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iPhone does compete with PSP outside games (which never was the strogest feature in PSP) to a large extent


Actually you are correct. MAde the decision for an iTouch and against a PSP myself because the better media capabilities, pocket friendly form factor and FAR better internet support were more important to me than the games. On the other hand iPhone gaming has some nice timewasters but comparing those to PSP games like God of War is a bit insulting.