Apple has designed the iPhone 4 so that the stainless steel band around the phone is "part of the antenna system" and "Is the result of some really cool engineering."
Well, if it is just part of the antenna system, what's the rest of the antenna system? How can two strips of metal wrapped around the phone (something that doesn't seem all that technical) be an important part of the antenna system?
The answer: it isn't!
After doing some investigating of my own, I learned of another part of the antenna system located on the backplate of the phone, under the glass.
I found out by asking what this is:
Photo courtesy of iFixIt.com
The answer was that it was part of the antenna system. This pressure contact touches a small area on the backplate of the phone which is part of a separate antenna array.
Photo courtesy of iFixIt.com
My theory:
This backplate antenna is the actual functional antenna inside the iPhone 4. Stainless steel isn't a good material to make an antenna out of anyway because it has around 10 times more resistivity than copper. This backplate antenna has to be an actual highly-engineered multi-band antenna for the iPhone 4 that serves as its GSM/EDGE and UMTS/HSDPA/HSUPA antenna which makes a lot more sense than having this stainless steel band do all the work.
So what's the problem with the signal loss if the antenna is on the back? Well, the stainless steel frame is still connected to the antenna system probably just to pick up extra RF modulations that can be filtered into the circuitry to help boost the signal a little bit, but when you touch the bottom left seam, shorting out the antenna, all the RF signal is grounded out through the separate WiFi/Bluetooth/GPS antenna
My hypothesis is that disconnecting the stainless steel frame from the antenna system would completely solve this signal loss issue.
I rest my case!
Well, if it is just part of the antenna system, what's the rest of the antenna system? How can two strips of metal wrapped around the phone (something that doesn't seem all that technical) be an important part of the antenna system?
The answer: it isn't!
After doing some investigating of my own, I learned of another part of the antenna system located on the backplate of the phone, under the glass.
I found out by asking what this is:

Photo courtesy of iFixIt.com
The answer was that it was part of the antenna system. This pressure contact touches a small area on the backplate of the phone which is part of a separate antenna array.

Photo courtesy of iFixIt.com
My theory:
This backplate antenna is the actual functional antenna inside the iPhone 4. Stainless steel isn't a good material to make an antenna out of anyway because it has around 10 times more resistivity than copper. This backplate antenna has to be an actual highly-engineered multi-band antenna for the iPhone 4 that serves as its GSM/EDGE and UMTS/HSDPA/HSUPA antenna which makes a lot more sense than having this stainless steel band do all the work.
So what's the problem with the signal loss if the antenna is on the back? Well, the stainless steel frame is still connected to the antenna system probably just to pick up extra RF modulations that can be filtered into the circuitry to help boost the signal a little bit, but when you touch the bottom left seam, shorting out the antenna, all the RF signal is grounded out through the separate WiFi/Bluetooth/GPS antenna
My hypothesis is that disconnecting the stainless steel frame from the antenna system would completely solve this signal loss issue.
I rest my case!