No, Its not arbitrary. In the above mentioned scenario, the decision is based on actual data points of the current system, with possible growth projections, and a judgement call from business perspective. Hardly arbitrary.
MS did the same thing with Live Mesh. Noticed that few people were using more than 2GB, so they cut the limit to 2GB.
Both of these seem like odd decisions. The people using more than your data driven limit are likely power users -- who are also probably your best evangelists.
Furthermore, given that so few are using beyond the limit, unless there is a technical reason to set the data driven limit, you incur virtually no cost to keep the limit high. In fact it argues that increasing it to unheard of numbers, ala gmail back in the day, makes more sense.
Again, there may be some technical reason they did this, which is fine. But if they looked at their data and saw that only 1% of their users had more than 10000 contacts, then they deserve to lose all those customers, plus the full wrath and bitterness they have as a result. They made a calculated decision to explicitly screw you over.
aka, an arbitrary limit, rather than a specific technical limit.