Live blog: New York gets the iPhone 3G

At Apple and AT&T stores in Manhattan, eager first-day buyers of the iPhone 3G get their hands on Apple's upgraded smartphone Friday morning. But does it really take 10 to 15 minutes to get set up? CNET News' Caroline McCarthy and Marguerite Reardon reported live from the bustling retail outlets. Click here for CNET News' complete iPhone 3G coverage.

McCarthy, 7:08 a.m. ET at the Apple store on Fifth Avenue: There's a HUGE gathering of cop cars across the street, lights flashing and all, but it doesn't appear to be iPhone-related.

McCarthy, 7:10 a.m.: Apple store representatives are handing out bottled water, and the Waiting for Apples team is handing out apples. Looks like the cop cars are doing a routine drill. They're driving south down Fifth Avenue now.

McCarthy, 7:15 a.m.: The activists from Waiting for Apples have dismantled their "camp" to save up space.

McCarthy, 7:17 a.m.: Looks like Conde Nast is in on the promo stuff too. A whole lot of people are carrying copies of Wired.

McCarthy, 7:22 a.m.: Security is saying I don't look "credentialed" enough to be press, not letting me get a photo I wanted to. I just went around the other side, though. I think that he just wanted to exert authority and talk down to people.

McCarthy, 7:27 a.m.: News crews are everywhere. My impression is that the people waiting this year are even younger than last year, or maybe that's because I'm getting older. More dogs are in line than last year too. Greg Packer, last year's infamous first-in-line guy, is closer to No. 10 this year.

Reardon, 7:30 a.m. ET at the AT&T store on Upper West Side 95th and Broadway: With the exception of one guy, who camped out overnight in his sleeping bag, the AT&T store is relatively quiet. People didn't start showing up until around 4 a.m., store officials said.

Jeff Peidrahite, 35, lives just two blocks from the store. He arrived around 4 a.m. for the phone he said he's waited a year to buy. A current AT&T customer, Peidrahite said he is a huge Apple fan but wasn't going to buy the slower iPhone that came out last year. He also wasn't about to wait in the crazy line that started forming at Apple's 5th Avenue store last weekend.

"I'm a die-hard fan," he said. "But I wasn't going to camp out for it."

The bulk of the line at this location, which runs about halfway down the block, only arrived at the store around 7 a.m. For most, it seems like a smart strategy. The store has 60 phones, 20 of which are the 16GB models.

Natalie Green, 20, who arrived around 7:10 a.m. with her mother, lamented that she should have gotten up earlier. Green, who was toward the end of the line, most likely won't get a phone today. But she isn't deterred.

"I should have been here earlier," she said. "But it's not a big deal. If I don't get one today, I'll come back tomorrow."

McCarthy, 7:35 a.m.: I now have a cushy spot in the press section, though people keep asking me if I'm allowed to be standing here. I'm standing next to some local news crews who are wondering whether to prioritize coverage of the iPhone or of a murder in the Bronx.

McCarthy, 7:38 a.m.: Apple store representatives declined to tell me how many employees are on hand. It looks as if they will be doing a "gauntlet" of employees to usher people, as they did last year. Apple PR is having some issues dealing with foreign film crews who either don't speak much English or are claiming that they don't. They're trying to really pack everyone in.

McCarthy, 7:41 a.m.: There is massive cheering going on inside the Apple store. It sounds like the employees are revved up. There's a big press presence, but way fewer people are crammed into the press section than were there last year. There are fewer spectators too.

McCarthy, 7:45 a.m.: One of the activists from the front of the line has decided to give an impromptu speech about sustainable agriculture. Something about turning the White House lawn into an organic farm.

McCarthy, 7:56 a.m.: Four minutes left, and a gauntlet of employees just formed.

McCarthy, 8:00 a.m.: It's on. The first guy in line ran ahead and was restrained by security. He was throwing apples. The other activists are well-behaved; they got iPhones. The apple thrower was going to give his iPhone to Barack Obama (I think that's what he said), anyway. I got it on video--coming soon.

