Apple Announces Free iPhone 4 Cases
Apple boss Steve Jobs unveiled the offer at a press conference called to tackle the ongoing speculation about the iPhone 4's antenna problem.
The case will help overcome a widely reported issue in which phone signal strength was drained when the phone was held a certain way.
Declaring "We're not perfect", Mr Jobs said reception problems were endemic throughout the smartphone industry.
To get their free case, owners will be able to apply via the Apple website from 22 July. Mr Jobs said Apple could not make enough for all owners of the phone but would source a supply and offer a range of cases.
Based on retail prices of iPhone cases, supplying one to all three million customers could cost Apple about $180m (£118m).
Apple will offer the free cases until 30 September.
Mr Jobs also extended an offer to iPhone 4 users to give them a full refund within 30 days if they were still unhappy with the handset's performance.
"They had to do something," Van Baker, research vice president at Gartner, told BBC News.
"The buzz kept getting louder and louder and louder and the evidence kept mounting more and more and more. They just couldn't ignore it."
Brian Marshall, managing director of Gleacher & Company, said he did not think the negative headlines hurt Apple in the marketplace though he was pleased to see it take action.
"This has been blown out of proportion and is a media firestorm," he said.
Apple called the press conference at which the case offer was made in response to ongoing speculation about the antenna issue.
The problem is thought to be caused by the steel case of the phone which houses several of the phone's antennas. Holding the phone on the lower left bridges the gap between two antenna depleting the signal.
Putting a case or "bumpers" around the phone stops this gap being bridged.
Opening the conference, Mr Jobs said that the drop in signal strength was not a problem "unique" to the iPhone 4.
"This has been blown so out of proportion, it's incredible," he said.
Apple had been looking closely at the issue since the first reports of problems surfaced just over three weeks ago, he said.
Videos comparing the iPhone 4 signal drop to other smartphones, such as the Blackberry Bold 9700, were aired by Mr Jobs during the conference.
He said this was a reflection of life in the smartphone world and presented a challenge for the whole industry.
Mr Jobs said the design of the iPhone 4, with a gap separating two sections of antenna, might have contributed to the problems as it perhaps subliminally encouraged people to touch that spot.
In the firm's defence, he cited figures from its Apple Care service arm which showed that only 0.55% of all iPhone 4 users have complained to the company about the issue.
"Historically for us, this is not a large number. This doesn't jive with what you read about this problem."
The number of phones returned to Apple was 1.7%, less than the 6% of 3GS models taken back to the shop by their owners.
Mr Jobs also shared data about the number of calls the iPhone4 dropped compared to the 3GS.
This revealed that the iPhone 4 drops only one call more per hundred than its predecessor.
He speculated that this was because most people who own a 3GS have a case for it. By contrast, he said, most iPhone4s leave Apple stores without a case.
Technology reporter Maggie Shiels who attended the conference for the BBC said it was a "sterling" performance by Mr Jobs.
"For Steve Jobs to publicly apologise to customers problem was amazing to hear," she said. "It didn't come until 45 mins into the event but it was clear throughout that he has taken the criticism personally."
"While he constantly underscored how hard Apple had worked to resolve the problem, he came out swinging for the fences and defended the phone to the hilt," she said.
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