I'm in the same boat. If the PSV was a phone, I would have completely passed over it as a gaming platform. Wouldn't have even considered buying one. Why? My two platform options for smartphones are either iOS or Android (sorry Windows Mobile). And no, I'm not paying for a second two year contract so I can play more games. 

So make the Playstation Vita an Android phone only with buttons and sticks? That's great for Playstation gamers who want to make their portable double as their phone, but no one else looking for a "serious" smartphone is going to pick up the one with the gaming buttons, d-pad and analog sticks unless they're equally "serious" about portable gaming. 

I certainly wouldn't pick up a two year service contract for a PS Vita Phone. 

I would have just been slightly ticked at not being able to play any PSV games that caught my interest on account of not wanting to enter a two year service contract just to do so, but I'd get over it.

The other thing to keep in mind in regards to the PS Vita Phone, is that it remains a viable option. The PSV would be the iPod Touch to the PSV compatible phone's iPhone. SCE wouldn't even have to market it as the "Playstation Vita Phone" since that would limit the target audience. They could just make a smartphone that is compatible with PSV games, using the same SDK with either controls built into the phone (resulting in an Xperia Play like device) or, and probably a better option; design a slick cradle device with a supplementary battery that houses all the physical controls, to be removed when it's simply not appropriate to bust out a phone with joysticks and face buttons on it during a meeting.