McCarthy, 8:06 a.m.: After the first "pack" of customers is in, Apple employees restricted further entry. Now they're letting the second pack in. This is the exact same protocol as last year's launch.

McCarthy, 8:12 a.m.: The first person out is a female activist. That was as fast as advertised. Now the guy who had been restrained by security was just allowed in with two police escorts. Five bucks says the cops buy iPhones too.

McCarthy, 8:20 a.m.: Turns out, the first woman to leave actually did not have an iPhone with her. Maybe she hadn't planned on getting one in the first place. It was a man who first got his hands on the iPhone--and he was not first in line. He is now surrounded by reporters.

McCarthy, 8:26 a.m.: That first guy to get his hands on the iPhone 3G, 24-year-old David Yoo, had actually been about 75th in line. He said he'd been here since midnight and somehow managed to be the first to get his phone. He then left abruptly because he didn't want to miss work. I didn't catch what his job is, but I did catch that he got a 16GB iPhone and had previously owned an iPhone.

McCarthy, 8:32 a.m.: I'm speculating that some of the very young people near the front of the line may have been having issues. The purchase requires a credit card, one's Social Security number, and possibly a photo ID. This line is definitely not moving as fast as last year's because of the in-store activation procedures.

Reardon, 8:41 a.m. at the AT&T store in Times Square: The scene in Times Square is definitely far less chaotic and crazy than it is at the Apple store on Fifth Avenue. I just did a quick appearance with CNET TV colleague Natali Del Conte on the Early Show and was amazed at the crowd assembled.

The Times Square AT&T store has a line that wraps around the front of the store on Broadway, around the block, and up on 43rd Street. The line is interrupted at points to make room for the entrances of theaters and other buildings in the neighborhood.

People standing near the front of the line said they got to the store around 5:30 a.m., and there were about 18 people in line--a far cry from the crowds assembled near Apple's Fifth Avenue store.

McCarthy, 8:41 a.m.: Greg Packer, the guy who had been first in line last year and maybe 10th this year, just left the store with his iPhone in hand. The frenzy is going to last for several more hours, but things are dying down. Press members are starting to leave.

Reardon, 9 a.m.: Word on the street (and I mean this literally, as I'm sitting on the curb in Times Square at the AT&T store) is that the Times Square store has between 50 and 200 phones.

Miguel Gallego, 30, who is about 60 people back in the line, was told when he arrived around 7:10 a.m. by an AT&T store official that it definitely had enough iPhone 3Gs for all the people standing in line at the time. Unfortunately, the store official wasn't so clear about whether it'd have enough of the 16GB model. And that's what Gallego is hoping to get. But even if he can't get the bigger-storage phone, he said he's still willing to buy the 8GB version.

Reardon, 9:15 a.m.: The line is moving very slowly. I'd compare it to a turtle crossing hot asphalt. It's almost painful to watch. People standing in line have been told that it will take 15 minutes per customer to get people activated on the AT&T network. This is regardless of whether customers have an account. But it appears to be taking much longer than that.

There are about 10 AT&T representatives in the store helping customers. And only 10 customers are allowed in the store at a time, so people are trickling in one by one to sign up for the new phone.

I'll have an update in a little bit of how that process is working inside when I talk to people coming out of the store. The security folks here won't let anyone, including reporters such as myself, in the store unless they've been standing in line. The security guard was even a bit touchy about me taking pictures outside the store through the glass door.

Reardon, 9:25 a.m.: The line is moving! The smell of the New York sewer system from my temporary office on the curb was making me a bit nauseated. Note to self: don't set up camp next to a manhole cover. Anyway, I've moved indoors.

I'm in a cafe next to the AT&T store. But now I have a perfect view of people waiting in line on 43rd Street. It looks as if the line took a major jump forward, which must mean that the AT&T represenatives inside have moved a big group of people through the iPhone activation process.

This has got to be a good sign for people like Roberto Ramirez, 35. He got in line at about 7:15 a.m. He was concerned when he realized he wasn't going to make it to work by 9:30 a.m. Luckily for him, his boss is on maternity leave. And he's got his BlackBerry, so he won't miss any of the action at work.

