Hotmail incinerates customer files

At stake was years' worth of personal and business correspondence, photos and the itinerary for a recently purchased trip, the San Jose, Calif., health care worker said. Frantic, she called the Microsoft-run e-mail service, only to get worse news: Due to "system events," the files were gone forever, and there was nothing to be done about it, a technical support staffer eventually replied.

"It's scary," Felton said. "These services are easy and free, so people don't even think about using them. But they should know there are risks. I won't store so much stuff on Hotmail again."

Felton's story offers a new twist on the ever-present danger of data destruction in the digital age, throwing a spotlight on the responsibilities of online service providers. Meanwhile, consumers are being bombarded with promotions for vast amounts of free storage--up to 1 gigabyte's worth in the case of Google's new Gmail Web-based e-mail and a slew of copycat services.

Consumers have been burned in the past. For example, service providers hosting customer files online folded suddenly at the end of the dot-com boom. Online storage providers such as Myspace.com and I-Drive.com that collapsed at the time gave scant notice, and some customers complained of lost files. Online photo site PhotoPoint closed down with no notice at all, although it later offered to return files to its 1.25 million customers if they paid a fee.

In a statement, Microsoft said "issues" have occasionally beset its Hotmail service, although the most recent case appears to have affected only Felton's free account.

"We put many precautions in place to protect our network and assure against customer data loss, which includes regular system backups to prevent file storage issues," Brooke Richardson, product manager for MSN and Hotmail, wrote in an e-mail. "That said, we recognize that issues can arise...In this case specifically, it appears to be an isolated incident that is not recurring within our customer base. We are working to understand how the customer's data was lost, but we are not able to recover the customer's files."

Legal experts said there is generally little recourse for consumers in the event of data loss on services such as Hotmail, which are typically covered by terms-of-service agreements that provide broad liability exemptions.

"In general, consumers are out of luck," said Ira Rothken, an attorney based in San Rafael, Calif., who has litigated such cases in the past. "Frankly, it's understandable. There are always going to be glitches that lead to data loss."

He said consumers can protect themselves by ensuring that valuable files are adequately backed up. Some Web-based e-mail services, such as Yahoo Mail, allow customers to download e-mail to their desktops and retrieve them using a PC-based e-mail client such as Microsoft's Outlook. Online storage services such as IBackup, Xdrive and Connected also provide file backup services for a monthly fee.

Raghu Kulkarni, a spokesman for IBackup, said demand for online storage services is growing. The privately held company serves thousands of customers who subscribe to service packages that run from $3 to $800 a month. The most popular plan costs $14.95 a month for a 4GB backup plan.

But he offers a sobering note: Online storage companies don't guarantee customers a fail-safe backup system.

"We do not provide a 100 percent guarantee that the backup will take place," he said. "That cannot be guaranteed by anyone. That's just because of the nature of the Internet--it's very difficult to provide a 100 percent guarantee."