Most Microsoft sites (Microsoft.com, MSN.com, Hotmail.com, etc.) are affected. The Microsoft technical team is troubleshooting this issue.
Hotmail has had no impact regarding this issue.
That's *not* what our clients have reported or what I observe. Some clients have hotmail set as their start page and are calling to report "The internet is DOWN!" To make matters worse, IE's default 'auto.search.msn.com' which is used when a site is unreachable is itself unreachable. So client's aren't even getting the marginally useful error page normally displayed if a site can't be contacted. I observed the same behaviors from a dialup outside our network ~9am MST, and no connections to www.hotmail.com were possible. It doesn't appear to be a DNS resolution issue for 'hotmail.com', as I can telnet www.hotmail.com 80 and GET / HTTP1.1 to retrieve the page. But Internet Explorer does *not* load the page, appearing to hang while attempting to access 'passport.com' which does not have resolution currently. Mike