The Wall Street Journal does an excellent job of giving you an overview of the imminent iPhone 3.0 software. This isn't rumor. They clearly answer common questions related to upgrading, using the phone as a wireless modem (aka tethering), Bluetooth options, and more. The article says that first-generation iPhone users will be able to upgrade, but that not all of the functionality will work. The upgrade will again be $10 for iPod Touch users. Regarding using the iPhone as a modem for your laptop, the iPhone 3.0 software does indeed make it possible. But it doesn't look like AT&T will make that available. The main issue is bandwidth. In fact, news reports have been saying for some time that the iPhone is already really taxing AT&T's network — that cell phone users are much more likely to use an iPhone to go online than they are other models. So if iPhones are already causing problems, it''s unlikely that AT&T will suddenly enable tethering, which would tax their network even more. However, that doesn't mean it won't happen in the near future. A fascinating article in TidBITS explains that AT&T is working hard to ramp up its network.