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The T1 has Wifi, the 650 doesn't.
The T1 can access the Reader Store, Google Books, Feedbooks/Baen, and Libraries from the device, the 650 can't.
The T1 has built-in support for multiple fonts, the 650 needs PRS+.
There are many minor improvements here and there to the device, plus hitting the price points that put it back in competitive territory are what Sony needed to do. I don't think it was about pulling ahead of the pack.
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