Reardon, 9:50 a.m. Lots of working people, like myself, are psyched about the iPhone's support for Microsoft Exchange e-mail. It means that the new iPhone 3G and the older iPhone with a software upgrade will now allow people to easily get their work e-mail pushed to them.

Being able to get his work e-mail was the main reason that David Ford, 22, wanted to get the new iPhone. Ford, who works as a public-relations representative, really needed a smart phone to keep up with everything happening with his clients. And when he heard that the iPhone would support push e-mail, he said he was sold.

But it looks like it will take a lot more than e-mail support for IT departments to make the switch. When Ramirez, who works for oil giant Hess, asked his office's IT guy if he could ditch his company-issued BlackBerry for the iPhone, he was told no way.

The biggest issue is that Hess has a service contract with Verizon Wireless. And the company isn't about to give that up for a few hundred employees who want the iPhone.

Miguel Gallego, 30, who also uses a BlackBerry for work, said his company isn't switching to the iPhone. He said the iPhone would have to access Bloomberg messaging and news for him and his co-workers to ditch the BlackBerry. But Gallego isn't concerned that he will have to carry another device around.

"It's a bummer I have to carry two devices," he said. "But it's better than carrying three. With the iPhone, I can now get rid of my first-generation iPod."

McCarthy, 10:55 a.m.: I took a live-blogging break to post a couple of other items. The line here at the Apple store on Fifth Avenue is still very long (I'm guessing that it's about 400 to 500 people strong) and slow-moving. The first 150 or so queuers are snaked through barricades to cut down on length. That's on the block between 58th and 59th streets on Fifth Avenue. The line continues to the corner of 58th and all the way to the corner of 58th and Madison. It ends slightly around the corner.

McCarthy, 11:05 a.m.: I talked to someone who was about 100 people back. He said he's been waiting two hours, which indicates that the line is moving slowly but steadily. I speculate that some people may have dropped out of the line when they realized that they wouldn't make it to work on time. It also appears that regular Apple customers (not looking to buy an iPhone 3G today) are out of luck this morning, at least at this location.

McCarthy, 11:05 a.m.: Now I'm actually in the store, after a bit of negotiating with security. There's a line leading up to the counter. Someone here commented that activation wait times of an estimated 40 minutes are the result of a problem at AT&T, not Apple.

Reardon, 11:15 a.m.: The average wait time appears to be about two hours. AT&T representatives have been working the line all morning, updating people on what's happening inside the store.

Apparently, there have been issues with getting people activated. Tim Haden, 31, had been waiting in line since 7:30 a.m. He finally made it into the store at 10:35 a.m. But it took him a grueling 25 minutes inside the store to set up his account for the iPhone.

Haden was already an AT&T customer and has the HTC Tilt, which he can't stand. So what took him so long? Haden said there wasn't anything unusual about his situation but that the computers in the AT&T store were very slow. And that's what the hold-up was.

Now Haden is headed into work about an hour and a half late. He plans to finish activating his phone on iTunes from the office.

"I have all day to play with it," he said. "I'm just looking forward to sitting down and having a cup of tea." (Did I mention Haden is British, which explains the tea bit?)

McCarthy, 11:26 a.m.: A few commenters have asked us whether they can feasibly grab iPhones during their lunch breaks. We don't recommend it, since the AT&T activation servers are continuing to be problematic, and people say they're waiting two hours or more. The Waiting for Apples activists, meanwhile, have set up shop in-store and are hanging out with customers, etc. That explains why they weren't the first to leave the store.

McCarthy, 11:30 a.m.: The line is pretty much at a standstill, and we're hearing reports from San Francisco that the New York activation system is down.

Reardon, 11:30 a.m.: The line at the AT&T store is dwindling. At last count, there were approximately 30 people standing in line. The bad news for many, though, is that the store is already out of the 16GB iPhone 3G. This means that all that's left is the cheaper 8GB version.

Gary Castillo, 19, says he doesn't care. He really wanted more memory on his iPhone 3G, but he'll take the 8GB phone. He wants it so badly, he's even willing to spend $300 to break his contract with T-Mobile to get the iPhone 3G.

