The last time I used Hotmail was the 90s, but I still know people who use it. But an issue like this goes far beyond email. If a company is prepared to so thoroughly sell out their customers, that's a problem. They'll probably get away with it though. In the balance of loss of revenue due to damage to their reputation with their customers versus loss of revenue due to Chinese government sanctions, the appalling truth is they probably made the right decision.
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