Let's face it—we know the NGP is going to cost more than Nintendo's 3DS, but just how much are we talking about? Sony's President Shu Yoshida told Game Informer that "it's not going to be $599." Just for interest's sakes, when the first PSP was released in 2005, it cost $249.
If smartphones are powerful enough (or soon to be powerful enough), game publishers just need to start trying to make third party controllers or something to use with Android and iOS devices - I don't think Apple, Samsung, HTC, or Motorola (or any other manufacturer for that doesn't make hardware for Sony) would care if a game publisher wanted to release their game on iTunes or the Android marketplace. They might care about making hardware peripherals for their devices, but I don't see why they should care if games are listed on the marketplace for $20-30.
Seriously, phones should be powerful enough by now, if not soon, and they cost around $400-600 unsubsidized. If the PSP2/NGP is $400+, or even $300+, people who already pay for data would just opt for a phone on contract that is powerful enough to play games. Now if you don't care for having a data plan ever, that's a different story.