Castillo has multiple lines with T-Mobile, which is why the early-termination fee is so high. Of course, if he waited a week, he'd likely be able to get the 16GB model that he really wants. But after passing on the first-generation iPhone, Castillo says he can't wait any longer.

"I just need it today," he said.

McCarthy, 11:40 a.m.: Alas, the line is moving again, but still not very fast.

Reardon, 11:45 a.m.: The big story of the day for the launch of the iPhone 3G will undoubtedly center around activation issues. Rashid Mannan stood in line at the Apple store on Fifth Avenue at 6 a.m to make sure that he could be one of the first to get his hands on the iPhone 3G. Mannan did the same thing a year ago, when the original iPhone came out.

When he reached the front of the line at 8:30 a.m., he was set to buy his new phone. But there was an issue with his existing AT&T account. Mannan wasn't sure what, exactly, the issue was, except that he has a business account.

The Apple store representatives weren't able to pull up any of his AT&T account data. So they sent him to AT&T. Mannan tried calling the AT&T service line, but he was put on hold for a half hour. He then decided to head down to the AT&T store in Times Square. But once there, AT&T representatives told him he'd have to wait in line all over again.

At this point, the line was still wrapped around the block, and the wait averaged about two hours.

"I am really annoyed," Mannan said. "I mean, I waited in line already for over two hours. It's AT&T's problem; not mine."

Mannan was already late for work around 11 a.m., so he decided to leave and try his luck again later. I'll follow up with him via e-mail to see when he finally gets his iPhone 3G.

Reardon, 12:02 p.m.: The line at the AT&T store here is much shorter now, and customers seem to be getting through the line in about an hour or hour and a half. It appears, based on news coming out of the Apple store on Fifth Avenue, that this AT&T location might be a quicker bet. I am heading downtown to the Apple store on 14th Street to check out the scene there. So stay tuned.

McCarthy, 12:07 p.m.: An iPhone was just activated next to me. It took about 10 minutes.

McCarthy, 12:14 p.m.: Staff are now estimating a 90-minute wait (from the end of the line outside) and are telling people that they are well-stocked. They didn't clarify whether they were well-stocked with both versions of the iPhone 3G.

McCarthy, 12:49 p.m.: The line is slightly shorter now, no longer extending to the corner of 58th and Madison. An Apple staffer confirmed to me that no one is going home with an activated phone. The accounts are activated, and the phones are unbricked, but the service is not activated. That needs to be done at home via iTunes. The staffer anticipates that reported iTunes activation issues will be resolved this afternoon.

Amid the mayhem, it is important to note that people are not going totally psycho. The Apple store staff here are being very professional, and customers not going crazy (or at least they don't appear to be).

McCarthy, 1:53 p.m.: It looks like people are finally getting back on track with activation. Wait time is probably getting closer to an hour.

Reardon, 2:00 p.m. at the Apple store on 14th Street: The line shows no signs of letting up.

Some people just reaching the door now have been in line since 8 a.m. Allyson Franklin, 40, and her 11-year-old daughter, Giovanna, have been in line for five hours.

Giovanna, who has had a cell phone since she was 6 years old, said she just had to get the iPhone 3G the first day it came out. She, like many of the people here braving the bright and very hot sunshine, say they're afraid that if they don't get the iPhone today that Apple will not have enough in the coming weeks to meet consumer demand.

"I just didn't want it to be another (Nintendo) Wii situation," Allyson said. "We had to wait five or six months for that."

Craig Kaiser, 39, of West Chester County, N.Y., who joined the line around 11:45 a.m. and is not even halfway up the block to the Apple store, said the same thing.

"I'd rather wait in line today than have to keep checking the Internet and calling stores in a week, seeing where they have phones in stock," he said.

Despite the long lines, people are still in good spirits. With next to no shade on West 14th Street here in the Meat Packing District, Apple is handing out umbrellas and distributing free water. One woman, who happens to be an Apple retail employee, is spending a vacation day standing in line with her boyfriend, who wants an iPhone 3G. True love.