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You'd think that Microsoft would have been listening to all that has been going on recently with Facebook, Google and iPhone and their privacy issues. The American public is very particular about their privacy issues.
I mean, I totally understand the march forward in advancements which require geo-location information. I even personally will choose to allow much of my geo-data to be released to my carrier in exchange to better customization of my applications. But in the end, it should always be the choice of the user as to whether or not that information is shared. Most likely, when folks realize what they can gain by allowing this type of information to be released, they'll weigh the pros and cons in a different light.