Consumer Reports won't recommend iPhone 4

NEW YORK (CNNMoney.com) -- Influential product review magazine Consumer Reports said Monday it will not recommend Apple's new iPhone 4 to consumers because of reception problems.

"Consumer Reports' engineers have just completed testing the iPhone 4, and have confirmed that there there is a problem with its reception," the magazine said in a blog post on its website. "When your finger or hand touches a spot on the phone's lower left side -- an easy thing, especially for lefties -- the signal can significantly degrade enough to cause you to lose your connection altogether if you're in an area with a weak signal."

Apple acknowledged the problem earlier this month, claiming that the issue was a software glitch, not a hardware problem. The company said the formula it used to calculate how many signal bars to display was incorrect, exacerbating the apparent decline in signal strength for customers in weak signal areas.

But Consumer Reports said its study called into question Apple's "optical illusion" claim: It tested the iPhone 4 along with several other AT&T phones, including the iPhone 3GS, in a controlled signal environment. None had the signal-loss problems that the iPhone 4 demonstrated.

The review said electrically bridging the gap between the phone's two antennas appears to be the cause of problem. The magazine suggested covering the gap with a non-conductive material like duct tape as an "affordable" solution.

"It may not be pretty, but it works," the magazine said in its blog.

Consumer Reports noted that the iPhone 4 otherwise ranked highest on the list of smart phone ratings that it released Monday. But the magazine said it will not recommend Apple's new device until the company unveils "a permanent -- and free -- fix for the antenna problem."

As an alternative, Consumer Reports said it continues to recommend the older iPhone 3GS, which is still available from Apple (AAPL, Fortune 500).

Apple said it will release a free software update in the next several weeks to fix the software glitch. It will use a new formula recommended by AT&T (T, Fortune 500), the iPhone's exclusive carrier, for calculating how many bars to display. Apple said it will also make the first three bars a bit taller to make them easier to see.

Still, the company has not admitted to any hardware issue. Apple sells a $29 "bumper" case, which the company suggested in late June as a possible solution to the reception issue.