i think most people will move to gmail in a heartbeat. The only reason for hotmail is so XP stops bugging you about passport, and for an offline message depository for Messenger.
Most of us ( i assume ) have real emails, to domains we own for our "real" email.
But anyone actually USING free email will go to gmail.
The core idea is free storage for all your photos and messages that you will never have to delete. A good example of a new competitor would be - Walmart + Free Linux + free Google/Gmail machines. - Also - google actually WANTS you to upload your photos, so
they can index them and add them to global search engine ( not nickel and dime you for everything you upload)
Dont see how MS will compete with this - as they like to CHARGE at EVERY juncture ( OS / Extra storage / Ads / Spam mail lists / Included paid links )
It does not take a geneius to see MS wants cash at too many places. Revenue! Revenue! Revenue!