[OzzyB]

Good point. The only thing I can think of is that they don't have to give too much for free -- they just have to give more than their competitors.

Dropbox gives 2gb for free, so 7gb from Microsoft is more than enough to be a competitive advantage.

Also, by not starting out at 25gb, Microsoft can slowly increase the free rate, as and when necessary, and generate lots of free press and happy users along the way as well.

Lastly, since Google's service hasn't launched yet, perhaps it's not prudent to get into an arms-race right off the bat.