There's no way to say this other than, under some signal conditions, the iPhone performance as a phone is simply unacceptable. Downstairs in my house the signal strength meter flickered between one bar and a 'No service' message. It dropped calls and often failed to send or receive text messages. I found this odd because I'd tested the strength of the O2 signal in my house using a friends phone and it had been fine. I invited her over and we compared how her phone (a Siemens something-or-other) and my iPhone performed. The Siemens was fine - two or three bars on the signal meter, no problems dropping calls, sending texts etc - while the iPhone (which was right next to it) did its one-bar/No service thing. I swapped the first iPhone for a second, but the replacement behaved in exactly the same way.
I don't quite know what is going on but made two other observations that might be relevant:
1) Both iPhones could always see Vodafone, T-Mobile and Orange signals in my house. They couldn't connect of course because they're locked to O2 so I couldn't check the signal strength, but the fact that signal was always received might indicate that it was just 02 reception that was compromised.
2) Both iPhones displayed a reasonable O2 signal (two or three bars on the meter) and could make and receive calls, send and receive text messages just fine when attached to an external power supply (computer or the mains).
To try to work out what is going on I had a look at this web site:
http://www.sitefinder.ofcom.org.uk
which shows the mobile phone base stations in the UK. It shows that in my area Vodafone has a mixture of 1800 and 900 MHz transmitters, Orange and T-Mobile have only 1800 MHz transmitters and O2 has only 900 MHz transmitters. It's obviously impossible to draw a conclusion from this scant information but a working hypothesis could be that the iPhone performs poorly in receiving in the 900 MHz band unless connected to an external power supply, i.e. there might be power management issues related to 900 MHz reception.
