The reason people use XML is to put some intelligence in the document and to ensure that you are getting a valid document. If you implement schemas with your XML document, you have a tremendously powerful data exchange environment. The bottom line is that the intelligence of the document and the ease of parsing a document have to outweigh any bandwidth limitations you have.
Because more and more of the IT world is starting to use shared schemas and protocols like SOAP, XML is only going to get more common.
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