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Free, or almost free, unlimited consumer cloud storage moved a step closer overnight. Microsoft increased the free storage on its OneDrive cloud service to 15 GB. This is more than double the previous seven GB and is free to all comers.

Microsoft also boosted OneDrive storage for customers of the company’s Office 365 software to a whole terabyte from 20 GB.  For most users, that’s effectively unlimited cloud storage. The terabyte applies to all Office 365 subscribers including Office 365 Personal which costs $NZ110 a year.

Until yesterday Microsoft sold 200 GB of OneDrive storage for US$100 a year — so in effect, it has boosted the storage and thrown in the Office software.

Consumer cloud storage: the battleground

Microsoft, along with Apple, Google and a host of smaller, more focused cloud service providers are in a cost-cutting spiral. Earlier this month Apple slashed the prices of its iCloud service. Overall personal cloud storage costs have dropped and free allocations have soared in the past decade.

It all started in 2004. At the time Microsoft allowed Hotmail users 2M of free storage, then Google came along offering Gmail users a gigabyte.

Microsoft, Apple and Google realise people tend to use the applications associated with each company’s cloud service. OneDrive users are most likely to create documents using Office, Apple with iWorks and Google with Google Apps.

Cloud sells software, hardware, advertising

This means whoever stores the documents, gets first option to supply the editing tools.

Given that Microsoft still earns rivers of gold from selling Office, having the most generous storage offer makes economic sense: it sells software. In Apple’s case free cloud can sell hardware while Google gives away free storage to, eventually, sell advertising.

For each of these three companies adding terabytes of storages costs little. And let’s face it most consumers will only use a fraction of their allocation so it’s not a matter of one terabyte per customer.

The next step in this game is that it will become difficult, perhaps impossible, to charge consumers for cloud storage. This has implications for focused storage companies like Dropbox and Mega who don’t sell software, hardware or services on the back of storage.

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