As the updated iPhone went on sale Friday morning, Apple enthusiasts who waited hours in front of Apple Stores reported problems activating their new phones.

Dale Larson, 39, camped outside for 36 hours to be the first in line at the Apple Store on Stockton Street in San Francisco and was cheered by the store employees when the doors opened at 8 a.m.

But one hour later store employees were still unable to get Larson's phone working, Larson said, and San Francisco police ordered him to move his camping tent off the busy sidewalk.

"The iPhone was cool because you didn't have to deal with bad service," Larson said. "I am certainly disappointed they have reverted it."

AT&T spokesman John Britton said the delays seemed to be tied to demand on Apple's system. "There is so much demand on the infrastructure, it's slowing things down considerably," he said.

Unlike last year's launch, when customers activated their phones at home, this year Apple and its wireless carrier AT&T are performing the procedure in stores to get customers on a contract and to thwart illegal unlockers.

Friday morning, however, customers were told to sync their phones with iTunes - the last step - at home.

Steven Peterson, a 27-year-old software developer in San Francisco, got in line at 6:20 a.m. at the AT&T store on Market Street in San Francisco. He said the he wasn't able to activate the phone in-store but was happier that way.

"I'd rather activate it at home, like last time," Peterson said. "It's irritating when they do it."

Peterson, a gadget addict, said he had to get an iPhone on Day One, in part to satisfy his gadget lust but also because he developed an application for the iPhone called Routesy, which helps San Francisco residents get transit times for Muni.

Just getting out of the door was tough for some customers with unique requests. Julie Price came early to the AT&T store with her husband, Rick Lindstrom, to buy two new iPhones, but they wanted to get phone numbers that were similar. The Apple system delays kept slowing down AT&T's process for selecting and confirming the phone numbers, frustrating the couple's attempts to nail down phone numbers.

"I can't pick a phone number," Price said after waiting an hour. "By the time I pick the number, it's gone."

But she didn't mind, saying, "it's the price you pay for being first."

Price, a 34-year-old product manager with a fitness club, said she was eager to get her hands on the iPhone 3G because of its ability to help organize and simplify her life.

"It has GPS, an MP3 player and a phone and it's easy to find local stuff," she said. "I won't be juggling multiple gadgets, and the usability and discoverability of the iPhone makes normal things fun."