Re: iCloud Terms and Conditions
It seems acceptance of the Terms and Conditions does rely on the latest OS updates.
As far as I know: Apple continues to make iCloud available for those on older OS versions who are unable to accept the T & C. However some features on iCloud do seem to rely on the updated software, so older OS versions and hardware may not be able to use all these features,
Apple Support provides articles: If you can't accept iCloud Terms and Conditions - Apple Support
and
System requirements for iCloud - Apple Support
Eg: says: "If you meet the recommended system requirements below, you can take advantage of the latest iCloud features and get the best overall experience. At the bottom of this page, you'll find the minimum requirements for each feature."
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Re: "You might call this an "Update Ambush".
Apple seems to have already allowed those with earlier versions to continue on using iCloud without agreeing to the T&C.
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Re: "Does anyone know the reason for this update?"
I don't know. See the linked "system requirements" article above.
With new features becoming available in iCloud, new T & C are not surprising
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Re:" Is it related to the AWS outage earlier this week?"
I don't know. We are all Apple users, like yourself. No-one here can speak for Apple.
People with older software have been running into the T & C issue on and off for some time now, and Apple addressed the situation promptly by allowing iCloud access whether or not our software meets current system requirements for all the iCloud features. .