Telstra, following discussions with the Australian Competition and Consumer Commission, agreed to provide full two-year warranties for customers who buy handsets on two-year contracts. The agreement included all manufacturers except Apple.
"Although nearly all major handset manufacturers have agreed to honour full warranties, the ACCC continues to have concerns in relation to warranty issues with the Apple iPhone," the ACCC said.
Third-party iPhone 4 cases are reportedly causing the glass back panel to crack.ACCC chairman Graeme Samuel said the strengthening of Telstra's mobile warranties, which comes after a similar agreement with Vodafone Hutchison Australia, was designed to avoid customers being "hung out to dry".
"Just because the manufacturer's warranty period is up, it does not mean that consumers can be hung out to dry if they are left with a faulty product and ongoing service contract," he said.
Previously, phone manufacturers offered standard one-year warranties but Samuel said in a phone interview that the ACCC took issue with this in cases where phones are sold on contracts that last longer than a year. Retailers then managed to negotiate two-year warranties with all major handset manufacturers except Apple, which charges customers extra for an extended warranty.
"The retailers are saying well we can't negotiate a 24-month warranty with Apple because it's too expensive," he said.
"The truth of it is they can but it's going to cost them, and of course that cost would then be passed on to the consumer in the purchase price of the phone. Consumers will then make up their mind whether it's a better deal to buy an Apple iPhone or a Samsung or HTC."
The consumer watchdog's concerns come as new reports surface of large cracks appearing in the iPhone 4's body when certain third-party slide-on cases are used.
The affected cases are Apple-approved third party products, not the rubber "bumper" sleeves that Apple was forced to give away free following the "Antennagate" issue that causes reception problems when the iPhone 4 is gripped in a certain way by the bare hand.
Well-known tech blogger Ryan Block, who ran Engadget.com before starting a new site, Gdgt.com, reported that sources inside and outside Apple had told him that the iPhone engineering team had been sent into "lockdown" over "another potential design flaw".
"Apple has apparently found that non-bumper style cases - specifically those that slide on to the iPhone 4, which are occasionally prone to particulate matter getting caught between the rear of the phone and the case - can cause unexpected scratching that could quickly develop into full-on cracking or even much larger fracturing of the entire rear pane of glass," Block wrote.
"To put it another way: Apple is afraid you might buy a standard slide-on iPhone case, put it on your phone, and then discover the next time you take it off that the entire back of your device has been shattered by no fault of your own."
Anthony Agius, owner of the popular Australian Apple community site MacTalk, said he had not seen any first-hand reports of Australian iPhone 4 owners experiencing the problems described by Block.
But he said some users had complained about Apple's iPhone warranty process, specifically that they were receiving refurbished replacement models instead of new phones and that they had to wait weeks to get a repaclement via a telco.
The Wall Street Journal reported that Apple was working on a new version of the iPhone 4 for Verizon Wireless in the US, to be launched early next year, that would have a slightly different form factor to fix some of the design problems.
Separately, the white version of the iPhone 4 has still not been released, with little in the way of an explanation from Apple.
The glass design of the iPhone 4 is pleasing to the eye but within days of the handset's launch repair shops were complaining that it smashes too easily. Dropped phones are not covered by Apple under warranty.
Other reported iPhone 4 issues include the recent daylight savings bug and a mysterious camera fault that causes a coloured tinge to be added to photographs.
Apple did not respond to a request for comment.