The iPhone is too precious. The fragility is not the big problem; any well made case seems to make an iPhone as durable as most any other phone. It's the water resistance. Or rather, the lack of resistance. When it comes to water, the iPhone makes Barack Obama look a tough negotiator.
It doesn't have to be this way. There's not much good to say about the obsolete Blackberry, but it's pretty good at surviving a swim. Maybe Apple will make some iPhone 5 or, more likely, iPhone 6 improvements. For example, they could go to a different connector, or get rid of the water-vulnerable home button.
In the meantime, every iPhone user needs to know the water drill. Go right now and read the Apple Core's overview. I've been through the rice version of this drill several times (family of five + 1 dog = 5 iPhones with 3 SIM cards = water practice). The key steps are:
- Wipe (shirt can work), remove case, wipe/shake water off.
- Power down the phone. Don't check to see if there are problems.
- Dry thoroughly. (I avoid compressed air, might push water into case).
- Place in a sealed container or baggie of rice (brown is best) or, if you have some stockpiled, surround with DampRid pouches (Amazon sells 'em).
- Leave in a hot dry environment for 24 hours. Some experiment with car in sunlight -- I worry a bit about too much heat. I like using radiant heat from an incandescent bulb.
Memorize and be ready. Remember, a new iPhone 4 is through;">$600-$700 $250 or so. You don't get the subsidized price unless your contract is up, and then you get a new contract a non-warranty iPhone repair will cost about $270 or so. 
That's treatment. Prevention is better. Most iPhone cases don't seal off vulnerable areas; I'm considering the Otterbox Commuter because of the port plugs. If you're boating, or even biking/walking in a downpour, you want a waterproof pouch like the Seattle Sports Dry Doc Digi Case. I bought one for my bike bag, but after my the middle kid's phone did yet another night in a rice bed I made it his phone case:
He can use the phone through the case in most locations, including anywhere outdoors. In his bedroom and in the water-free living room he uses the naked phone. He's happy with this arrangement, and I'm buying another waterproof case for my own phone and (another post) my MacBook Air.
 Correction! Martin reminded me in comments. I was thinking replacement, but in this case the phone is not lost. Apple will do refurb swap for about $270. I don't know, however, if this implies a contract extension.
If you ever need to take it in for repairs or want to sell it, there is usually a "dunk indicator" dot inside the phone but where you can see it without doing something that would void the warranty. On most phones it is under the battery.
The dot starts white but a dye inside migrates when wet so that it permanently turns a color.
Is Apple now allowing people to even open a battery compartment without voiding the warranty?
Memorize and be ready. Remember, a new iPhone 4 is $600-$700 or so. You don't get the subsidized price unless your contract is up, and then you get a new contract.
I broke my iPhone 4 glass a few weeks ago. Apple offered me a new or refurbished iPhone 4 for CHF 269.00 (original price CHF 898.00). It seems to be a standard offer, i.e., intentionally breaking your iPhone 4 glass might be a solution if you are looking for an affordable exchange of a wet iPhone 4 …
Today, CHF 269.00 equals about USD 350.00, however, Apple usually uses a conversion rate of 1:1 between CHF and USD.
CHF 898.00 was around USD 750.00 last fall (it is around USD 1'150.00 today – wow!).
Thanks for the correction! Did you have to get a contract extension as well? I wonder if Apple's refurb swap/repair price is the same for an out-of-contract phone.
The Euro's currency appreciation (against everything) is amazing. The impact on the EU is, of course, in the headlines.
I bought my iPhone 4 directly from Apple without a contract/subscription for the above-mentioned CHF 898.00. That allows me to hunt for affordable pre-paid subscriptions when I travel abroad.
Has there been a EUR appreciation from your perspective? From my perspective, EUR and USD are getting weaker and weaker alike.
Neat graph, I added the Yuan .
Looks like the Swiss Franc is appreciating against the Yuan just as fast as against the Euro and the USD.
It is rather a depreciation of other currencies than an appreciation of the CHF. There's AFAIK no free market rate for the RMB, i.e., I would expect a close correlation to the USD.
China has of course a huge leverage over the US due to its USD holdings. I'm therefore surprised again and again when US policies towards China and in favor of other countries (Japan, Taiwan, ASEAN) seem to contradict this fact.
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