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After you install Microsoft Exchange Server 2016 Cumulative Update 8 (CU8), free/busy queries from Microsoft Office 365 users to on-premises mailboxes in hybrid environments fail if the cloud mailboxes are not archive-enabled.
This problem occurs because of a known issue that affects OAuth connectivity in Exchange Server 2016 CU8.
To work around this issue, create personal archive mailboxes for each cloud mailbox.
To fix this issue, install Cumulative Update 9 for Exchange Server 2016 or a later cumulative update for Exchange Server 2016.
To verify that you are experiencing this issue, use the Test-OAuthConnectivity cmdlet.
For example, connect to Remote PowerShell to Office 365 and run
Test-OAuthConnectivity -Service EWS -TargetUri https://<On-Premises EWS URL>/ews/Exchange.asmx -Mailbox <Cloud Mailbox>
If your scenario is a match, this cmdlet will generate the following response:
Exchange Response Details:
HTTP response message:
Exception:
System.Net.WebException: The remote server returned an error: (500) Internal Server Error.
at System.Net.HttpWebRequest.GetResponse()
at Microsoft.Exchange.Monitoring.TestOAuthConnectivityHelper.SendExchangeOAuthRequest(ADUser user, String orgDomain, Uri targetUri, String& diagnosticMessage, Boolean appOnly, Boolean useCachedToken, Boolean reloadConfig)
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