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The xg1v4 does use its hard drive and will have more/longer storage than you get in the cloud. It will also provide surround sound where your cloud recordings are only stereo but that won't matter unless you have external speakers. Whether you save money by returning your last device may depend on your contract/packages. I think some of the packages include the first box in the package price and some don't.
@CCAndrew wrote:
Technically, yes you can. But as noted, you will lose some benefits in doing so.
currently with one x1 set top box in home you can have 5 streams at one time. without a set top box you can have 20 hours or 60 hours only of DVR (depends on plan) and only 2 streams at same time.