The software giant announced today that users of the free service, which has 4.1 million subscribers in Australia and 170 million worldwide, would see their e-mail storage allocation increased from two megabytes to 250.
The announcement comes a week after Yahoo increased capacity for users of its rival e-mail service from six megabytes to 100. Google is also trialling its Gmail service, which includes one gigabyte of storage. Microsoft officials didn't deny that competitive pressures played a part in the decision.
"We're responding to a changing marketplace," said Dominic Finnegan, director of consumer services for Ninemsn, which runs Hotmail in Australia. However, he added that new automatic virus cleaning services, which will become available in July, consistently topped the list of services requested by customers. "The number one concern is security," he said.
Finnegan was unable to specify when the extra capacity would be generally available beyond saying it would be in "the next few months". Beta testing of the service has begun, he added.
Tellingly, there's a more concrete timeline for the new version of Hotmail Plus, the company's paid service. Ninemsn previously charged AU$37.95 a year for a 10M inbox -- a package which will be made redundant by the new free offering. From July, customers will have the option of paying $US19.95 for a 2 gigabyte inbox and "no graphical advertisements".