@Graham Jordan Hmm, I think that you have a point there.
"I find it really hard to believe that people exceeding the 1TB limit aren't doing so illegally."
It is perfectly possible (although it does not make Redmond look less "pratish" on this occasion) that it suddenly dawned on them that they were inviting headlines like "Microsoft hosts DRM-pirates" etc. etc. etc.
I.e. Their Legal and PR departments suddenly read the memo and did not like it, not one little bit.