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Instructions
Initiate the update process by using the controller to access the "Settings" menu in the user interface screen. This is the second option from the left. Press up on the analog stick until the "System Update" is highlighted and press the "X" button.
Observe the update process. A successful update will require the approval of a new licensing agreement. Press right on the analog stick and then choose "Agree." At this point, the update should begin to download.
If the update does not download automatically, check the Internet connection. Access the "Network Settings" option from the same "Settings" menu as before. It is the last option on the list.
Initiate the network configuration process. Choose "Wired" or "Wireless," according to your system configuration. Continue to press "X" through the next several options, as the default setting should be fine.
Watch the Playstation 3 test the connection. All phases of the test should be successful. If not, the Playstation will inform you that the connection is not working. At this point, investigate your Internet connection at the source. If using a modem, make sure all cables are connected. Restart the modem and router by disconnecting the power momentarily. Try the test again.
If using a wireless connection, consider trying a wired connection. This requires running an Ethernet cable from your modem or router to the back of the Playstation 3. Connect the wire and try the Internet configuration again.
If the connection is successful, try the update again. If it still doesn't work, wait a while and try again. It is possible that the servers at Sony are down temporarily.
If all else fails, update the Playstation 3 manually. Use a computer to download the update from Sony's website and transfer it to a memory stick. Insert the memory stick into an available USB port on the console and access it through the user interface. You should be able to run the update manually.