Just a few blocks away from the Moscone Center, where Steve Jobs and company host Macworld and WWDC every year, the enthusiasm for Apple's latest product launch was apparent.

SAN FRANCISCO (BetaNews) - Purchasing products in the Apple Store here typically can be an interesting experience, as it's quite common to exit a Jobs keynote and head to the store just a few blocks away, with Apple employees still unaware of what was announced.

This morning, BetaNews visited the Apple Store along with three local AT&T retail locations around the Union Square/downtown area, and found lines outside of all three locations. Although the lines were more subdued due to the fanfare at the Apple Store, the people waiting in line were just as anxious to get their hands on the iPhone 3G.

When I arrived outside of the San Francisco Apple store at 7:55 a.m. PST, at least 150 people were in line patiently waiting for the Apple Store to open.

Shortly after the store opened its doors at 8:00 a.m., in keeping with problems faced across the country, the Apple computer network went down, and customers were forced to patiently wait longer before being able to make purchases. Each customer who purchased a new iPhone must go home and activate it through the Apple iTunes service, as Apple's computer infrastructure is being slammed by the launch of the iPhone 3G in 22 countries.

But customers scrambling home to activate their phones are also facing server issues, due to continued high pressure on the iTunes servers.

At 10:15 a.m. PST, the activation system was fully operational, and customers were able to leave the store with a fully functioning iPhone. But with only a handful of people allowed into the store at a time, and purchasing and activating a new iPhone was happening at a snail's pace.

At 10:30 a.m. PST, the line only continues to grow, with the line stretching down Stockton Street, around O'Farrell, and almost all the way down to Powell Street.

I randomly selected 50 people in line, and discovered that a whopping 38 of them already had an iPhone, and were eagerly ready to purchase the iPhone 3G. Thirty-five of the people in line said they were going to purchase the 16 GB model, though the number was evenly split at 25 people purchasing the white iPhone and 25 purchasing the black model.

"Yeah, I already have an iPhone," a bleary eyed San Francisco State University student told me. "But I figured I would roll by and pick up the new one anyway, because I want the increased speed from 3G."

The local news media and online hacks are hovering outside like vultures, though the press corps seems a lot smaller than the first iPhone launch at the same location.

"It has been rather uneventful considering how chaotic the original launch was," said James Mitchell, 27, San Francisco. "I woke up and took a bus over here and have just been hanging out, drinking coffee and making small talk with people in line."

11:00 am PDT July 11, 2008 - Reports from several local AT&T retail outlets indicate they are selling out of iPhones, with 150 or less in stock. Customers who didn't get one are able to fill out a voucher and come back later once more phones arrive. There still appear to be phones inside the Apple store, but Apple employees patrolling outside are not saying how many units are still available inside.

The continued chaos of a hectic iPhone 3G launch in one of the country's most tech-friendly regions will continue for the next couple of hours, or until the store runs out of iPhones for customers, which is very possible before the end of the day.

12:25 pm PDT July 11, 2008 - The line at the Apple Store here continues to stretch around the corner, as its ability to activate customers' phones remains...iffy.