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The move was recently detailed in a mass e-mail sent to users of Hotmail's Post Office Protocol (POP) Mail Retrieval service.
POP is the standard for sending e-mail from an Internet server which allows users to forward and receive e-mail from different accounts.
The free service will be discontinued from 16 July. Hotmail users who wish to continue using POP Mail Retrieval will have to sign up for Microsoft's MSN Extra Storage program which offers users 10Mbytes of storage, 30Mbytes of Communities storage, the ability to send larger attachments and exemption from the service's account expiration policy.
Microsoft's decision to discontinue its free POP mail service follows a similar decision by Yahoo! which ended its free Yahoo! Mail POP3 access and e-mail forwarding features earlier this year.
Amid a continued downturn in the online advertising market, the two companies have been looking for ways to move users from free to fee services.
Both Microsoft and Yahoo! have long offered extra e-mail storage capabilities for a fee, but POP users did not take the opportunity to buy storage given that users can save e-mail on their computers and not in their Hotmail or Yahoo! mailboxes.