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Broken X360 plus Region coding: who foots the bill?
We're well aware of the movie and game industry practices of region locking their software to tie users into buying discs from specific territories. In the past, the differences between NTSC and PAL TV systems were typically enough to deter free trade, but now that that's no longer an issue and now that most games and high-def movies run on a worldwide-compatible 60hz HDTV system, the companies have to introduce artificial lockouts in order to keep the gig up.
The average guy or girl on the streets of Europe probably still thinks that games and movies from the US "don't work" over here because "they use a different system". That's if they've thought about it at all - although most Brits seem to think of the American cultural psyche as insular and ignorant of the world at large, most of the people I know still consider a game or film to "not be out" when what they really mean is "not available to buy from my local shop". (I had a funny conversation with a friend here, asking him if he wanted to play my US copy of TRAUMA CENTER for the Wii, released about half a year earlier in the US - his reaction was "I don't want to play it, it's not out yet" - when I was holding it in front of him!)
So public ignorance and apathy means that they can keep getting away with it, and keep charging Europeans higher prices for the same or inferior products. (Well, they can usually get away with it - Nintendo were fined 149 million Euros in 2002 for keeping prices artificially high in the European market).
ANYWAY! My American Xbox 360 is broken. Microsoft UK tell me that if they repair their notoriously unreliable hardware, they'll only be able to provide a European version console back. That would be fine - but my games are American and many of them will not play on a European 360. The call centre people tell me that the American Xbox 360 is a COMPLETELY different system and is mystical and alien. In reality, since the region lockout is completely artificial, I'm fairly sure that Microsoft will have a way of lifting a stock console and setting it to any region code that they wish (I must point out that Microsoft are much better than many other companies when it comes to region coding: it seems to be here to appease the likes of CAPCOM and other publishers - Microsoft themselves typically release games without locks and on in time in all territories). Anyway, the call centre people have to read from a script and wouldn't understand this anyway, so that option is out of the question.
Similarly, Microsoft US are happy to service my US 360 under warranty, under the condition that it's routed through a friend in America's address first. I've not weighed the 360 for shipping to and from the USA, but I imagine that's going to be expensive. Simply put, I don't see why I should foot the bill for the mess that they've created.
By the way, I've tried asking the people over the phone in the UK call centre (which seems to be in India or another territory where English isn't the first language) if I can speak to someone higher up. They don't seem to understand the request, again perhaps because English isn't native to them.
Isn't it interesting that the games industry thinks it can save money by moving operations half way across the world, yet I'm supposedly not allowed to swap games with my friends in the States?
Anyway, I'm still waiting to hear from someone higher up at Microsoft. If it does come to shipping it back to the US for service, it's not going to be the worst thing to happen because I can combine it with other items I'll be sending over for business soon, anyway. And, I'll be paying money to the shipping company, not to the games industry for their dodgy practices. But that's still money out of my pocket that their bureaucracy and backward thinking is making me pay.

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I imagine the European 360s are distinct in hardware to American and Japanese units, in that they have PAL support in the video DAC chip (which, admittedly, you don't need for your HD set). Either way, I think it's a little optimistic to expect the people at returns to modify a UK unit to have USA region. In fact, I'm surprised the UK wing of MS even offered to replace it.
I'm not saying you shouldn't import hardware, but if you do I think it's fairly predictable that the company will wash their hands of responsibility for the unit. Devil's advocate: you're not playing by the rules, so why should they?