressing Apple’s concerns by building baseband processors with lower power requirements. Broadcom earlier this month unveiled an ultra-low power UMTS chip that would enable cell phone makers to build new 3G phones in more compact form factors with longer battery lives at a fraction of today’s costs.

Pressure for a more advanced network for the iPhone is even more prevalent in Europe, where users are accustomed to 3G speeds. Competition is also stiffer— while AT&T has released a handful of UMTS handsets in the U.S., hundreds are available over dozens of networks in Europe. That does not mean, however, that European operators are not craving a 3G version of the iPhone. The iPhone is just the type of device that could help them justify the billions in spectrum network investments they’ve made in 3G. Vodafone’s CEO, Arun Sarin, in particular has said he would “absolutely” deal with Apple to carry the 3G version of the handset.

Jackson said that European carriers are already competing to get the Apple exclusive. While most carriers admit that they need the phone regardless of whether it has 3G, many are starting to demand a 3G version. Exclusive partnerships for the 2G phone have already been forged between Apple and O2 in London, T-Mobile in Germany and France Telecom’s wireless division, Orange, in France. Competition for those exclusives would likely be even higher if 3G was on the table. Apple may not be in hurry to give carriers what they want though, Jackson said: it has had so much success with the original iPhone model, that it is not overly concerned about appeasing the service providers.

“Apple doesn’t care about a carrier’s network agenda,” Jackson said. “What they really care about is a mutually beneficial partnership, in which they receive access to distribution networks that they don’t already have and shared revenue streams they wouldn’t already get.”

Apple may also use the release of a 3G iPhone to add cosmetic enhancements in addition to the new radio. For a phone that earned its bragging rights based on the “cool factor” of its sleek design, an important consideration will be what the 3G iPhone will look like. Teng said to expect a similar design to the original, but with the problems and complaints from the first one improved and upgraded. Jackson, on the other hand, isn’t making any predictions on what Apple will do with a new iPhone design.

“They carry product language up and down a portfolio as good as anybody, so it will look different,” Jackson said. “I don’t know what that means, but they don’t want me to know what that means either – they want to keep everyone guessing.”