"Firmware" is a name given to the internal software that runs a device like Apple's iPhone. If you want to change the firmware (which includes the firmware used to control the unit's internal modem), you'll have to first check and make sure a new version is actually available. Apple occasionally releases firmware updates for the iPhone that are available by connecting your device to your computer.
Plug your Apple iPhone into your computer. Push one end of the USB linking cable into the long, thin port on the bottom of your iPhone. Then, connect the other end of the USB linking cable to any working, available USB port on your computer case.
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Open Apple's iTunes iPod/iPhone management software.
Locate and click on the name of your iPhone. This will be on the left side of the iTunes program window under the word "Devices."
Click "Check for Updates." If any firmware updates are available for your iPhone, you will be notified.
Click "Download and Install." This will download the firmware updates to your computer. Once this download process is complete, iTunes will create a backup copy of all of your personal iPhone settings. It will then install the new firmware on your iPhone. Once the installation is complete, iTunes will replace all of your personal settings from the backup copy and then sync your iPhone to your iTunes media and application library. You will have just updated the firmware on your iPhone.