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"I think that has more to do with the backlight than with the touch-screen."
The Sony PRS-700 does not have a backlight. Instead, it uses frosted plastic to diffuse the light from side mounded LED lights onto the eInk display.
That frosted plastic diffusion screen, while required to illuminate the eInk in a dark environment, has also destroyed the contrast.
For an honest evaluation, the PRS-700 must the compared with the PRS-505 with it's illumination option. You will find that they share the same problems, and for the same reasons.
Sony should have abandoned the side-lights and placed the touch-screen directly upon the eInk display.
Oh well, lessons learned.
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