Updating to iPhone OS 3.0 is pretty simple. Just follow the following five steps:

Step # 1:
The iPhone OS 3.0 is available via iTunes 8.0 or above. So download iTunes 8 here

Step # 2:
Connect your iPhone/iPod Touch to your computer via USB.

Step # 3:
Open iTunes. Your device will be listed on the left pane under the “Devices” heading. Click on your device name.

Step # 4:
In the “iPhone Summary” pane click “Check for Update” button.

Step # 5:
Click “Download and Install”. Be patient until the update finishes.

Step # 6:

When the update finishes, the iTunes will notify you. Disconnect your iPhone and enjoy the brand new OS!

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