I'm not exactly sure how they plan to compete with Google Apps in the small business market when they don't offer a free service tier.
So, the problem isn't so much the fact that it's not cost-free, but that it's cost-free but cheap. I don't like cheap.
I'd like to say that customer service is another huge difference since Google Apps customer service is basically non-existant, but Microsoft's may be even more frustrating because it lures you to think that it exists, but it's horrible.